Consumers form their first impressions of dealers through advertisements. The majority of dealers advertise through the internet, allowing dealers the ability to change and update their advertising in real-time, several times a day. Advertising compliance is critical for not only federal and state regulators but consumers.

The FTC and state regulators have certain objectives for advertising compliance, which are: (1) the advertising must be truthful and not misleading; (2) advertisers must have evidence to substantiate (i.e., back up) their claims; and (3) advertisements may not be unfair. These objectives are not new and are well-known to dealers. Under Regulation Z (which governs consumer credit sales) and Regulation M (which governs consumer leases) of the Truth in Lending Act (TILA), dealers’ advertisements must provide additional mandated disclosures for vehicle financing and leasing that contain “trigger terms.” An FTC hot-button item is properly advertising the price of a vehicle.

Now more than ever, consumers are looking for a certain vehicle at an affordable price. Based on the publicity surrounding the FTC’s CARS Rule and actions against dealers by the FTC and state regulators, consumers are on high alert, and the internet has made everyone a “lawyer.” Dealers do not want the headaches associated with legal actions because salespeople did not sell vehicles at the advertised price and overcharged the consumers.

A screenshot of an improper advertisement or selling the vehicle at a price over the advertised price is a “gotcha” by a regulator and/or a consumer. Dealers need to follow the roadmap of proper advertising to avoid very costly advertising violations.

Price

The price advertised must be available to everyone. The failure to sell the vehicle at the advertised price is the cardinal sin of bait and switch. Even if a consumer does not know of the advertised price at the time of purchase, the failure to give that advertised price can still lead to a bait-and-switch claim or regulators launching an investigation. The advertised price shall not include any manufacturer incentives or rebates that are not available to everyone. Some dealers believe that advertising a price that is not available to everyone may be solved by a disclaimer. That is a wrong belief, and such a disclaimer is used by the FTC and regulators as proof that the dealer did not intend to sell vehicles at the prices advertised.

No “Bait” Advertising

“Bait” advertising is a deceptive sales tactic in violation of section 5 of the FTC Act which prevents unfair or deceptive acts or practices. However, many state laws also prevent bait advertising. For example, Va. Code §46.2-1581 states that “For purposes of this chapter, a violation of the following regulated advertising practices shall be an unfair, deceptive, or misleading act or practice …”

Bait advertising, in which an advertiser may have no intention to sell at the price or terms advertised, shall not be used. By way of example, but not by limitation:

1. If a specific vehicle is advertised, the seller shall be in possession of a reasonable supply of said vehicles, and they shall be available at the advertised price. If the advertised vehicle is available only in limited numbers or only by order, that shall be stated in the advertisement. For purposes of this subdivision, the listing of a vehicle by stock number or vehicle identification number in the advertisement is one means of satisfactorily disclosing a limitation of availability.
2. Advertising a vehicle at a certain price, including “as low as” statements, but having available for sale only vehicles equipped with dealer added cost “options” which increase the selling price, above the advertised price, shall also be considered bait advertising.
3. If a lease payment is advertised, the fact that it is a lease arrangement shall be disclosed.

MSRP

If you list the MSRP only on the advertisement, the MSRP is the price of the vehicle and should be sold at that price (or lower). FTC does not look kindly at advertisements that have the MSRP for the vehicle but due to market conditions, the consumer pays over that price. If you want to charge over the MSRP, the “Dealer’s Price” must state the price you want to sell the vehicle at (even if it’s over MSRP). Listing a disclaimer that states you are charging $10,000 over MSRP due to market conditions is nothing more than evidence that you advertised a price you never intended to sell the vehicle at.

Manufacturer Incentives that Require Qualifications

Dealers should avoid telling a consumer that they are not eligible for the vehicle’s advertised price because they don’t meet the rebates or incentives that the advertised price includes. If there are rebates and incentives offered by manufacturers that are not available to everyone (i.e., not all consumers are qualified to receive it), or rebates are mutually exclusive (i.e., $1,500 loyalty rebate and $1,500 first-time buyer rebate), those incentives or rebates are deceptive and should not be included in dealer’s advertised price. There may be manufacturer rebates and incentives available based on specific criteria (i.e., military rebate), which can be listed but not subtracted from the advertised price since it may not be available to everyone.

EV Tax Credits and Gas Savings

A vehicle’s advertised price should not include the Federal EV tax credits that may not be available to everyone. Federal EV tax credits should be treated like manufacturer incentives that require qualifications, thus advertised as an additional item that can reduce the advertised price but is not included in the advertised price. Additionally, stating the advertised price of the vehicle includes estimated gas savings per month or year is a misrepresentation and deceptive. Saving on gas is an estimated cost (not verified) and does not bring down the actual price of the vehicle. It should not be included in an advertised price.

Internet Price

There is no such thing as an “Internet Price.” Advertising on the internet is the norm and is plain advertising. Under the law, if a dealership advertises a price for a vehicle, that price should be made available to customers whether or not they mention the internet-special advertising. That is why sales staff should understand what you are advertising. A sales manager who did not know that a vehicle was advertised at a price lower than which it was sold to a customer will not insulate the dealer from a lawsuit if a customer later discovers the lower advertised price. It makes no difference whether the customer knew of the lower internet price at the time of purchase or not.

Geographic Price

There is no such thing as a “Geographic Price.” Dealers shall only advertise the price of the vehicle that is available to ALL consumers/purchasers, whether the consumer lives in your PMA or not. The law does not differentiate between those purchasers in the dealer’s state from those that are out of the state. Dealers cannot give a disclaimer to disclaim the price they are advertising from one group of purchasers from another. This is similar to the violation of having a disclaimer that the advertised price is $X, but due to market conditions, the price may be increased at the point of sale. Dealers must be prepared to sell the vehicle at the advertised price regardless of the geographic location of the consumer. There is no disclaimer that can absolve a dealer from advertising a price that won’t be available to ALL consumers.

Add-Ons

For dealer-installed add-ons prior to sale, such as roof racks (i.e., hard adds), the advertised price needs to reflect those add‑ons so that the consumer is not deceived into additions to the advertised price. If there are voluntary add-on packages that the consumer may purchase at the point of sale, they can be advertised but should be disclosed as “optional” and not be a required purchase by the consumer to get the price advertised. For example, an add-on package that includes 10 oil changes, all-weather mats, unlimited car washes and rental vehicles is a voluntary package and should not be added to the vehicle’s advertised price but chosen by the consumer at point‑sale. Add‑ons are an FTC hot-button item, and dealers should be wary of preinstalling add-ons to increase the sale price of the vehicle. The FTC does not look favorable to add-ons such as paint protection and etching to vehicles to increase prices for which the consumer has no option but to purchase because they cannot be removed from the vehicle. Dealers should reconsider pre-installing add-ons to vehicles prior to purchase.

Compliance Advertisements

The “Dealer’s Price” is one that is available to every consumer. When someone walks through your doors and is looking at that vehicle, the customer’s price starts at the “Dealer’s Price” (whether they have seen the ad or not) and the only additions to that should be tax, tags/title, freight (if not included in the advertised price), processing fees (if not included in the advertised price) and add-ons that the consumer voluntarily purchases (at point-of-sale and separately itemized on the buyer’s order). If the consumer meets the qualifications for other incentives offered, the “Dealer’s Price” is reduced for those incentives. Dealers should not be adding qualifying incentives that buyers cannot qualify for (i.e., military or college grad) back into the price and thus increasing the “Dealer’s Price.” To view an example of a compliant advertisement, go to vada.com/wp-content/uploads/2024/09/Compliant-Advertisement.pdf.

Freight Charge

It has become customary in competing markets that the advertised price of a vehicle excludes the “Freight” charged for delivery of the vehicle, which is listed on the Monroney sticker. If you are removing the “Freight” from your advertised price, dealers must remember and adhere to the following:

• Clearly and conspicuously (and within reasonable proximity to the advertised price of the vehicle) disclose the amount of the freight to be charged by the model in the advertisement.
• Freight cannot be advertised as a range. The exact amount of each model’s freight should be listed. Consumers should easily be able to add the freight amount for the vehicle they are looking at to the advertised price. Dealers often do this by a hyperlink so that they can easily update the hyperlink page should the freight charge change instead of changing the disclosure on every advertisement for freight charge changes.
• The freight charge should be the exact amount charged to the dealer. Dealers should consider freight similar to a pass-through charge (paid by the dealer when invoiced and reimbursed by the consumer upon purchase of the vehicle). Customers should not be double charged for freight. If the dealer’s price is the vehicle’s MSRP price, that means the freight is already included and dealers should not do a pencil that has an added charge for freight.
• Freight should not be charged on used vehicles.

“Trigger Terms” For Sales and Leases

In vehicle sale advertisements, a Regulation Z “trigger term” is:

• The amount or percentage of a down payment (i.e., “10% down,” “$1,000 down,” “90% financing,” “trade-in with $1,000 appraised value required”); OR
• The amount or percentage of any payment (i.e., “monthly payments less than $250 on all our loan plans,” “pay $23.44 per $1,000 amount borrowed,” “$210.95 per month”); OR
• The number of payments; OR
• The period of repayment (i.e., “up to four years to pay,” “48 months to pay”); OR
• The amount of any finance charge (i.e., “financing costs less than $300 per year,” “less than $1,200 interest”).

If any Regulation Z “trigger term” is in a vehicle sales advertisement, then the following disclosures must appear “clearly and conspicuously” and in proximity to the trigger term in the advertisement.

1. The amount of the installment payment; AND
2. The amount or percentage of the down payment; AND
3. The number of installments for repayment (term); AND
4. The “annual percentage rate,” which may be abbreviated as “APR.” Dealers also must disclose if an APR can be increased after the credit transaction is complete.

Dealers should not advertise “No down,” “$0 down” or the equivalent in an advertisement unless, in fact, no payments or trade-in of any kind is required at delivery (not even sales tax, license fees or use of any manufacturer’s rebate). Likewise, if manufacturer captives want dealers to advertise “no interest” loans but said the offer is “no interest” because the consumer is buying down his or her own rate through the life of the loan, it is technically not a “no interest” loan and should not be advertised as such.

In vehicle lease advertisements, a Regulation M “trigger term” is:

• A statement of any capitalized cost reduction or other payment required before or at lease consummation, or by delivery if delivery takes place after consummation, or that no payment is required; OR
• The amount of any payment.

If any of the above Regulation M trigger terms appear in a vehicle lease advertisement, then the following disclosures must appear “clearly and conspicuously” and in proximity to the trigger term in the advertisement:

1. A statement that the transaction advertised is a lease; AND
2. The total amount of any payment (such as security deposit or capitalized cost reduction) required before or at the consummation of the lease, or by delivery if delivery takes place after consummation, or a statement that no such payment is required; AND
3. The number, amounts and due dates or periods of scheduled payments under the lease; AND
4. Whether or not a security deposit is required; AND
5. In leases where the consumer’s liability is based on the difference between the vehicle’s residual and its realized value at the end of the lease term, that an extra charge may be imposed at the end of the lease term.

Many manufacturers are requiring dealers to advertise through their chosen third-party sites that dealers may not have control over all terms and conditions advertised. In the event the third‑party site is advertising a “trigger term” such as the amount of any payment if the follow-on disclosures cannot appear or they aren’t accurate with the third party, dealers should look at changing how they advertise with the third party such as using the advertised price of the vehicle instead.

Disclosures

Disclosures in advertisements should be “clear and conspicuous” and used to explain an advertised term, not to negate it. Disclosures should:

• Tell the consumer what is included and excluded from the advertised price (i.e., freight is included, but tax and processing charge (voluntary and cost of $895) is not included).
• State that the MSRP is the Manufacturers Suggested Retail Price, and that the price is set by the dealer.
• Have the consumer contact the dealership to verify the vehicle’s availability, options, price and incentive eligibility prior to purchase.
• State the processing fee as voluntary and the price the dealer charges for that fee.
• Let the consumer know that financing and leasing are subject to credit approval. However, it is noted that dealers should never tell a customer that they must finance through the dealership to get the advertised price. The vehicle should be sold at the advertised price to ALL customers whether the customer is paying cash, using dealer-arranged financing or using their own financing.
• Disclose whether the pictures online are stock photos or actual images of the vehicle being sold. If stock photos are used, tell the consumer that it’s a stock photo example and not the actual car itself, and thus, the photos may not reflect the exact vehicle color, trim, options or other specifications.

For proper disclosures, dealers should seek legal advice from experienced dealer counsel to determine if their disclosures are appropriate.

“Clear and Conspicuous” Disclosures

Whether disclosures in vehicle advertisements meet the standard of “clear and conspicuous” depends on whether consumers actually perceive and understand the disclosure in the overall context of the vehicle advertisement. Essentially, there is no set formula prescribed to determine whether a disclosure is clear and conspicuous, the following recommendations should be considered:

• The placement of the disclosure in an advertisement should be in close proximity to the claim they qualify (i.e., “trigger” term, the “price” or the incentive to be met).
• Consumers should likely notice and understand the disclosures and that they are in connection with the representations that the disclosures modify. Simply making the disclosure available somewhere in the ad, where some consumers might find it, does not meet the clear and conspicuous standard.
• The prominence of the disclosure.
• Whether there are items that distract and draw attention away from the disclosure in other parts of the advertisement.
• If the disclosure is understandable to the intended audience.
• For disclosures in audio messages, they must be presented in an adequate volume and cadence.
• For visual disclosures in televised messages, they must appear for a sufficient duration.
• The size of the font of the disclosure should be readable (i.e., Maryland law requires font size 10 and bold for freight and processing charge disclosures if the charges are not included in the advertised price).
• Hyperlinks
  • The hyperlink’s label should make it not only obvious to consumers to click on it for more information, but it should also show the consumer that the hyperlinked information relates to the qualifying information.
  • Label the hyperlink appropriately and in a style that is a typical hyperlink.
  • Since different websites use different signals for hyperlinks, dealers should use similar text, graphics, format and color throughout a single web page for easier identification of hyperlinks by consumers.
  • If you use a click-through page, it should display the complete disclosure prominently. It should not provide distracting visuals or extraneous information. Any “close” or “click-away” opportunities should be displayed discreetly and not block the disclosure information.
• Consumers should not have to scroll to the entire bottom of the page to determine if they qualify for an incentive or financing offer.
• If consumers have to scroll, then:
  • Use text and visual design cues to indicate that scrolling is required.
  • Text prompts such as explicit instructions should be used to alert the consumer that more information is available.
  • Avoid placing disclosures at the bottom of the screen with a blank space between the disclosure and the product because consumers may not continue reading or may not scroll to the bottom.