On October 9, 2024, the Fifth Circuit Court of Appeals heard oral arguments in a case that could determine whether American car buyers get meaningful federal protection from dealership deception — or whether the status quo of junk fees and bait-and-switch pricing continues without consequence.
The case pits the National Automobile Dealers Association (NADA) against the FTC's Combating Auto Retail Scams Rule, known as the CARS Rule. Here's what's actually at stake.
What the CARS Rule Would Do
The FTC finalized the CARS Rule in late 2023. It was designed to address deceptive practices that the agency documented extensively across American car dealerships. If it survives legal challenge, the rule would:
- Require dealers to disclose the actual price of a vehicle upfront, including all fees
- Ban add-ons that consumers didn't request and didn't agree to
- Prohibit bait-and-switch advertising — advertising one price and then presenting a higher one at the dealership
- Require clear disclosure of any financing terms before a deal is signed
- Ban misrepresentation of what's included in a loan or lease
The FTC estimated that these practices cost American consumers approximately $3.4 billion per year. That's not a small number. That's real money being taken from car buyers through tactics that are legal only because no specific rule prohibited them at the federal level.
What NADA Is Arguing
The National Automobile Dealers Association challenged the rule in the Fifth Circuit, arguing that:
- The FTC did not follow proper rulemaking procedures under the Magnuson-Moss Warranty Act framework
- The rule is overbroad and would impose compliance burdens on dealers
- Some of the prohibited practices are already covered by state law
The Fifth Circuit, which covers Texas, Louisiana, and Mississippi, agreed to fast-track consideration. Oral arguments were held October 9.
"The dealership industry's argument is essentially that they should be allowed to keep doing what they've been doing because it was technically legal. That's not a defense — that's a description of the problem."
What the Ruling Could Mean
If the Fifth Circuit sides with NADA and vacates the rule, federal protections for car buyers remain where they've been: limited, patchwork, and dependent on state-level enforcement that varies enormously.
If the rule survives, dealers would face real consequences for practices that have been industry standard for years:
- Charging for "dealer prep fees" never disclosed until signing
- Adding paint protection packages or VIN etching without clear consumer agreement
- Advertising vehicles at prices that exclude mandatory add-ons
- Marking up financing rates without disclosure
Why This Matters Beyond the Dealership
The CARS Rule legal fight is about more than dealerships. It reflects a broader question about whether the FTC can enforce consumer protection rules against entrenched industries that have normalized deceptive practices over decades.
EthicalMechanic.org will continue tracking this case as the Fifth Circuit issues its ruling. For car buyers, the bottom line is simple: the CARS Rule, if it stands, would make the car buying process substantially more honest. That's worth paying attention to.