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BBB's ire over 'guaranteed' claim

August 5, 2011
The Better Business Bureau is raising questions about the use of the word “guaranteed” in connection with a vehicle trade-in program promoted by AutoTrader.
Under the program, a consumer can complete an online form on the AutoTrader website to essentially establish a price for the vehicle he currently owns. The vehicle can be used as a trade-in for a new-vehicle purchase or sold outright to a dealer participating in the program. The price, characterized as “guaranteed” in AutoTrader advertisements, is determined under an algorithm that considers many factors after the customer enters information on an online form.
At a participating dealership, a vehicle inspection is performed, which can lead to changes in the vehicle’s price. The program anticipates that the price upon inspection may be lower than what was established under the algorithm. AutoTrader represents to the dealer that it will pay the dealer the difference between the first and second price and, consequently, the dealer would not suffer a loss due to the vehicle’s reduced value after inspection.
But the customer will only be offered the price after inspection, not the price established by the algorithm. Thus, the dealer is protected but the consumer is not.
Use of the word “guaranteed” in such a context can be misleading, BBB officials said, because the initial value established for the consumer’s vehicle is likely to change upon inspection. Indeed, the program itself anticipates that result.
The BBB has argued to the Illinois attorney general’s office that portraying a trade-in value as guaranteed prior to inspection is unfair and deceptive under the Illinois Consumer Fraud Act, and the BBB has begun sending letters of violation to dealers who engage in that advertising practice.
Participating dealers, said the BBB, must do a better job advertising the AutoTrader program so that consumers fully understand how the program works.