In January 2025, the Fifth Circuit Court of Appeals vacated the FTC's CARS Rule — the Combating Auto Retail Scams Rule — on procedural grounds. Dealers and their industry lobbying groups celebrated. Consumer advocates called it a setback. And then... enforcement kept going.
Here's what actually happened, what it means for you, and what protections you still have.
What the CARS Rule Was
The FTC finalized the CARS Rule in December 2023 after years of complaints about dealership add-ons, bait-and-switch pricing, and "junk fees" buried in finance contracts. The rule would have required dealers to:
- Clearly disclose the total price of a vehicle upfront
- Get explicit consent before adding optional products to the deal
- Stop misrepresenting financing terms or the cost of add-ons like extended warranties and paint protection packages
The auto dealer lobby — primarily the National Automobile Dealers Association (NADA) — sued immediately, arguing the FTC violated the Administrative Procedure Act by skipping required cost-benefit analysis steps in the rulemaking process. The Fifth Circuit agreed and tossed the rule.
Why It Didn't Stop Prosecutions
Here's what the industry didn't advertise: the CARS Rule was never the only tool prosecutors had. The FTC Act's Section 5, which prohibits unfair or deceptive acts and practices, has been on the books for over a century. State consumer protection statutes have similar teeth.
The FTC and state attorneys general have continued pursuing dealers under these existing authorities. In the months after the rule was struck down, the FTC sent warning letters to dealerships flagged for deceptive pricing practices and proceeded with ongoing investigations. Several state AGs followed up with their own actions.
None of that required the CARS Rule to exist.
California Stepped In
California, which has historically led on consumer auto protections, enacted its own version — the California CARS Act — to fill the gap at the state level. It imposes requirements similar to what the federal rule would have mandated: transparent pricing, no unauthorized add-ons, written consent for optional products.
California dealers started complying in 2025. Dealers in other states are still operating under whatever their state law requires — which varies significantly.
What Protections You Still Have
Even without the federal CARS Rule, you're not without options:
FTC Act protections — Deceptive practices at dealerships can still be prosecuted federally. The rule's absence doesn't mean the FTC went home.
State consumer protection laws — Every state has them. Some are strong (California, New York). Some are weaker. Know yours.
Truth in Lending Act (TILA) — Dealers must disclose the actual cost of financing. If they obscure APR, fees, or payment terms, that's a federal violation.
Your right to walk away — No rule required, no legislation needed. If a dealer adds products to your contract without asking, you can refuse to sign. This is the most underused protection in existence.
The Bottom Line
The death of the CARS Rule was a procedural win for the dealer lobby, not a substantive one. Dealers don't get a green light to deceive customers just because one regulation was vacated. The legal tools to prosecute them still exist. Enforcement is still happening.
What changed is that the rules are less uniform across states. If you're shopping for a car, California buyers have clearer protections than buyers in states that haven't passed equivalent legislation.
Before you sign anything at a dealership, read every line of the contract. If you see charges for products you didn't ask for, say so in writing before you sign. And if you believe a dealer deceived you, file a complaint — with your state AG, with the FTC at ReportFraud.ftc.gov, and with your state's DMV or consumer affairs office.
For more on avoiding dealership scams, see our guide at /avoiding-scams/.