How AI Helps Dealers Navigate the New FTC CARS Rule Requirements
Auto, Aviation & Transportation News / Artificial Intelligence & Machine Learning News
For many, buying a car is a major life milestone, which isn’t something that should be done without some research. They might ask friends, coworkers, and neighbors about their car choices. They probably think about what they like and dislike about their current car, taking note of any upgrades that they’d ideally want in their new purchase. From there, they head to a dealership to compare makes and models in person, conducting test drives, and eventually signing on the dotted line.
The transaction that occurs between a dealer and a buyer is not currently regulated. Yet, the Federal Trade Commission is trying to change that with its new CARS (Combating Auto Retail Scams) rule requirement. The goal of the rule is to protect customers from junk fees and bait-and-switch tactics that dishonorable dealerships might be conducting. Here’s what car dealerships need to know about the new rule, as well as how AI can help them navigate the proposed regulations.
What are the New FTC CARS Rule Requirements?
The Federal Trade Commission was established in 1914 to crack down on unfair business practices, protect consumers from deceptive advertising, and combat monopolies. The commission’s CARS Rule was initially set to take effect in July 2024; however, due to a court ruling, the rule is currently under judicial review and has therefore not been implemented yet. That said, this rule would bring significant change to car dealerships, which is why knowing about its requirements now is important.
If implemented, the new rule will require dealerships to provide clear offering prices for vehicles, disclosing all optional add-ons before purchase. It will also require dealers to receive consent before charging buyers for these add-on features. The purpose of the rule is to prevent misrepresentation across vehicle pricing and financing. It will also ban unnecessary fees, such as duplicative warranties on a vehicle.
Upon bringing these new rules forward, the FTC noted that many reliable, trustworthy dealerships already follow many of these practices. The rule is there to set them into law, ensuring standardization and regulation across the industry.
How Can AI Help with Compliance Regulations for the FTC CARS Rule
Thanks to AI, the relationship between customers and automotive dealers is changing. Now, potential buyers can schedule test drives and learn about different models by asking chatbots their specific questions. This allows representatives to be fully with in-person clients, knowing that AI is taking care of and nurturing future leads for them.
AI can even help with the new FTC CARS Rule, ensuring dealerships are following the new procedures and regulations. Here’s how.
Transparent Pricing
One of the biggest changes with the new rules is the need to provide transparent pricing to everyone. This prevents dealers from hiding hidden junk fees or charging unnecessary add-ons at the end of the buying process. AI-driven digital retailing tools leverage machine learning and advanced algorithms to optimize the retail process from beginning to end. These tools ensure that consistent and clear communication of pricing details is given to prospective buyers from the very start of their browsing process. This pricing can be displayed on digital platforms, such as a car dealer’s website, as well as physical stickers placed on car windows.
Advertising and Website Monitoring
A car dealership may think that they are being compliant, but the FTC may find them at fault if their website isn’t up-to-date. AI tools can scan a dealer’s website and all advertising campaigns to ensure that everything is compliant and all required disclosures are present on all in-market materials. The tools can even help draft marketing campaign text that will follow all of the FTC’s regulations. This can be helpful for dealers as they transition all of their communications and pricing models to the new rules.
Record Retention and Auditing
Another requirement of the CARS Rule is for dealers to keep specific records, such as all written communications and advertising materials, for two years. Managing all these records can be a challenge, but AI tools can assist in organizing, filing, and storing the necessary materials for the required period. During an audit, this can help protect dealers, as they will likely need to provide certain files within that timeframe.
Customer Communication Monitoring
As mentioned, AI tools are already helping dealerships respond to inbound inquiries from potential buyers. AI can also help track and monitor these conversations, as well as those conducted by dealer representatives, to identify any potential compliance violations. This monitoring will be helpful when the rules are initially implemented, as some may require some getting used to by dealers. AI can flag any message that is outside of the new regulations, providing suggestions for alternative messaging instead.
Tips and Takeaways
Even though the FTC CARS rule has not been implemented yet, dealerships should be aware that changes in their business practices may be needed if the rule passes. Thankfully, many of the AI tools and technologies that car dealerships already have access to can help with compliance with the CARS rule. From assisting with communications to compiling materials for audits, AI can keep dealers organized and ensure their practices follow the FTC’s mandates.
