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Tag: Auto Sales

  • FTC Cracking Down on ‘Junk Fees’ and ‘Bait-and-Switch’ Auto Sales

    FTC Cracking Down on ‘Junk Fees’ and ‘Bait-and-Switch’ Auto Sales

    The Federal Trade Commission is preparing to crack down on unsavory auto sales practices amid skyrocketing prices.

    The price of automotive purchases in the US has been exploding as a result of supply chain issues and rising inflation. The result has been record prices, often made worse by dealerships adding on “junk fees.” The FTC is preparing to crack down on these practices, proposing new rules to address the problem.

    “As auto prices surge, the Commission is taking comprehensive action to prohibit junk fees, bait-and-switch advertising, and other practices that hit consumers’ pocketbooks,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “Our proposed rule would save consumers time and money and help ensure a level playing field for honest dealers.”

    The FTC is proposing rules that would address four specific types of dishonest, exploitative behavior:

    • Ban bait-and-switch, wherein customers are lured in with deceptive promises, only to be saddled with more expensive options, worse financing terms, and more.
    • Ban fraudulent junk fees, such as services and options that offer no value or benefit.
    • Ban surprise junk fees and prohibit dealers from charging additional, undisclosed fees without the customer’s written consent. The rule would also require the dealer to inform the customer what the vehicle would cost without the add-on fees, giving the customer the ability to make an informed decision.
    • Require full disclosure of costs and conditions upfront. This would require the “offering price” to be the full and total price, with only government taxes and fees excluded.

    The FTC’s rules should help address some of the more egregious issues plaguing car buyers, especially since the beginning of the supply chain issues impacting the industry.

    With inventory in short supply, some dealerships have taken to gouging customers. Others have even reserved the right to price-adjust up to six months after purchase, charging the customer more depending on current pricing.

    The FTC’s new rules should be a boon for consumers and reign in the dishonest, predatory behavior some dealerships are engaging in.

  • Gas Up, Car Sales Down: Consumers Choose Differently

    Here’s some not so surprising news from the publishers of Kelly Blue Book, the authority on resale auto values, consumers have changed their minds about what vehicle they wish to purchase based on the rising costs of fuel. About 66% of consumers who planned to purchase a new car or truck in this first quarter of 2012 have considered vehicles which were not real options for them in the past or have simply decided not to buy at all.

    Over three quarters of these consumers are being realistic, and believe gas prices will continue to rise over the next thirty days. Surprisingly, only about 20% of shoppers said they were looking for a vehicle that would give them better gas mileage. A majority (30%) of consumers cited high mileage as a reason for wanting to trade in or sell their current vehicles. The average ride was about eight model years old, with over 85,00 miles on it.

    Jack R. Nerad, executive editorial director and executive market analyst for Kelley Blue Book’s kbb.com comments ton the trend in vehicle sales:

    “The rollercoaster of gas prices has taken its toll on new-car shoppers,”

    “The reality of today’s economy means that many shoppers are factoring in fuel efficiency and gas prices toward the top of things they consider when choosing their next new car. Lucky for them, each year auto manufacturers work increasingly hard to improve fuel economy in their new models, with many gasoline-powered vehicles now achieving 40 mpg or higher, while a handful of alternative-energy vehicles achieve upwards of 100 mpg-equivalent.”

    The three most important factors consumers are taking into account when shopping for a new vehicle include warranty, fuel mileage, and power/locks. Very interesting, I would think fuel economy would be the number one concern given the drastic increase in fuel costs over the last ninety days.

    When considering a new vehicle it is important to weigh the total cost of ownership over the duration. Maintenance can be a real killer on some vehicles once they are out of warranty, and an extra five miles per gallon can save you hundreds over the course of a couple years. Look at the hidden costs before you sign on the bottom line. I would bet on gas prices being higher in the future, so if the vehicle you want already stretches your budget, reconsider.