FTC Cracking Down on Car Ads

The Federal Trade Commission is sending a warning to car dealers -- don't run deceptive ads. The consumer organization recently ordered several car dealers to stop running ads it called misleading.

Maybe you've heard car ads like, "I want your car no matter how much you owe." Or, this one, "Credit upside down? Need a new car? We want to pay off your car."

The Federal Trade Commission says many of those ads are just not true -- it's cracking down. Calling on auto dealers to back up the ads or stop running them. Consumer Attorney, John Gayle says it's a victory for consumers.

"It would have been nice if they would have kind of hammered them so that other car dealers would go wow, not only are they going to tell me to stop and slap me on my wrist, they are going to hit my pocket book," said Gayle.

The case is the first of it's kind by the FTC. The agency says several dealers across the country misled consumers into thinking they would no longer have to pay off the loan balance on their trade-in, even if it was more than the car's actual trade-in value. The FTC claims the dealers just tacked on the negative equity into the new price. Gayle says, ""Hopefully, the cracking down of this will have a ripple effect so that other car dealers across the country will stop similar deceptive practices when they are advertising their vehicles."

None of the dealers named in the FTC settlement are located in Virginia.

We reached out to the Virginia Automobile Dealers Association about the case. In a statement it says:

"Since October 1, 1998, dealers have been required to disclose to customers any prior loan or lease balances that are included in the amount the customer is financing for a vehicle purchase. The prior balance must be separately stated as an amount paid to others on the retail installment sales contract signed by the customer. Dealers provide a wide range of options for consumers who wish to finance their vehicle purchases. The National Auto Dealers Association and the American Financial Services Association, in conjunction with the Federal Trade Commission, created a great resource for consumers, "Understanding Vehicle Financing" that can be accessed at the FTC website here."

"There are very good car dealers out there," said Gayle. "There are honest car dealers that are trying to do the right thing and they may send out a memo to the sales managers."

He says, while the FTC ruling is a step in the right direction, he'd like to see a stiffer punishment.

"Unfortunately, the FTC is not putting any significant penalty on them, they are just telling them don't do it anymore and you're going to have to report to us for the next 20 years that you are doing it properly."

This recent case, prompted the FTC to create a new publication on it's website informing consumers about Negative Equity Ads and how to avoid it. There's also a section to file a complaint if you feel you've been misled or have noticed a misleading car ad.

For more information, visit the FTC page.