FTC: Add-on Items Confuse Buyers

By Staff Writer August 04, 2020

Two new reports from the Federal Trade Commission highlight some of the challenges and confusion consumers can face in buying and financing a car, particularly relating to charges for add-on items after the initial price negotiation.

The reports are based, in part, on a study of auto buyers conducted by the FTC that consisted of in-depth interviews with 38 consumers about the car buying and financing process.

A staff report from the FTC’s Bureau of Consumer Protection (BCP) notes a number of issues that arose in the study, from the advertising that draws consumers in through the entire car buying experience.

The BCP report notes that consumers were sometimes not aware of key terms of sales and financing contracts, and it points in particular to issues that potentially keep them from having an accurate picture of the amount they are paying. One of those issues was focusing on monthly payments rather than considering other important terms as well, like the total price of the vehicle and the amount and length of the financing.

The later stages of the buying and financing process, including the sale of “add-ons” like extended warranties, service plans, and GAP (guaranteed asset protection), and meeting with the dealer’s financing office for additional negotiations after seemingly negotiating a price with a salesperson, also present issues, according to the report.

When it comes to add-ons, the BCP report notes a number of issues that caused consumers significant confusion in the study, including limited or no discussion of charges for add-on products, questions about whether the add-ons are a mandatory part of the purchase or financing, and unexpected limitations on add-on products such as extended warranties or service plans.  

The BCP report also cites issues after consumers negotiate a price with the dealership sales staff and are sent to meet with the “finance and insurance” office, pointing to multiple instances in the study where the previously negotiated price was changed during this process. The report notes that dealers should honor discounts and sales terms promised to consumers through the entire sales process, or not make them in the first place.

The report also states that consumers were at times not aware of the terms they had agreed to, with some only discovering key elements of their contracts while reviewing the documents as part of the FTC study. The report notes that the sheer length of the car sales process can overwhelm consumers and make it difficult for them to adequately review the paperwork presented to them.

Rate this item
(1 Vote)
Last modified on Friday, 07 August 2020 13:58

Trending News

NIADA President Tedeschi Takes Reins

NIADA President Tedeschi Takes Reins

Sep 23, 2020 Rate: 5.00

AiM Hits Milestone

AiM Hits Milestone

Sep 23, 2020 Rate: 0.00

CDK Installs DMS at Auto Group

CDK Installs DMS at Auto Group

Sep 23, 2020 Rate: 0.00