4 Shady Things Some Car Dealers Do That Are Actually Illegal

Buying a car is one of the priciest decisions most Americans will ever make. As if price wasn't enough, the complicated and time-consuming fine print adds insult to injury. It's as high-stakes as it is confusing. Unfortunately, that combination has created plenty of opportunities for some dealerships to take advantage of people. Of course, you can still find credible car dealers out there. But the Federal Trade Commission (FTC) has warned that some car dealers have been known to cross the line from aggressive sales into outright illegal behavior.

The FTC has specific rules and regulations in place to keep the shadiest illegal sales tactics at bay. But that doesn't always mean car dealerships follow them as they should. From hidden fees to crooked financing, the FTC previously estimated that people had lost billions of dollars (not to mention millions of hours) to deceptive deals. These four tactics are some of the most common. Every last one can violate federal consumer protection laws, so it's definitely something to be aware of.

It's so frustrating when you see a car listed at a great price online, only to get to the dealership and find out the offer's not even available. You got bait-and-switched, which violates the FTC Act. In California, the CARS Act takes protecting consumers a step further by going after this practice.

Bait and switch scams can happen in more ways than one. Maybe a dealership advertises a specific vehicle that it doesn't actually have in inventory. Or maybe it tells you about discounts or rebates that you don't qualify for. The same for financing terms that change once the paperwork begins. It's all a bait and switch. And it's all illegal.

The dealership's just trying to get you in the door with one offer, only to pressure you into accepting a more expensive alternative. But the law says dealers aren't allowed to misrepresent any key information about a vehicle's price, financing terms, or availability. What you see advertised is what you should realistically expect to pay, no exceptions. The same goes for used cars, too.

Everybody knows somebody with a similar story: You and the car salesperson agree on a price, then you get to the signing process and see the final price contains fees that were never clearly disclosed. These so-called "junk fees" are almost always buried deep in lengthy contracts, revealed right when you've already committed and are less likely to walk away. Billions of dollars have been wasted on these junk fees, but the FTC's putting its foot down.

Junk fees come in several different forms. You might see duplicate warranty coverage, vague administrative or processing fees, unnecessary service contracts, or charges for extra features your vehicle doesn't even support. Whatever it may be, federal regulations say dealerships can't offer you add-ons that don't deliver a real benefit. Dealers also have to clearly disclose the full offering price upfront, not just a partial figure designed to get you on the hook. Always double-check the car loan's terms, just to be safe.

Upsells are a thing just about anywhere you shop. But shady car dealerships have a way of pressuring consumers into purchasing extras or agreeing to specific financing terms by framing them as a requirement to seal the deal. That's not the same thing as an upsell. It's actually unlawful. Car dealerships have been known to force these add-ons on customers, intentionally failing to disclose them in initial advertising and dropping the bomb only after the buyer has invested time and effort in the sale.

Examples include requiring customers to purchase extended warranties or service packages that weren't part of the original offer. In some cases, dealerships also insist that buyers use in-house financing to qualify for a particular price. That's illegal, too. They aren't allowed to limit your ability to shop for better loan terms elsewhere. To stay compliant, the FTC says dealers have to tell you that add-ons are optional and can't condition a deal on specific financing arrangements.

Beyond pricing and sales tactics, federal law is also looking out for how dealerships handle sensitive customer data. Because many dealers arrange financing or leasing, they're legally considered financial institutions under federal regulations. Therefore, the FTC says they have to follow the same strict data protection requirements as banks and other lenders.

These rules require dealerships to put comprehensive security programs into place to protect customer information. That includes Social Security numbers, financial records, and other personal data collected during the financing process. Failure to do so (or, worse, allowing unauthorized access) is a violation of federal law.

In addition to these basic precautions, dealers also have to regularly assess risks, implement encryption and access controls, monitor their systems, and update their security measures. They're also required to report certain data breaches within a specified timeframe. Otherwise, they're breaking federal law. If you've encountered any one of these shady dealings, the FTC encourages you to report the fraud.