What's at Stake? 

The CARS Rule, as proposed by the FTC, introduces several new requirements that dealerships must follow when selling vehicles. These requirements include mandatory disclosures of the offering price, monthly payments, and additional recordkeeping obligations. While the FTC argues these measures aim to protect consumers, the automotive industry contends that the rule could harm dealers and consumers alike. 

Texas Independent Automobile Dealers Association (TIADA) and the National Independent Automobile Dealers Association (NIADA) have joined the lawsuit by filing an amicus brief, asking the court to vacate the rule. They argue that the rule will harm independent dealerships, increase consumer costs, and disrupt the entire sales process. 

Potential Impacts on Dealers and Consumers 

• Increased Costs for Consumers: One of the main arguments against the CARS Rule is that it will drive up vehicle prices. Dealers will need to comply with the new disclosure and recordkeeping requirements, which will increase their operational costs. These costs will likely be passed on to consumers, making vehicles more expensive.
• ?Longer Sales Process: The additional disclosures the rule requires will complicate and extend the vehicle sales process. Consumers may find the process more confusing and time-consuming, which could discourage potential buyers and impact overall sales. 
• Impact on Dealerships: Small dealerships, in particular, may struggle to adapt to the new requirements. With the additional time needed for each sale, sales personnel may be able to assist fewer customers, which could reduce their overall compensation. Many smaller dealerships could also face a decrease in revenue, which could lead to their closure. The rule could tighten credit options for dealers as banks and lenders become hesitant to work with those unable to meet the new standards. 
• Ripple Effect on Communities: The potential closure of small dealerships would affect business owners and their employees and have broader economic consequences. Many local communities rely on small dealerships as a critical part of their economic infrastructure. Fewer dealerships would mean less competition, fewer financing options, and reduced consumer access to affordable vehicles. 

What Happens Next? 

Each side will have 30 minutes to argue its case on October 9th. A live stream of the proceedings will be available for those who want to follow along in real time. After the court appearance, the arguments will be available for download from the U.S. Court of Appeals Fifth Circuit website. For more information on the case and to listen to the arguments after the October 9th hearing, visit this link. 

For now, a stay on the CARS Rule remains in effect, meaning the FTC cannot enforce the regulation while the case moves through the courts. The automotive industry, including TIADA and NIADA, is hopeful the court will side with the dealers and vacate the rule, preventing it from taking effect.