The passing of the Federal Trade Commission’s (FTC) proposed “Motor Vehicle Dealers Trade Regulation Rule” is imminent. Yet, many auto dealerships still need to prepare managers and employees and make them aware of the FTC rule changes and how the new rule will affect them.
The new rule will require dealers to advertise a vehicle’s “true offer” price without any optional add-on products and services and to disclose financing terms fully. In addition, the rule also bans junk fees (defined as add-on products and services that do not provide a benefit to the consumer).
At a time when many dealers are trying to reduce the time it takes to purchase a vehicle, unfortunately, the rule makes the purchase process longer. But, more significantly, the rule will require significant process changes in how dealerships market, sell, and finance vehicles.
Are your employees ready for the FTC rule changes, or do they even know about them? If your dealership still needs to prepare, here are a few tips.
Tips for Auto Dealerships to Prepare for FTC Rule Changes
Assign or hire a compliance officer.
Every dealership needs a compliance officer or qualified individual who leads up the store’s compliance program. This person should not work in a silo. Every employee needs to know who the compliance officer is, what they do and why it’s important.
These rules affect many roles in the dealership, not just the F&I office. So, hold an all-hands-on-deck meeting to explain to every employee how the rules will impact their day-to-day activities.
The dealership compliance officer is responsible for implementing and overseeing the rules. This person will also need to train, audit, report, update, and assess the effectiveness of these and other rules. It is a huge responsibility, so choose someone up to the task, and make it worth their while.
Train store personnel.
The trade regulation rule primarily affects marketing, advertising, and the sales process in the store. Therefore, dealerships must educate every employee that has responsibilities in these categories on the changes and how to prepare for them.
Salespeople must get trained on when to use the new forms and how to present them to customers. For example, if a customer asks how much a vehicle is on the lot, the salesperson cannot just say, “Oh, that one is $42,000 compared to this one which is $36,000.” Instead, every price quote will require signing three new forms.
Marketing and advertising will require more oversight. For example, dealers will no longer be able to pre-load products like paint protection packages and nitrogen tires onto a vehicle and post the selling price with these products already added. Instead, all add-on products and their prices must get presented to the consumer. And dealerships must obtain written consent.
To train personnel, utilize resources from your local dealers’ association, the FTC website, trade publications, and news articles. Better yet, get your employees certified by the Association for Finance & Insurance Professionals (AFIP). AFIP is a non-profit, non-aligned sanctioning body that offers a comprehensive certification course designed to give dealership professionals the knowledge necessary to maintain compliance with this rule and several others.
Make sure your vendors are ready.
Are your vendors ready for the new rules? Your marketing partners and F&I vendors should already be preparing for the changes. Set up meetings to discuss how the new rules will affect the products and services they provide to you.
First, it was the Safeguards Rule, and now this. The Motor Vehicle Dealers Trade Regulation Rule is the second major change to hit our industry in a period of several months. Building a solid compliance program should be a top priority for dealerships in 2023.
About the Author
Erica Cooper, MPFS, is senior manager of training operations with APCO Holdings, LLC, home of the EasyCare and GWC Warranty brands. Erica is responsible for sales training, curriculum development, in-dealership coaching, and classroom training. Erica is an AFIP Certified Master Instructor.