The Federal Trade Commission's proposed new rules on auto dealerships would cost customers time and dealers money, a new Center for Automotive Research study concludes. In June 2022 the FTC proposed requiring expanded disclosure and consent on finance-and-insurance products and physical accessories "not provided to the consumer or installed on the vehicle by the motor vehicle manufacturer." The agency also is considering cracking down on dealerships' statements related to the cost or financing of the vehicle itself, seeking to curtail bait-and-switch pricing and lower monthly payments that mask higher overall cost to a consumer. The agency has not taken further action on its plan following the close of a public comment period last year.

Under the FTC's plan, the average consumer would spend two more hours on a vehicle transaction, the Center for Automotive Research wrote in a May analysis based upon polling more than 60 dealerships. NADA opposes the rules and has requested that the FTC withdraw them, calling the agency's plan "severely flawed both as a matter of law and public policy."

According to the study, the automotive retail industry would also incur between $18.69 billion and $22.34 billion in additional compliance expense over the course of a decade because of the FTC rules — more than 10 times the $1.36 billion to $1.57 billion predicted by the agency. An individual dealership location would spend a median $46,950 in upfront cost and $50,958 in recurring expense every year to comply with the regulation, the survey found.

Under the FTC's proposal, customers can't buy physical accessories or F&I products — both of which the FTC designates as "add-ons" — without first declining in writing the option to buy or finance the vehicle by itself at the corresponding amount. A manager also must sign the document.

The proposal also calls for customers to provide "express, informed consent" and receive cost information about "add-ons" before a dealership can charge them for or help them finance any of those products. Prechecked boxes or a "signed or initialed document, by itself" doesn't qualify, the agency said. Consent must be "unambiguous" and, in the case of physical transactions, oral.

When the compliance cost figures were combined with the value of two more hours of customer time — priced at $22.20 per hour by the FTC — per transaction, the Center for Automotive Research put the net cost of the regulations over 10 years at between $38.06 billion and $45.87 billion. That's significantly different than the $29.72 billion to $34.77 billion in net benefit predicted by the FTC.

Under the FTC's proposal, dealerships would need to list an out-the-door cash price they would honor for any specific vehicle or financing term they advertise. However, the same requirement applies to the dealership's first response to a customer's inquiry about a vehicle. The regulation imposes other disclosure rules on a dealership's discussion of monthly payments as well as "add-ons."

Read the full Automotive News article here.