You ever wonder how those radio or TV ads with some caffeine-high emcee yelling “We’ll pay off your old loan, no matter how much you owe! Push it! Pull it! Drag it in! But only this Monday! Monday! Monday!” work?
Short answer is that most don’t. They’re deceptive at the minimum and outright lies at worst. Finally, however, the Federal Trade Commission has decided to take action in enforcing stipulations regarding “Negative equity and auto trade-ins.”
What most ads never explain is that dealerships don’t pay off your loan as they suggest. Instead they compound your remaining payments onto the back end of a new loan. In some cases, they’ll raise a buyer or lessee’s interest rate, too, on the existing payment amount instead of keeping it what it was, pending a new interest rate is actually higher than an outgoing amount.
In the case of four U.S. dealership groups, the FTC has said they are to be held responsible for “clearly and conspicuously” displaying all terms to lease and financing agreements in accordance to the Truth in Lending Act.
“Buying a new car or trick is a major financial commitment, and the last thing consumers need is to be tricked into thinking that a dealer will ‘pay off’ what they owe on their current vehicle, when they really won’t,” says FTC Consumer Protection Bureau director David Vladeck in a statement. “The Federal Trade Commission is constantly on the lookout for potentially deceptive ads, and brings action to stop them when appropriate.”
In its latest order, the FTC has come to an agreement with Billion Auto, Inc. in Sioux Falls, S.D.; Frank Myers AutoMaxx LLC in Winston-Salem, N. C.; Key Hyundai of Manchester LLC and Hyundai of Milford LLC in Vernon and Milford, Conn.; and Ramey Motors, Inc. in Princeton, W.V.
While specifics were not disclosed as to fines or any other penalties, all of the dealers are now under strict agreement to come clean in their ads. Dealers are also required to give all of their employees copies of the sales materials to make them aware of promotions. The dealers are also required to file compliance reports with the FTC to show they are meeting the terms of the agreement, and will have to do so for the next…wait for it…20 years.
Automotive.com’s take: If something sounds too good to be true, it probably is. We’ve become a nation desensitized by car ads, learning to read between the lines. But we also deserve to hear the truth in advertising. Cars are massive investments, and if a dealer really wants to pay off someone’s old loan before getting that person into a new car, that’s great. But if that’s not the case, we’re with the FTC. It’s good to see the agency standing up for the little guy.
Source: Federal Trade Commission