Four auto dealers in Southern California and five others around the country agreed to settle with the Federal Trade Commission over charges of deceptive advertising that misled consumers about low prices and financing when buying cars.
The nationwide sweep, dubbed Operation Steer Clear, targeted dealers that ran misleading print, online and video ads that misrepresented costs for the sale, financing and leasing of automobiles.
“For most consumers, buying a car is one of the most expensive transactions they will make in their life. We want to make sure they have accurate information,” said Malini Mithal, assistant director of the division of financial practices at the FTC.
The Southland dealers include Honda of Hollywood and Norm Reeves Honda in Cerritos, the biggest Honda dealership nationally. Both allegedly advertised that customers could pay nothing upfront to lease a vehicle, but the advertised price actually excluded “substantial fees and other amounts.” The dealers also allegedly failed to disclose certain lease and credit related terms.
Two other local dealers, Casino Auto Sales of La Puente and Rainbow Auto Sales of South Gate, were accused of advertising specific low prices to car buyers who later found the cost was actually $5,000 higher.
The dealerships did not admit guilt as part of the settlement.
The two Honda dealerships referred calls to their lawyer, who did not immediately respond. Casino Auto Sales did not immediately return a call seeking comment.
Michael Lopez, manager at Rainbow Auto, defended his dealership by pointing out the difficulty of advertising a single price to customers who have very different credit scores.
Banks and lenders who ultimately buy car loans from dealerships charge extra fees for customers who have bad credit, Lopez said. He called the extra $5,000 a “cushion” for buyers with bad credit histories.
“I can’t sell a car to two different people for the same price,” he said. “It’s a cushion because you can’t advertise a car only for people with an excellent profile.”
Mithal said the FTC has devoted increased resources to stamp out such practices and raise consumer awareness in recent years. The settlements bar dealers in the future from violating the consumer protection laws they are accused of breaking, as well as preventing them from misrepresenting information on the sale, financing or leasing of motor vehicles, she said. Future violations could result in fines of $16,000 per violation per day.
Other dealerships in Georgia, Illinois, North Carolina, Michigan and Texas also agreed to settle.