Why a court’s decision could cost car buyers in U.S. $3.4bn annually

Car buyers in the United States face renewed challenges after a federal court overturned Biden-era rules designed to protect them from deceptive dealership practices. The decision, announced by the 5th Circuit Court of Appeals, nullifies regulations aimed at improving price transparency and preventing unnecessary add-on charges.

The overturned rules, finalised in January 2024, required upfront pricing in advertisements and sales discussions. They also mandated informed consent for additional costs, such as service contracts or warranties deemed redundant. The Federal Trade Commission (FTC) had estimated these measures could save consumers over $3.4 billion annually and reduce car shopping time by 72 million hours.

“This ruling is a victory for the rule of law and a win for consumers,” said Mike Stanton, president of the National Automobile Dealers Association (NADA). He argued the regulations would have added “time, complexity, and cost” to car buying, making the process burdensome for customers.

The legal challenge originated from NADA and a Texas-based dealer group. They claimed the FTC violated procedural rules by enacting the regulations without adequate notice. The court, in a 2-1 decision, agreed, halting the implementation of the policies.

Judge Stephen Higginson dissented, emphasizing the years of preparation behind the rules. “Congress gave the FTC authority to enforce price transparency and combat deception,” he stated. Higginson highlighted over a decade of public input, including 100,000 consumer complaints about misleading dealer practices.

The FTC’s efforts have previously yielded significant results. In December 2024, the agency secured a $20 million settlement from ten dealerships accused of defrauding buyers. Still, the recent court ruling raises concerns about how consumers will now navigate an already complex car-buying process.

One of the rejected rules sought to outlaw “junk fees,” such as service contracts for electric vehicles requiring no oil changes or duplicate warranties. “These fees drain buyers’ wallets and trust,” said an FTC spokesperson, who called the decision a step backward for consumer protection.

For many, this ruling marks a setback in the fight for fair practices in the auto industry. With annual car sales in the U.S. exceeding $1 trillion, the implications are enormous. Consumers must now be even more vigilant when purchasing vehicles, as the protections once in place have been stripped away.

Why It Matters:

For the average car buyer, this decision means a return to navigating potential pitfalls in dealership agreements. The absence of these rules could lead to additional costs and lost time, making transparency and informed decisions more critical than ever.

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