FTC Warning Letters issued to 97 Auto Dealers

FTC Warning Letters issued to 97 Auto Dealers: What Transparent Pricing Means for Compliance and Profitability in 2026

The Federal Trade Commission (FTC) has issued warning letters to 97 auto dealer groups across the United States, signaling a decisive shift in how pricing practices will be monitored and enforced in the automotive retail sector. While these letters do not impose immediate fines or penalties, they should not be underestimated. This broad and unprecedented action by the FTC did not go as far to name the 97 dealers but does communicate a clear and deliberate message from regulators: dealerships must ensure that the prices they advertise reflect the true cost a consumer will pay.

For many dealers, this development arrives at a critical moment. The industry is already navigating tightening regulations, increasing consumer expectations, and the upcoming implementation of the California CARS Act in October 2026. Taken together, these factors point toward a new operating environment where transparency is no longer optional. It is fundamental.

Over the past five years, FTC enforcement activity in the automotive sector has increasingly concentrated on allegations of deceptive pricing and hidden fees, signaling a clear regulatory priority. Between 2020 and 2024, the Commission initiated at least 12 enforcement actions, resulting in 9 settlements and a combined $57.3 million in financial penalties. Notably, settlement values have escalated significantly, peaking at $33.6 million in 2024 alone, which underscores both the scale and seriousness of recent violations. While earlier years saw more modest penalties, the sharp increase reflects a more aggressive enforcement posture, with additional actions still pending. The trend is unambiguous, regulators are intensifying scrutiny on pricing transparency, and dealerships should expect continued oversight and higher financial exposure if practices are considered misleading.

It should also be noted that these enforcement actions have not only been taken against dealers, but individuals also. Recent enforcement actions have, in some cases, extended beyond the dealership entity to include individuals in leadership and operational roles.

At the heart of the FTC’s warning is the principle that pricing must be accurate, clear and not misleading. Under Section 5 of the FTC Act, any practice that deceives or is likely to mislead a reasonable consumer is considered unlawful. Historically, enforcement actions often focused on the most egregious cases. Today, however, the regulatory landscape has evolved. Enforcement is becoming broader and more proactive, with less distinction between intentional misconduct and operational inconsistency. As highlighted in recent industry analysis, regulators are moving toward a zero-tolerance approach where even small discrepancies in pricing or disclosures can be treated as violations.

Advertising a price that does not reflect all required fees

The FTC’s concern is rooted in a pattern of pricing practices that create confusion or mislead consumers during the vehicle purchasing process. One of the most common issues identified is the advertisement of vehicle prices that do not include all mandatory fees. While it is acceptable to exclude government-imposed costs such as tax, title and registration, any dealer-imposed charge that a typical consumer is required to pay in order to purchase the vehicle should be reflected in the advertised price. When this does not happen, customers are often drawn in by an attractive price, only to discover additional charges later in the process.

From a regulatory perspective, this creates a classic “bait-and-switch” dynamic, which falls squarely within the definition of a deceptive practice. Having any excluded fees as a foot note or denoted anywhere on the advertisement other than being included in the total price will more than likely bring attention from the FTC. Disclaimers alone are unlikely to cure a misleading advertised price if required fees are excluded, and reliance on them may still attract FTC scrutiny.

Some examples of the fees that appear to be of focus are:

·Docs Fees: The same doc fee must be charged to every customer and included in the advertised price

·Optional Equipment

·Delivery Charge/ Destination Charges (Primarily on New Vehicles)

·Service Fees

NOTE: These are listed as examples – not an exhaustive list

The FTC has specifically referred to these charges as a “required fee”. The distinction being that these are fees required by the dealer. If required by the state these can generally be excluded.

Advertising a price that reflects rebates or discounts not available to all consumers

Another area of concern involves the use of conditional rebates or discounts in advertised pricing. Many dealerships promote pricing that includes incentives tied to specific eligibility criteria, such as military service, loyalty programs or financing conditions. While these incentives are legitimate, the issue arises when they are presented as universally available. If the majority of consumers do not qualify for those rebates, the advertised price becomes misleading. The FTC considers this a material misrepresentation because it affects the consumer’s perception of the deal from the outset.

If a vehicle or offer attracts any rebates or discounts these can be listed on the advertisement, for example to the side or bottom of the advertisement. All conditions and significant exclusions must be listed on the advertisement. Rebates and discounts may be presented, but they must be clearly qualified and not presented as universally available if eligibility is limited.

Advertising a price that fails to take into account the amount of an additional required down payment

Similarly, advertising practices that fail to disclose required down payments can distort the true cost of a vehicle. When a price assumes a certain level of upfront payment without clearly communicating that requirement, it creates a disconnect between the advertised figure and the actual financial commitment. This is particularly relevant in transactions involving financing, where additional obligations under the Truth in Lending Act (TILA) may also apply.

Conditioning the advertised price on consumers using dealer financing

The FTC has also raised concerns about pricing that is conditioned on the use of dealer-arranged financing. While dealers are permitted to offer incentives tied to financing, these conditions must be clearly and prominently disclosed. Presenting a price that is only available under specific financing terms, without adequate explanation, can mislead consumers into believing that the price applies universally. This lack of clarity undermines informed decision-making and increases regulatory risk.

Requiring consumers to buy additional items not reflected in the advertised price

One of the most common complaints State and the FTC receive, involves mandatory add-ons that are not included in the advertised price. Products such as protection packages, accessories, or service contracts are often presented later in the transaction as required purchases. When these items are effectively non-optional but excluded from the advertised price, they are viewed as hidden fees. Where add-ons are effectively mandatory, they should be included in the advertised or Offering Price to ensure compliance with FTC expectations.

Some other commonly seen hard adds are:

·Supercharges

·Window Tints

·Inventory tracking hardware

·Theft deterrent

·Tire and wheel modifications

·Subscription services

This practice directly conflicts with the direction of the 2026 California CARS Act, which requires clear disclosure of the offering price and explicit, informed consent for any additional products or services.

Understanding when add-ons must be included in the advertised price is becoming increasingly important under FTC scrutiny and the direction of the 2026 CARS Act. The key principle is straightforward, if an add-on is required it must form part of the true Offering Price presented to the customer. In practice, this often depends on the nature of the product. Services such as GAP, maintenance plans, or service contracts are typically considered optional, while pre-installed items may be viewed as mandatory, particularly where they cannot be readily removed or are consistently included in transactions.

Another important factor is whether the dealership is willing and able to remove the add-on. If it can be removed upon request, this supports its classification as optional. However, if removal is difficult, impractical, or would cause damage, the product is more likely to be treated as required and must therefore be included in the advertised price. State law also plays a defining role, with jurisdictions such as California specifically categorizing certain products as optional. As a result, dealers must ensure their pricing strategy, advertising, and disclosures are fully aligned with both federal expectations and state-specific regulations to avoid compliance risk.

Advertising unavailable or non-existent vehicles

Finally, the FTC continues to monitor the practice of advertising vehicles that are not actually available. Whether due to inventory inaccuracies or intentional tactics to drive traffic, listing vehicles that cannot be purchased under the advertised terms is considered a deceptive act. This type of conduct not only erodes consumer trust but also exposes dealerships to significant enforcement risk.

What can you do?

These regulatory concerns are not emerging in isolation. They reflect broader shifts in consumer behavior and market expectations. Research from recent industry studies shows that price transparency has become the single most important factor influencing purchasing decisions. At the same time, frustration with additional fees and unexpected charges continues to rise, with a growing percentage of customers reporting dissatisfaction when pricing lacks clarity. This is further compounded by declining trust levels within the F&I process, where customers increasingly expect straightforward explanations and transparent communication.

In this context, compliance and customer experience are no longer separate considerations. They are deeply interconnected. A dealership that fails to present pricing transparently not only risks regulatory action but also undermines its ability to build trust, secure repeat business, and maximize profitability. Conversely, a dealership that embraces transparency can differentiate itself in a competitive market, creating a stronger foundation for long-term success.

To navigate this evolving landscape, dealers must adopt a more disciplined and integrated approach to pricing and compliance. This begins with ensuring that advertised prices accurately reflect the total amount a customer is required to pay, excluding only legitimate government fees. Consistency across all platforms is essential, as discrepancies between online listings, showroom pricing, and final contracts can quickly become points of exposure. Internal processes should be designed to ensure alignment at every stage of the transaction, from initial advertisement through to deal completion.

Equally important is the need to treat add-on products as truly optional, supported by clear disclosures and documented customer consent. This not only aligns with regulatory expectations but also enhances the customer experience by reducing pressure and increasing confidence. Training plays a critical role in this process, as sales and F&I teams must be equipped to communicate pricing and product information in a clear, accurate, and compliant manner.

Regular auditing of deal jackets provides an additional layer of protection. These records serve as the primary evidence of compliance in the event of an investigation, making it essential that they are complete, accurate, and reflective of the customer journey. A structured audit process allows dealerships to identify and address potential issues before they escalate into regulatory concerns.

Ultimately, the FTC’s warning letters should be viewed not as a threat, but as a catalyst for improvement. They highlight a direction of travel that is already being reinforced by state-level regulation and consumer demand. The dealerships that respond proactively by embedding transparency into their operations will not only reduce their risk exposure but also unlock meaningful commercial advantages.

As the industry moves through 2026, one principle is becoming increasingly clear. Compliance is no longer a back-end function. It is a front-line driver of performance. Dealers who recognize this shift and adapt accordingly will be better positioned to build trust, improve customer outcomes, and achieve sustainable profitability in a more regulated and more transparent automotive marketplace.

This content is for informational purposes only and does not constitute legal advice. Regulations and enforcement guidance may change, and readers should seek independent legal or compliance advice for their specific circumstances. The author accepts no liability for actions taken based on this information.