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Fifth District Court Throws Out CARS Rule on a Technicality
Think of the battle over the CARS Rule as a championship boxing match between two heavyweights: the Federal Trade Commission (FTC), the government agency tasked with protecting America’s consumers, and the National Automobile Dealer Association (NADA), a 108-year-old association of over 16,000 car dealers. On January 27, the referee—the U.S. Court of Appeals for the Fifth District—stepped into the ring and threw out the FTC on a technicality.
What’s the CARS Rule? Its full name is the Combating Auto Retail Scams Trade Regulation Rule. Its stated purpose is to “add truth and transparency to the car buying and leasing process by making it clear that certain deceptive or unfair practices are illegal.” Examples given in the Rule are misrepresentation of costs (whether buying, financing, or leasing), vehicle availability at a given price, and the cost or benefit of any add-on. Under the Rule, dealers must disclose the offering price, that add-ons aren’t required, and the total of payments for a financed or lease transaction. To the FTC’s credit, it points out that these practices are standard for any honest dealer.
The FTC published the rule on January 4, 2024. The very same day, the NADA petitioned for a review and moved to stay the CARS rule—the legal equivalent of “hang on a hot second.” To give you an idea of NADA’s influence, glance over its mid-year report for 2024 (the full-year one isn’t available yet): From January to June, 16,936 franchised light-vehicle dealers sold 7.8 million light-duty vehicles. Sales topped $613 billion, with service and parts sales accounting for over $76 billion (about 12 percent) of that.
NADA claimed three things: that the FTC violated its own regulations by not filing advance notice of the ruling, that the FTC “did not engage in reasoned decision making,” and that the FTC’s cost-benefit analysis was unreasonable. (They threw in a few references to “arbitrary and capricious,” too.)
Meanwhile, there was confusion over what sort of add-ons the FTC was targeting. Any gearhead would roll their eyes—or blow a gasket—at the sort of deception the FTC mentions that the Rule seeks to prevent: oil changes for electric vehicles, ineffective theft-deterrents or rust-proofing, or a subscription to a service on a vehicle that can’t use it (ex. subscribing to a hands-free driving system on a car that wasn’t built with the proper sensors.) But what about dealer add-ons that are beneficial to the customer, like window tints or spray-in bed liners? Pointing to the original text of the proposed Rule (all 372 pages are here), then-FTC chair, Lina Khan, clarified that it didn’t seek to eliminate all dealer add-ons, only those that were of “no benefit” (emphasis original).
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Finally, on January 27, 2025, the court issued its ruling: because the FTC failed to issue “an advance notice of proposed rulemaking”(ANPRM), the CARS Rule loses its binding power (is “vacated”).
In the ruling, the main issue was not whether some car dealers are dishonest or whether consumers should be protected from such dishonesty but where the FTC drew its “statutory authority” for making the Rule. Whether or not the FTC was required to give advance notice depended on where it drew its “statutory authority” for the Rule: from its internal regulations, which do require an ANPRM, or from the Dodd-Frank Act (201), which according to the court’s ruling, “relaxes the statutory procedures that the FTC must follow when promulgating rules regulating motor vehicle dealers.” If you’d like to read precisely why the court was persuaded thus, or to read the dissenting opinion of Judge Higginson, check out the link above.
NADA issued a two-paragraph release the day after the ruling. The CARS Rule “would have added massive amounts of time, complexity, paperwork, and cost to the car-buying and car-shopping experience for virtually every customer,” it reads. “That truly would have been a nightmare for consumers and dealers alike.”
The FTC, headed by Andrew N. Ferguson as of January 20, has not issued a comment.
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My wife decided to buy a new Olds in 1999. She’s a darned good accountant and discussed and agreed to the costs of the car prior to picking it up. Of course the day she went in to get it, they had snuck a $200 insurance policy of some kind to the cost. She called them on it and asked the salesperson to remove it. He said he would have to wait until his manager returned so he could sign off on it. She called me on the phone and I told her to walk out of the dealer and don’t look back. It’s what I would have done. She stuck around and they made the adjustment.
Yes after I settled on a price for the new car they added a few hundred dollar charge. I complained and was told “All the new cars have that charge”. I said “I agreed on an “out the door price including everything”. Now honor it or I’m OUT THE DOOR! They took the extra charge off. BTW the new “administration” just cancelled the laws requiring dealers to be more honest with charges on cars they sell. Golden rule – the folks with the gold make the rules.
An alternate headline could be: “Fifth District Court Throws Out illegally enacted CARS Rule.”
and the drama continues… I’m not sure if this rule would have been helpful or not for the very real problem that exists with some dealers.
Right – Good guys continue to do the right thing, and the bad guys find work-arounds or ignore the rules altogether.
I was looking for a good used car for around 20K. I found a pretty nice Toyota Avalon at a decent price and decided to buy it. When the final sales document was presented the price had been inflated with add-ons to the tune of over $4000. I told them I would buy the car, but didn’t want the add-ons. They said since they were already installed I had to take them. Since my ride had left I said “Take me Home”!!
This was a Penske dealership!
About 1980 I was going to buy a 79 Impala from a dealer. I declined the warranty. When I went to pick it up,
they had put the warranty on the paperwork, saying GMAC required it. I made a call to a lady I knew who had worked there 30 years. She told me GMAC did NOT require a warranty, but that many dealers were saying that to get cut. I walked out. The owner called me the next day and I told him if he had salesmen that would lie, I’m not buying from you. Bought a sweet 78 Caprice Classic the next week.
First sentence: “Think of the battle over the CARS Rule as a championship boxing match between two heavyweights: the Federal Trade Commission (FTC), the government agency tasked with protecting America’s consumers, and the National Automobile Dealer Association (NADA), a 108-year-old association of over 16,000 car dealers.” I expected the last phrase “a 108-year-old… etc” would be “‘..a 108-year-old association of over 16,000 car dealers’ tasked with protecting the interests and practices of its members.’ “
Grace, my comment got cut? Disappointed 2x.
Watch your wallets. DOGE aides could already be on their way to FTC headquarters.
There are some honest dealers. My son bought a used truck in a different county. The sales tax was higher in that county. The dealer and my son didn’t catch it at the time of sale. A few weeks later he received a check in the mail for the overcharged sales tax with an apology. This dealer also fixed a half a dozen warranty issues with no questions asked. They are top notch and I recommend them to my friends The ford dealer down the road not so much. My wife bought a ford escape and I had to file a complaint with the state consumer protection agency to get a stuck rear caliper replaced under warranty. The escape had 3 other warranty issues the dealer never fixed. A coworker was picking his truck up from their body shop awhile later and he saw a customer screaming at the top of his lungs at the body shop manager. Again word of mouth. I tell friends to avoid the ford dealer at all costs. It’s not about brand it’s about customer service