Deceptive Auto Advertising
Dear New Yorker:
New York law prohibits false, deceptive and misleading advertising. These laws recognize that advertising plays an important role in helping consumers decide which products to purchase, and that false, deceptive and misleading advertising can undermine consumers' purchasing decisions.
For many consumers, purchasing a car is the second most important purchase in their lives. Advertising should provide accurate information for consumers to aid them in deciding what kind of car to purchase, and from whom to purchase. When advertising is deceptive or has the capacity to mislead consumers, it makes it more difficult for them to make informed decisions about their purchases.
False and deceptive advertising also makes it difficult for dealers who comply with the law. Dealers who violate the law may have a competitive advantage precisely because they are attracting additional business away from competitors with their false or deceptive ads.
Our office has developed the following information to assist you in evaluating offers and solicitations for new and used automobile purchases and leases.
"Under invoice," "Below dealer's cost," "Under Wholesale!!" all imply that a dealer is selling a used car for less than what it paid. These advertising tactics are considered misleading since the invoice price or the dealer's price does not accurately reflect what auto dealers ultimately pay for the automobiles that they sell. Many manufacturers compensate dealers in other ways, through "holdbacks" (money withheld to the dealer until it sells a certain number of vehicles), rollbacks, and other in-kind offers, that significantly alters what the dealer eventually pays. In reality, the final price is frequently not determined until the end of the model year, when the dealer's actual volume of sales has been determined.
"Public Liquidation Sale", "Public Notice Sale" phrases imply that the sale is court- ordered or that the auto dealer is going out of business when that is not the case. Consumers should beware that such sales may not provide the great bargains that its advertisements imply.
"0.9% financing!" Many auto dealers advertise low finance rates on new cars. At times, these advertisements imply that the advertised rates are available to all consumers, when, in fact, the offers are limited to consumers with a good credit rating. Moreover, often these low rates are available only on select models, or may require a substantial down payment.
"All Rebate and Incentives Applied" Many advertisements imply that an advertised price is available to all consumers with a small footnote indicating that, in fact, a limited-availability rebate amount has been factored into the advertised sale price. Some examples of rebates that are often subtracted from the actual price include (1) "commercial buyer rebates" which apply only to individuals who are purchasing cars for their businesses, (2) "college grad rebates" available only to recent college graduates, and (3) "owner/lease loyalty rebates" which apply only to consumers who have previously leased or owned the same model of car.
"$49 Down," "Acquisition Fee, Bad Credit - No Problem," "Unclaimed vehicle sale" Some auto dealers advertise special promotions that state that all consumers have to pay to purchase a vehicle is "$49 down," or a similar low down payment. These ads often promise that bad credit is not a problem, which is always the case, and fail to disclose the real cost of financing the purchase, as required by federal law. Sometimes these advertisements give one example of the terms of sale that is not representative of the terms available on most of the automobiles offered for sale.
"$0 Down, 0% interest for 6 months" These statements are misleading because, at a minimum, consumers generally will be responsible for tax, title, and registration fees upon the purchase or lease of the vehicle. In addition, the cost of the financing will be included in future payments so that the vehicle is not really "free." Consumers should consider these deals carefully because monthly payments probably will be increased after the first six months or a significant balloon payment might be due at the end of the lease.
"Lease a Car for $169 per mo." These claims violate the federal Truth In Leasing Act and imply that the only amount due a lease signing is $169. In fact, in addition to tax, title and registration amounts, there are often significant payments at lease inception, such as a down payment, an acquisition fee, and a security deposit. Indeed, federal law requires auto dealers to make disclosures regarding all payments due at lease inception. This law also requires disclosures regarding other significant costs that may arise during or at the end of the lease, such as: mileage limitations and over-mileage fees, whether the consumer is responsible for maintenance and wear and tear on the car, and any termination fee if the vehicle is not purchased by the lessee.
"Push, Pull, Drag It in, Guaranteed Trade-in $3,000!" This advertising is deceptive since auto dealers cannot, in fact, pay money for a trade-in regardless of its actual worth. Dealers often raise the prices of the cars on their lots prior to this "special sale" so that consumers actually do not get a bargain. Others merely negotiate the terms of the deal so that the customer is not really getting as much as they think for his/her trade-in.
"Program cars," "Loaded," "Low Mileage" Some auto dealers advertise used cars without disclosing the prior use of the car (such as that it was a rental vehicle, or is a manufacturer buy back, etc.), what options the car has, as well as how many miles it has been driven. It is important for consumers to have all that information in assessing whether the advertised price is a good price, or what its condition may be.
"Pre-approved credit," "You are pre-approved for $15,000" Some auto dealers use solicitations and advertisements stating that consumers have been " pre-approved" for auto loans. In fact, not all the consumers who respond to the advertisement obtain the financing for which they have been "pre-approved." This violates federal law that requires auto dealers soliciting/advertising using such terminology either have approved - or retain a lending institution which has actually approved - the consumer for the credit amount prior to the solicitation. In addition the law requires that the auto dealer provide certain disclosures, including advising the consumer that his or her credit report has been checked, that there are steps that can be taken to stop that kind of pre-application credit check, that the consumer may not get the credit if he or she does not provide collateral, etc.
"$5,000 off," "$7,000 off list price," "$2500 off MSRP" Some auto dealers advertise that a vehicle's sale price has been reduced by a specified dollar amount, but fail to disclose the price from which the amount has been taken, and the amount on which it is based. When using a price or comparing the dealer's price to the discounted price, the dealer must rely on the manufacturer's suggested retail price (MSRP) when selling new cars, and must disclose the amount of the MSRP. Be wary of a dealer that uses a "list price" as opposed to the MSRP for a new vehicle. Consumers also should beware of ads that only provide how much the car has been reduced without providing consumers with additional information. Keep in mind, however, there is no such thing as a MSRP for used cars.
"Free gas and oil change," "Sweepstake contest-prizes guaranteed" Some dealers offer "free" merchandise to consumers who are seeking to buy a car. It is more complicated when car dealers offer so-called free merchandise since the final price of a car is negotiable. Often, the so-called "free" merchandise is simply factored into the price of a car. In addition, auto dealers must disclose the terms and conditions of such offers. Likewise, if a dealer is sponsoring a sweepstakes or other similar promotions, state law requires proper registration with the NYS Secretary of State, along with information about the rules and odds of winning.