A new rule proposed by the Federal Trade Commission (FTC) threatens to complicate and lengthen the already tedious car-buying process. Despite surveys showing high satisfaction levels with current dealership experiences, the FTC’s new Vehicle Shopping Rule – also known as the Combating Auto Retail Scams (CARS) Rule – could result in longer transactions and added costs for consumers and car dealerships alike.
More Paperwork, More Waiting
Introduced in December of last year, the CARS Rule aims to make the car-buying process more transparent, but critics argue that it’s a solution in search of a problem. Car dealerships have made tremendous strides in recent years to streamline the purchasing experience, with transaction times shrinking significantly. Yet, this new rule is poised to add 60 to 80 minutes to the process, according to an independent study. That’s up to an extra hour spent at the dealership filling out additional paperwork – a frustrating and unnecessary burden for consumers already dealing with long waiting times.
The rule would require car buyers to complete five new forms throughout the shopping process, not just at the point of purchase. This additional paperwork could cost consumers an estimated $1.3 billion a year in lost time alone. And it doesn’t stop there. The rule mandates that all communications between buyers and salespeople – including seemingly innocent texts and emails – must be stored for two years and handed over to the FTC upon request. This will only add to the administrative burden and increase operating costs for dealerships.
The Financial Impact on Consumers and Dealerships
The costs of this rule are far-reaching. The FTC’s rule would impose an estimated $24.1 billion in expenses on the auto industry over the next decade. These costs are expected to be passed down to consumers in the form of higher prices for vehicles and dealership services. As car buyers are already grappling with rising prices for essentials like groceries and healthcare, the added financial strain from this regulation could further pinch household budgets.
Dealers, too, are feeling the pressure. The new rule’s focus on document collection and storage places additional logistical and financial burdens on dealerships, many of which are already operating on slim margins. These costs come at a time when dealerships have worked hard to make car buying more efficient and customer-friendly.
As a family business that’s been serving customers for over 100 years, I can say with confidence that our customers do not want to spend more time or money at the dealership. The added paperwork and compliance costs will make the process more frustrating, not easier.
A Rule Designed in Secret
The FTC’s approach to this rule has been called into question by many in the industry. The rule was drafted in secrecy, without input from dealers or consumers, and passed without congressional oversight. The result is a regulatory framework that could have unintended consequences for both buyers and dealerships.
The rule’s premise is based on the idea that car buyers are being scammed, but the evidence for this claim is thin at best. In fact, consumer satisfaction with car dealerships has remained high, consistently hovering above 90%. The new rule does not add any new consumer protections that weren’t already in place, leading many to conclude that it is a solution looking for a problem.
Challenges Ahead for the FTC’s Rule
Recognizing that the rule may not work as intended, the FTC has chosen not to enforce it while it faces legal challenges in court. This decision reflects an awareness that the rule may not be practical or effective, especially in light of the feedback from industry professionals and consumers alike.
To address this overreach, Congress is now being called upon to intervene. The bipartisan FTC REDO Act, introduced by Sens. Jerry Moran (R-Kan.) and Joe Manchin (I-W.Va.), seeks to repeal the CARS Rule and require the FTC to rewrite it with transparency and public participation. The bill would ensure that future regulations are developed with input from all stakeholders, including car buyers and dealers, and are based on real, tangible consumer protections.
A Call for Congressional Oversight
The proposed rule represents a significant shift in how the auto industry is regulated, and it’s clear that it needs a more careful, thoughtful approach. Congress has the power to stop the FTC from moving forward with this rule, and with leaders like Sen. Chris Van Hollen (D-Md.) and Rep. Steny Hoyer (D-Md.) holding influential positions, they can use their authority to prevent this costly and inefficient regulation from taking effect.
Consumers are already struggling with high costs, and the last thing they need is more paperwork and longer waits when buying a car. The CARS Rule, as it stands, would only make the situation worse.
Comments