Though dealership trade groups have opposed the Federal Trade Commission’s proposal for new auto sales regulations, majorities of retailers polled by Cox Automotive said the agency should keep key transparency provisions in the plan.
Concepts such as online cost disclosures, a guaranteed universal price, clear consent for finance and insurance products and true advertising found favor among retailers. The FTC’s plans for record-keeping and banning valueless F&I products, however, were accepted by less than half of the dealers polled.
Cox didn’t delve into the results and had no analysis to share, spokesman Mark Schirmer said last week.
An F&I consultant and a compliance expert who works with dealerships explored the data with Automotive News last week.
Some of the findings might indicate dealership leaders think their stores already are practicing the behavior prescribed by the FTC “when in fact they’re not,” said Becky Chernek, president of Chernek Consulting.
“I think more dealers want to see everybody on the same playing field and say, ‘Who has the best sales team?’ ” he said.
Cox’s third-quarter Dealer Sentiment Index survey July 26 to Aug. 9 also asked 574 franchised dealership representatives about the FTC’s plan for new dealership advertising and F&I rules. Most of the respondents were department managers or above.
Forty percent of those polled hadn’t heard of the FTC’s proposal, which the agency unveiled June 23. Thirty-five percent called themselves somewhat or very familiar with it. Cox put follow-up questions to the 60 percent who had some awareness.
Daly said he was “shocked” by how few dealers were aware of the plan.
“It’s been all over everything,” he said.
The FTC seeks to prevent dealerships from bait-and-switch price advertising and sneaking F&I products into deals.
The agency’s draft plan unveiled in June would require dealership ads to contain a buy-it-now “offering price” it would honor for anyone and ask dealerships to list optional accessories and F&I product prices online. Charging for any such “add-ons” would be illegal “if the consumer would not benefit,” according to the proposal.
Customers must provide what the FTC calls “Express, Informed Consent” and receive cost information before a dealership can charge them for a product or help them finance it. The agency says prechecked boxes or a “signed or initialed document, by itself” doesn’t qualify; the consent must be “unambiguous” and, in the case of physical transactions, oral.
Sixty percent of dealers said the regulations would have at least a moderate impact on their business over the next year were they to be enacted immediately, and 60 percent said the rules would have at least a moderate impact on their dealership’s profitability three to five years out.
But majorities still indicated they could live with some of the FTC’s plans.
Sixty-three percent of dealers said the FTC’s plan for disclosure and “Express, Informed Consent” on optional accessories and F&I products should be left as is. Only 15 percent of dealers said this provision should be eliminated, and another 22 percent said it should be revised.
Itemization and informed consent might not be a stretch, Daly said.
“I have dealerships across the country that already have these forms,” he said. “They already use these. And they’re not required to.”
However, the National Automobile Dealers Association has pointed out how this aspect of the FTC’s proposal could also bog down the process with paperwork. Daly said the dealer acceptance captured by Cox reflected support for transparency rather than the specific logistics of the FTC’s plan.
But Chernek said the results reflected dealers overestimating how transparent their employees are in paperwork.
Requiring advertising prices to match those in the dealership saw the second largest degree of support, with 59 percent of dealers reporting the FTC should retain that planned rule. Twenty-seven percent of dealers sought changes to that proposal, and 14 percent supported killing it altogether.
Fifty-three percent of the dealers Cox surveyed backed retaining the FTC’s proposal for mandating the disclosure of a universal offering price, with and without financing. (The FTC also wants dealers to disclose the cumulative cost of a financed vehicle and its payments at the end of the loan term.) Twenty-eight percent sought a revision to this item, and 19 percent wanted it gone entirely.
Dealers favoring the FTC’s advertising plans might be trying to check rivals’ deceptive practices, Daly said, and Chernek agreed. But another possibility was simply a lack of understanding of how their own stores were behaving, she said.
An FTC mandate to list all optional add-ons and prices online found acceptance with 55 percent of dealers. A fifth of the respondents thought the idea should be scrapped, and a quarter of dealers said revisions were necessary.
Protective Asset Protection polling at about the same time found dealership decision-makers saw online F&I sales as an opportunity. The 2022 Protective F&I Trends Report revealed 38 percent of dealership leaders said F&I sales would improve if those products were offered online. More than half of the retailers said they needed to provide pricing online to succeed in digital F&I sales.
“I’ve had dealers across the country for a long time now saying, ‘I think I want to go this route,’ ” Daly said.
He said the transparency also would streamline in-store F&I sales by informing customers about the products in advance.
Majority support for preserving those four proposals remained regardless of whether the dealer came from a small, medium or large operation, based on Cox’s results.
Two FTC ideas explored by the poll lacked majority acceptance in their current form, Cox said.
Only 41 percent of dealers said the FTC should retain its plan for two years’ worth of extensive record-keeping, a proposal the National Automobile Dealers Association called “new and costly” and an attorney agreed would require document retention beyond what a prudent retailer would do today. A third of dealers wanted the FTC to do away with the record plan entirely, and 26 percent favored revision.
The FTC’s notion to prohibit the sale of any physical accessory or F&I product “if the consumer would not benefit” proved particularly unpopular, with 45 percent of dealers calling for its removal, and 28 percent seeking it to be revised. Just 27 percent would have let the FTC proceed.
Chernek and Daly thought dealerships’ opposition to this rule stemmed more from the FTC’s vagueness rather than a desire to sell useless wares.
NADA in public comments to the agency pointed out how the FTC’s wording could be problematic.
“Of course, while dealers should not be offering valueless products to customers, with respect to many products, it is far from clear whether in the eyes of the FTC the product fails that standard,” NADA wrote in a public comment to the FTC. “Indeed, the value of any product depends on several factors related to the customer and vehicle.”
The FTC defined worthless accessories and F&I products to include any items which “do not provide coverage for the vehicle, the consumer, or the transaction, or are duplicative of warranty coverage for the vehicle.” It said this included guaranteed asset protection coverage, which pays the difference between a customer’s loan balance and vehicle value in the event of a total loss, “if the consumer’s vehicle or neighborhood is excluded from coverage or the loan-to-value ratio would result in the consumer not benefiting financially.”
The FTC said the ban also included nitrogen tires with the level of nitrogen naturally found in the air.
Fifty percent of the dealers said this proposal would have a major impact on the industry, by far the No. 1 item they perceived would be an issue.
The No. 2 proposal seen as having a significant impact was the record- keeping requirement, with 36 percent of dealerships flagging. Retailers could pick more than one answer.
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