“Buckle Up: Navigating Auto Sales and Financing” — What You Need to Know

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Last updated Apr 25, 2023

The Federal Trade Commission recently released a report highlighting the struggles consumers encounter when trying to buy a car. The report, titled, “Buckle Up: Navigating Auto Sales and Financing,” is a 13 page Staff Report produced by the Bureau of Consumer Protection.

There is an accompanying 48 page report entitled, “The Auto Buyer Study: Lessons from In-Depth Consumer Interviews and Related Research,” which goes even more in depth into the consumer interviews the FTC conducted for their research.

Both reports are dense, and take a long time to read. Here at CarEdge, we feel responsible to distill reports like these for you. So, that’s exactly what we did. Click on the table of contents below to jump to a section, or enjoy the accompanying YouTube video that goes in depth on why you shouldn’t negotiate based off of a monthly payment.

If you find this content helpful, please consider sharing it with a friend or colleague.

Let’s dive in.

Automotive advertising is a bunch of … B.S.

It should come as no surprise that the FTC found that automotive advertisements are generally full of misleading information. The report reads, “Advertisements with misleading financing terms (as well as those with deceptive price and discount offers) remain a concern.”

The report goes on to suggest that dealers should, “make only accurate and non-misleading advertising claims to consumers, advertise terms that are actually available, and clearly and conspicuously disclose material qualifications or limitations on any advertised deal.” This is a novel concept. Let’s hope it catches on.

As we’ve discussed before, there are many ways to find which car dealership you should go to, and our recommendation is to follow these steps:

What the heck is the actual price of the vehicle?

Another key finding from the FTC’s research is that consumers are generally confused about what the price of a vehicle is, and what is and isn’t negotiable. You would have hoped that with the advent of websites like TrueCar, AutoTrader, and more, that consumers would have an advantage in understanding what the true cost to purchase a vehicle would be, but that couldn’t be further from the truth. Unfortunately websites like the ones we listed above simply perpetuate the “smoke and mirrors” that comes with automotive pricing.

The study repeatedly discusses the importance of negotiating the “out-the-door” price. As far as we know, our Out-the-Door Price Estimator is the only such tool on the internet that is designed to help you estimate what your total OTD price will be when purchasing a vehicle. Please use the tool! It is FREE!

The study goes on to report that consumers that do negotiate on the out-the-door price still run into trouble, “As some study participants explained, after negotiating what they thought was an agreed price for a vehicle with sales personnel, they faced negotiating again during the dealer’s financing process, which they found frustrating and time-consuming. The introduction of add-ons during financing discussions caused several participants’ total sale price to balloon from the cash price, and for two participants, negative equity for trade-ins caused the amount financed to increase.”

Be sure to watch this video to better understand how you can be prepared for this situation, should you encounter it:

Consumers get screwed in the F&I office

I spent at least 20 minutes trying to think of a more appropriate title for this section of the article, and candidly, I couldn’t think of anything else that accurately sums up what the FTC uncovered in their report.

As a car buyer, it is important that you know that you can negotiate nearly everything at the dealership, and that includes finance options, insurance products, and more.

The FTC report reads like a horror novel, “Several participants did not recall learning the length of the financing or the APR before agreeing to financing. Several participants were surprised to learn about these terms when they reviewed their paperwork during the FTC’s qualitative study.”

If you do not feel comfortable with something that is going on in the F&I office, ask the F&I Manager to slow down, and ask questions. More on how to handle being in the F&I office here:

Dealer add-ons are confusing and dumb

The FTC report brings to light how confusing and frustrating the dealership practice of adding ancillary products and services to vehicles really is. If you’re unfamiliar with this concept, it is when a dealership sells you a car with additional products installed that you did not request. For example window etch, or LoJack, among many others.

The FTC report highlights the many challenges consumers face when confronted with dealer add-ons, including but not limited to:

  • Never discussing add-ons, but including them in the selling price of the vehicle;
  • Consumers are confused and think the add-ons are free;
  • Consumers are under the impression that the add-ons are mandatory;
  • And more.

The future of car buying and ownership should be different

Here at CarEdge we are determined to change the way car buying and ownership works in the United States. Buckle Up: Navigating Auto Sales and Financing from the FTC is a great reminder as to why it is so necessary to evolve the way we buy and own vehicles.

If you’re interested in being a part of that change, please consider being an early tester of the CarEdge platform.


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