These actual ads could have you racing to your local car dealership and paying more than you expect for your favorite model:
- “$1 gets you out of your current loan or lease!”
- “Max your tax! We’ll match your refund!”
- “$19 down delivers or just pay $269 per month!”
Put the brakes on those deals and check out the details before the deceit you detect is visible only in your new car’s rearview mirror.
The Federal Trade Commission, trying to curb deceptive ads, recently took a Texas car dealer to task for misleading consumers with enticing prices and terms while hiding crucial cost-revving information. The dealer, which placed the ads in newspapers, ran them on television and posted them on its website, Facebook and Twitter, admitted no wrongdoing but agreed to end deceptive advertising practices or face future fines.
“I don’t know about you, but I’m concerned when businesses don’t play by the rules,” wrote Colleen Tressler, an FTC consumer education specialist, in an agency blog about the deceptive ads. “Consumers can’t comparison shop effectively if the information they rely on isn’t the truth, and competition is harmed when a business lures consumers away from its competitors under false pretenses.”
The FTC limits claims dealers can make to get you to part with your dollars.
Acknowledging what it called “intense scrutiny” of dealers by the FTC, the National Automobile Dealers Association last month issued a booklet, “Driven: A Dealer Guide to Federal Advertising Requirements.” Intended for dealers, but illuminating for consumers, you can check it out here. The guide provides examples of bad and good ads and chapters on 41 federal advertising topics. The association also warns dealers to check state regulations on advertising practices.
On the following pages, we’ll show you what’s wrong with the examples above and give you more tips from the FTC, the dealers’ association and others to help you avoid rip-offs through deceptive car ads.
The buck stops here
Trophy Nissan of Mesquite, Texas, a Dallas suburb, claimed prominently in a newspaper ad it would “Get you out of your loan or lease for $1,” the FTC charged. Only in fine print did it say “With Approved Credit. Any Negative Equity applied to the new loan.”
In a similar TV ad, the FTC said, the dealer claimed: “Stuck with a high car payment? Owe more on your vehicle than it’s worth? Trophy Nissan can set you free for a buck!” It posted similar claims on Facebook and Twitter.
Contrary to the claims made in the advertisements, the FTC said, consumers with outstanding loan balances on trade-in vehicles could not get out of their loans for $1; they had to pay the amount of the outstanding loan balance. Consumers with leases — in addition to $1 — had to pay other amounts, such as lease termination fees.
Taxing your patience
The dealership posted on its website an enticing offer to “match your refund so you can use it for a down payment,” the FTC said. The dealer added that a tax adviser would be onsite.
The fine print, however, said the dealership “will match your Tax Refund up to $1,000 when used (as) a down payment on any new or used vehicle.” The fine print added that the dealer would “not provide tax advice and recommends that you obtain your own independent tax adviser.” The average tax refund in 2014 was nearly $2,700, the IRS reported.
Deliver your dollars
One dealer ad, charged the FTC, prominently called attention to the claim “$19 down delivers or just pay $269 per month!” for certified pre-owned vehicles.
Only in the fine print, the agency said, would you find the loan length, annual percentage rate (APR) and other required terms. The $19-down deal’s fine print said the buyer would get 6.9 percent APR financing for 60 months, but it didn’t even specify the monthly payment let alone the car’s real price. The $269-a-month deal specified in fine print 72 months of payments (totaling $19,368) after a “10 percent down payment, plus tax, title, license, equity and $150 doc fee.” It didn’t say how much “10 percent down” was.
Your watch list
Here, from the FTC, NADA and others, are another dirty dozen enticements that should make you pull the emergency brake on any deal so you have time to review the fine print before you sign. “The law requires that if a dealer advertises discounts, prices, or special low payments, the ads must clearly explain the important details of the offers and how a buyer may qualify for them,” the FTC says.
APR rate: Financing terms if advertised must be expressed as APR; if not, the advertised rate may not reflect your true annual cost of financing and may exclude certain costs required to be included in the APR.
0% APR (or some low rate): The low advertised rate may apply to limited loan amounts, perhaps just $12,000, far below the price of the car. Watch for a higher APR on loans financing higher amounts.
Any APR: The rate generally should be available to you and other consumers. The ad should clearly and conspicuously state if the APR terms are limited to “well-qualified buyers.” Otherwise, you may pay more than the stated rate.
Great low price or discount: The price may be available only after applying a down payment, often thousands of dollars, plus other fees, such as taxes, licensing and document fees, on approved credit. Other catches: The discount is only for a pricey, fully loaded model or only for certain buyers, such as “recent college grads,” or a particular bank’s account holder. If you don’t bank there, you don’t get the deal.
$18,888 or $179 per month lease: The ad may omit key details, such as the total amount due at lease signing, including the down payment and fees, or a balloon payment. Watch for the words “an extra charge may be imposed at end of lease.”
Bait ads: A dealership should only advertise what it really wants to sell. The ad shouldn’t lure you in for one deal only to have salespeople switch you to another or “unsell” you later. Good: You should see the dealer’s ad disclose how many vehicles are available at the advertised price. Better: Look for the last six numerals of the VIN numbers of the available vehicles.
$0 due at lease signing: The fine print may indicate that additional fees — sometimes several thousand dollars — are due for taxes, a security deposit, or the first month’s payment.Push, pull or tow it in, we’ll give you $1,000: Offers involving potential over-allowances on trade-ins are susceptible to claims of deceptive practices. Check the fine print for restrictions, such as vehicle mileage, condition criteria and inspection requirements, that must be fully disclosed.
Drip price: Advertising only part of a product’s price, with other charges revealed to buyers later in the purchase process, is not allowed. When it comes to advertising, the price that’s listed is the total you should expect to pay, excluding government-imposed fees and taxes. Many states deal with documentation fees separately.
Green or eco-friendly car: Claims like these are too vague to be meaningful. All products have some environmental impact. Gas mileage should be shown as an EPA estimate. Ask the dealer to substantiate claims about environmental benefits or non-toxic materials.
$2,500 under MSRP: An advertised price that’s compared to the manufacturer’s suggested retail price could mislead you to believe the car is generally sold at that price. That may not be the case.
Free $50 gas card with purchase: Because a vehicle’s purchase price is usually negotiated, you may have no way of knowing if the dealer will recover the cost of any “free gift” by marking up the car price or substituting some inferior goods or services.
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