FTC’s CARS Rule Overturned: What It Means for Car Buyers on Auto Dealer Scams.

Buying a car should be an exciting experience, but for many Americans, it's an expensive and confusing process riddled with hidden fees, inflated interest rates, and misleading sales tactics.

Auto dealers and finance entities have long taken advantage of consumers by charging more than they should for financing, tacking on unnecessary add-ons, and even engaging in discriminatory lending practices.

To combat these issues, 104 national and state organizations have come together to support the Federal Trade Commission’s (FTC) Combating Auto Retail Scams (CARS) Rule. This new regulation aims to bring fairness and transparency to the car-buying process, making it harder for dishonest dealers to take advantage of consumers.

As of early 2025, the FTC’s Combating Auto Retail Scams (CARS) Rule has been struck down by the 5th Circuit Court of Appeals due to procedural issues.

The rule, which aimed to protect consumers from deceptive practices like bait-and-switch pricing and hidden junk fees, was initially set to take effect in July 2024 but faced legal challenges from industry groups.

With the court’s decision invalidating the rule, consumer advocates are pushing for alternative measures, while the FTC may revise the rule to address legal concerns. The future of the CARS Rule remains uncertain pending further developments.

What the CARS Rule Means for Car Buyers

According to John W. Van Alst, senior attorney at the National Consumer Law Center:

“For many Americans, a car is a necessity, yet the car buying and financing process is designed to allow dealers to profit from complexity and withholding information rather than from honest competition. The CARS rule is a good first step to bring transparency and fairness to the process.”

Other consumer advocates echo similar concerns, emphasizing that deceptive sales practices have inflated car prices and left many buyers feeling powerless.

Key provisions of the CARS Rule include:
✔️ Banning Junk Fees – Dealers can no longer charge for products or services that provide no real benefit to the buyer.
✔️ Preventing Bait-and-Switch Tactics – The rule makes it illegal to advertise misleading car prices.
✔️ Requiring Informed Consent – Dealers must obtain explicit agreement from consumers before adding extra charges.
✔️ Cracking Down on Loan Scams – Unethical practices like “yo-yo financing,” where dealers change loan terms after the sale, are now under stricter regulation.

Consumer advocates believe the rule will not only protect buyers but also help honest dealerships compete on a level playing field. As Erin Witte, director of consumer protection at Consumer Federation of America, put it:

“The CARS Rule will improve some parts of the process and send the message that car dealers are not too politically powerful to regulate.”

How to Avoid Car Dealer Scams

Car dealership fraud is more common than many buyers realize. The Federal Trade Commission (FTC) receives over 100,000 complaints each year related to auto sales, financing, and deceptive advertising.

If you're planning to buy a car, here’s what you need to know to protect yourself:

Common Car Dealer Scams to Watch For

🔴 Bait-and-Switch – A dealer advertises a car at an unbelievably low price, but when you arrive, the car is mysteriously “no longer available.” They then push you toward a pricier vehicle.

🔴 Title Washing – Some dealers hide a car’s past damage (such as flood or accident history) by altering or reissuing the vehicle title in a different state with looser regulations.

🔴 Junk Fees & Hidden Charges – These can include “pre-delivery inspection” fees or unnecessary service contracts that inflate the price of your car.

🔴 Odometer Fraud – Dealers illegally roll back odometers to make high-mileage cars appear newer and more valuable.

🔴 Yo-Yo Financing – After you've driven off the lot, the dealer calls to say your loan was “not approved” and forces you into a higher interest rate.

🔴 Buy-Lease Switch – Some unethical dealers trick customers into signing a lease when they thought they were purchasing a vehicle.

Your Legal Protections as a Car Buyer

Thanks to federal and state laws, car buyers have protections against many of these scams.

✔️ Truth in Lending Act (TILA) – Requires clear disclosure of loan details, including the interest rate and all fees.
✔️ Consumer Leasing Act – Ensures lease agreements are easy to understand, with no hidden costs.
✔️ Used Car Rule – Mandates that all used cars for sale display important information (e.g., vehicle history, warranty status).
✔️ Magnuson-Moss Warranty Act (Lemon Law) – Requires dealers to repair defective vehicles under warranty or provide refunds.

Some states also have additional laws, such as California’s Car Buyer’s Bill of Rights, which gives buyers extra protections.

Tips to Protect Yourself When Buying a Car

💡 Before You Visit a Dealership:
✔️ Research Fair Market Prices – Check sites like Kelley Blue Book or Edmunds to know what a car should cost.
✔️ Get Pre-Approved for a Loan – Credit unions often offer lower rates than dealerships.
✔️ Check Dealer Reviews – Look up ratings on Yelp, DealerRater, and the Better Business Bureau (BBB).

💡 At the Dealership:
✔️ Hold onto Your Keys – Some dealers use entrapment tactics, claiming they “lost” your keys to keep you on-site.
✔️ Verify the Vehicle Identification Number (VIN) – Run it through CarFax or the National Insurance Crime Bureau’s VINCheck to check for accident history.
✔️ Have a Mechanic Inspect Used Cars – A professional inspection can reveal hidden issues.
✔️ Read the Contract Carefully – Watch for unnecessary add-ons, hidden fees, or lease terms if you intended to buy.

💡 If You Suspect Fraud:
📢 Report It! Contact:

• Your state’s consumer protection agency (often part of the Attorney General’s office).
• The FTC for deceptive sales tactics.
• The National Highway Traffic Safety Administration (NHTSA) for vehicle safety concerns.
• The Better Business Bureau (BBB) Auto Line for warranty-related disputes.

You can also leave a review on platforms like Google Reviews, Yelp, DealerRater, or Edmunds to warn other consumers.

Final Thoughts

Buying a car is one of the biggest financial decisions many people make. While dishonest dealers continue to take advantage of consumers, the now-overturned FTC CARS Rule was meant to bring transparency and fairness.

By staying informed and knowing your legal rights, you can still take steps to avoid scams, secure a fair deal, and protect yourself in the car-buying process.  🚗💨

Have you experienced dealership fraud? Share your story in the comments below!

Don't forget to read our Explainer on: How Scammers Steal from Older Adults