Under the Hood: A CARS Rule Series Part 2
By David Estrada
Regulatory Specialist
(Game of Thrones spoilers ahead . . . you’ve been warned)
One of the strongest running themes that carries through the hit television series “Game of Thrones” (and its five-book source material) is one of “hard truths”. Bran had early dreams of knighthood before being paralyzed and forced on a different path. Sansa started with an adoration of Joffrey only to realize who he really was later on in their engagement. You can say the same with the FTC’s CARS Rule (Rule): the hard truth is that dealers will have to change the way they have always been doing business. One of these hard truths involves vehicle advertising and availability and is one of the most prominent questions we received on our live webinar we hosted back in December 2023.
Vehicle Availability Requirement
The CARS Rule prohibits dealers from making any misrepresentations about the availability of vehicles at an advertised price. Keep in mind, this prohibition is also consistent with various state laws. Seemingly straightforward, many dealers read that requirement and focus on the price of the vehicle, but do not focus on the vehicle’s actual availability. Though the industry got out from under the worst of it, vehicle inventory still plays a major issue for most dealerships. This poses a unique problem in that advertising a vehicle that is not physically at the dealership can be viewed by consumers as unscrupulous behavior while arguably being a legitimate offering by the dealership. Nevertheless, the Rule has cemented that vehicle advertisements must always reflect a vehicle’s current availability.
Common Scenarios that Implicate Vehicle Availability
Vehicles “In-Transit” from the OEM
One of the most popular questions posed to us in our first CARS Rule webinar was whether dealers can advertise a vehicle that is currently in transit from the manufacturer. Some manufacturers mandate dealers to list in-transit vehicles on their websites particularly due to current inventory shortages. In its comments, the FTC provided clarification on this point and stated the rule does not prohibit a dealer from “advertising a vehicle with limitations on availability in a truthful manner, such that any limitations are clear and conspicuous to the consumer”. Therefore, the answer is “yes” as long as the vehicle’s current status is clearly and conspicuously disclosed on the advertised vehicle. Applied here, dealers will want to show “in-transit from manufacturer” in the vehicle advertisement or something to that effect. It may also be prudent to mention the expected arrival date when the vehicle will be available for sale. Avoid any misleading implications that the advertised vehicle is available for immediate sale at the listed price when it is still in transit.
Vehicles Located on Other Properties
A prevalent issue for dealer groups with multiple locations, advertising vehicles at a location where the vehicles are located at other sister locations should be considered in this CARS Rule prohibition against misleading vehicle availability as well. Again, it is critical that the vehicle advertisement is truthful and transparent. In its comments, the FTC states that “dealers should not affirmatively represent that a vehicle is available on its lot without a reasonable basis that the vehicle is on the lot or without clearly and conspicuously noting that the vehicle will be made available after transfer from an affiliate’s lot.” Therefore, if ABC Motors advertises a vehicle that is located at XYZ Cars then the dealer needs to be sure that its current location is stated in the advertisement. Furthermore, dealers can also state that the off-site vehicle can be made available at the current dealership, if applicable. This approach helps prevent customers from being misled about where the vehicle is physically located.
It is advisable to clearly identify each vehicle’s location in its respective advertisement. This includes affected vehicles advertised in lease and finance specials as well as all of the affected vehicles on a dealership’s VDPs. Dealer groups should consider adding a disclosure to affected vehicles on VDPs that states “Please be aware that this vehicle is currently located at an affiliate dealership and can be made available for viewing or purchase upon a transfer request to our dealership.”
Vehicles Still in Recon(ditioning)
A commonly overlooked area within the inventory involves vehicles that still need to be reconditioned prior to sale (Recon). These vehicles are purchased at auction or received as a customer trade-in. Depending on the circumstances, dealers may want to move these vehicles rather quickly. However, it is important that dealers do not advertise these vehicles on any print or digital media until the vehicle is ready for sale because these advertisements will fall under the same scrutiny for availability at an advertised price. We suggest that dealers go as far bullpenning these vehicles out of sight and away from the showroom floor until they are ready to go. Alternatively, if dealers have low inventory and would still like to show vehicles in reconditioning on their sites, then we recommend that they follow the same suggestions mentioned above and clearly and conspicuously disclose on the advertisement that the vehicle is in reconditioning. Just be aware that this puts more responsibility on dealership staff to update advertisements.
Recently Sold Vehicles
In focusing on the vehicle’s availability, dealers need to ensure that all vehicle advertisements are kept as current as practically possible to avoid any potential misrepresentation claims. This is probably most critical for recently sold vehicles. It is essential that dealers implement a process to ensure that sold vehicles are promptly removed from their website and other platforms of print and digital advertising. This is often managed through an automated system that integrates the dealership’s inventory feed with its website. Once a vehicle is marked as sold in the dealership’s system, it should automatically be removed from the website during the next routine synchronization. The primary aim of this practice is to avoid scenarios where customers visit the dealership under the false impression that a vehicle, which has already been sold, is still available for sale.
Summary
A hard truth: what most dealers have been doing already in their vehicle advertisements, the CARS Rule will put into stone. They will be scrutinized over vehicle price and availability, so dealers need to make sure that they have proper processes in place. Here are the key takeaways for dealership advertising practices as they relate to vehicle availability under the CARS Rule:
- Dealerships cannot advertise vehicles for sale that are actually unavailable at a given price. The focus is twofold: the price and the vehicle’s availability.
- Advertisements for vehicles in transit should clearly and conspicuously disclose that the vehicle is in transit and disclose an expected arrival date (if available).
- Vehicle advertisements should list the physical location of the vehicle, especially for dealer groups with multiple locations. Furthermore, if the vehicle can be made available by a dealership-to-dealership transfer, then it should be stated in the advertisement.
- Advertisements for sold vehicles should be taken down as soon as practically possible to avoid confusion. Check with your website provider as well as any third-party platforms.
About this Series
Authored by various industry compliance experts at ComplyAuto, this series of articles will cover specific aspects of the Rule and will be released every month up to the Rule’s effective date of July 30, 2024. Each article will also be followed up by a short webinar that will provide further insight into the discussed topics and a live Q&A session for you to ask practical questions. If you would like to be notified of each article as they are released or of the ComplyAuto-hosted webinars, please send us a note at info@complyauto.com with “Subscribe to Newsletter” in the subject line of the email.