Dealers Behaving Badly: FTC Seeks to Crack Down on F&I

We would wager our combined annual salaries – a sum roughly equal to the value of a half dozen donuts from Krispy Kreme – that every single soul reading this website has a story or three about being blitzed with products in a dealer’s F&I office. Vehicle etching, useless warranties (sorry – this paper only covers mechanical fuel pumps), and p-packs up the wazoo are the bane of most shoppers’ existence when trying to buy a car.

Make no wonder some people call it the “Effin’ Eye” office.

This environment may change if the Federal Trade Commission gets its way. According to a report by Automotive News, a new proposal by the FTC would ban finance/insurance coverage and physical vehicle add-ons “that provide no benefit” while also requiring expanded disclosure on such items.

The commission’s notice of these proposed regulations was approved by a 4-1 vote earlier this week, said AN. An accompanying news release described some physical additions and F&I products as unfair add-ons, though the quartet of commissioners who voted in favor of these proposed regs did acknowledge that “not all add-ons provide no value.” Some of the items which rankled their feathers included misleading motor vehicle advertising, financing paperwork falsification, and so-called yo-yo financing practices.

“As auto prices surge, the commission is taking comprehensive action to prohibit junk fees, bait-and-switch advertising and other practices that hit consumers’ pocketbooks,” FTC Bureau of Consumer Protection Director Samuel Levine said in a statement. “Our proposed rule would save consumers time and money and help ensure a level playing field for honest dealers.”

Stated on page seven in the document linked above is a statement that the National Auto Dealers Association (NADA) suggests dealers averaged a profit of $2,444 per vehicle in pre-pandemic times, with more than half that profit coming from the F&I office. Today’s figures are surely skewed differently, what with obscene dealer markups on retail units being the norm rather than the exception. Your author has personally viewed deals with over $20,000 gross when counting both the front and back ends. And that was on a fairly pedestrian vehicle, not a bazillion-dollar hypercar. Gross, indeed.

A former colleague of this writer used to intentionally refer to the Business Manager at our store as the Finance Clerk, a term guaranteed to make the man’s blood pressure rise since he saw himself as a cornerstone of moneymaking operations at the place. While he did sell his share of WearCare and nitrogen-filled valve stem caps (seriously), there was always the overarching argument that his high-pressure tactics ‘in the box’ routinely scuppered scores the shopper would give on the brand’s follow-up survey, tanking any hope of a quarterly bonus even though the customer had little issue with the salesman himself.

How about you? Any horror stories from the Effin’ Eye office? Sound off in the comments below.

[Image: Murilee Martin]