The FTC’s “Total Price” Crackdown
Why 97 Auto Groups Just Got a Warning
In a major move to eliminate “junk fees” and bait-and-switch tactics in the automotive industry, the Federal Trade Commission (FTC) recently issued stern warning letters to 97 dealership groups across the United States. These letters represent more than 500 individual retail locations and signal an aggressive shift in how the federal government monitors car advertising.
The core of the issue is “all-in” pricing. The FTC has grown increasingly frustrated with dealerships that lure customers with low online prices, only to tack on mandatory “doc fees,” “preparation charges,” or “protection packages” once the consumer is in the finance office.
(Read the full letter here: Warning Letter.)
Key Highlights from the Official Letter
The Mandate
The letter explicitly states that “the price consumers see in advertising [must be] the actual price they will pay,” excluding only government-mandated charges like taxes and registration.
The “Final Notice” Tone
It warns that while the letter is not a formal determination of a law violation, the agency is actively monitoring the marketplace and will take “additional action as warranted.”
Cited Precedents
The letter references several active or recent cases against major auto groups as a reminder of the legal consequences of non-compliance.
Broad Scope
Christopher Mufarrige, Director of the Bureau of Consumer Protection, clarifies that this is part of a larger federal push for price transparency that also includes industries like rental housing, hotels, and ticketing.
While these letters do not constitute a formal finding of law-breaking, they serve as a “final notice” before the agency initiates enforcement actions that could lead to heavy fines and long-term federal monitoring.
The 6 “Red Flag” Practices Identified by the FTC
The FTC’s letters specifically identified six common practices that it considers deceptive under Section 5 of the FTC Act:
- Excluding Mandatory Fees: Advertising a price that does not include all dealer fees (only government taxes and registration can be excluded).
- Universal Discounts that Aren’t Universal: Promoting a price that includes rebates or discounts (like military or student discounts) that most consumers won’t actually qualify for.
- Hidden Down Payments: Failing to clearly state that an advertised price is only available with a substantial cash down payment.
- Forced Financing: Conditioning a low price on the consumer using the dealer’s specific financing partner.
- Mandatory Add-ons: Requiring the purchase of products like VIN etching, nitrogen tires, or GAP insurance that were not factored into the advertised price.
- “Ghost” Inventory: Advertising vehicles that are not actually in stock or available for sale to lure customers to the lot.
What Dealerships Need to Do Now
Whether or not a dealership has received a letter, the FTC has made it clear that “business as usual” is no longer acceptable. Here is a checklist of actions dealerships should consider as more information comes to light on this issue:
The Headline Price is All-In
Audit your website and third-party listings to ensure the “Headline Price” includes every mandatory fee. If a fee is required to buy the car, it must be in the advertised price.
Scrutinize Rebates
If a price is only $25,000 because it includes a $500 military discount and a $500 first-time buyer discount, that price can be considered deceptive because those discounts are not available to everyone. Avoid stacking the rebates or adding them in if they will not be available to everyone.
Disclosure Clarity
Ensure that any conditions such as required down payments or financing terms are “clear and conspicuous.” Do not bury conditions in small print or in places that are difficult to see.
Inventory Accuracy
Implement a real-time system to pull sold vehicles from your website immediately. The FTC has viewed this as a “bait-and-switch” technique and is a top priority for them.
Employee Training
Train your sales teams to quote the “Total Price” over the phone. If a salesperson quotes a price that excludes mandatory add-ons, the dealership can be liable for a deceptive practice.
The Bottom Line
Because federal FTC rules can sometimes conflict and with this being a fluid situation due to ongoing consideration, specific state laws (such as how doc fees are disclosed), and further questions the FTC has yet to provide answers for, there will be more information forthcoming.
However, it appears the FTC is moving toward a “what you see is what you pay” model. Dealers who move first to be transparent will likely gain a competitive advantage in consumer trust while avoiding what may become Federal litigation.
Disclaimer: This article provides general information and should not be considered professional financial or tax advice. Please consult with a qualified CPA or financial advisor for guidance specific to your individual business needs.
Dealership Experts
Tom Wolf, CPA is a tax advisor specializing in dealership accounting and automotive industry finance. With over 15 years of experience helping dealerships maximize tax savings and navigate complex depreciation rules, Tom combines deep technical expertise with practical insights. He is passionate about empowering dealership owners to make informed financial decisions that drive growth and profitability.