The CARS Rule, short for Combating Auto Retail Scams Rule, was a Federal Trade Commission regulation meant to stop bait-and-switch pricing and hidden junk fees at car dealerships. It never took effect. The U.S. Court of Appeals for the Fifth Circuit vacated the rule on January 27, 2025, finding the FTC skipped a required step in its own rulemaking process, and the agency formally withdrew the rule effective February 12, 2026.1Federal Register. Revision of the Negative Option Rule, Withdrawal of the CARS Rule, Removal of the Non-Compete Rule To Conform These Rules to Federal Court Decisions Car buyers still have protections under Section 5 of the FTC Act, the FTC’s Used Car Rule, and various state consumer protection laws, but the specific CARS Rule requirements are not enforceable.
What the CARS Rule Was Designed To Do
The FTC finalized the rule in December 2023, using authority granted by the Dodd-Frank Act that let the agency write rules for auto dealers through a streamlined process.2Federal Trade Commission. FTC Announces CARS Rule to Fight Scams in Vehicle Shopping It targeted two problems: deceptive pricing tactics and charges for add-on products with little or no real value.
The rule would have applied to any dealer licensed by a state to sell motor vehicles who takes title to or physical custody of vehicles.3Office of the Law Revision Counsel. 12 USC 5519 Exclusion for Auto Dealers Private sellers, unlicensed individuals, motorcycles, agricultural equipment, and vehicles sold strictly for scrap or parts fell outside its reach.
Why the Fifth Circuit Struck It Down
The National Automobile Dealers Association and the Texas Automobile Dealers Association challenged the rule the same day it was published. On January 27, 2025, the Fifth Circuit sided with the dealers, finding the FTC violated its own internal regulations by skipping a required advance notice of proposed rulemaking before issuing the rule.4United States Court of Appeals for the Fifth Circuit. National Automobile Dealers Association v. Federal Trade Commission, No. 24-60013
The dispute was procedural, not substantive. The Dodd-Frank Act let the FTC bypass certain statutory rulemaking steps for auto dealer regulations, but the court concluded that the Act did not excuse the FTC from following its own internal procedural rules, which independently require an advance notice before proposing a trade regulation rule. The FTC argued the omission was harmless. The court disagreed, finding the CARS Rule was detailed and complex enough that early input from dealers and the public could have changed the outcome. It vacated the rule in full.
Following the decision, the FTC formally withdrew the CARS Rule effective February 12, 2026, stating it was conforming the regulation to the court’s ruling.1Federal Register. Revision of the Negative Option Rule, Withdrawal of the CARS Rule, Removal of the Non-Compete Rule To Conform These Rules to Federal Court Decisions The agency has not announced plans to restart the rulemaking process with the required advance notice step.
What the Rule Would Have Required
The vacated rule is worth understanding because its provisions describe practices the FTC still treats as deceptive under other authorities, and because buyers lost specific safeguards when it went away.
Pricing and Disclosure Requirements
Dealers would have had to disclose an “Offering Price” in any advertisement mentioning a specific vehicle or financing term. This meant the full cash price the dealer would sell the vehicle for to any buyer, with only government-imposed charges excluded (taxes, license and registration, inspection or certification fees).5Federal Trade Commission. 16 CFR Part 463 – Combating Auto Retail Scams Trade Regulation Rule Documentation charges, prep fees, and advertising surcharges would have needed to be built into that price, not added later.
When a dealer mentioned an add-on, the rule would have required a clear statement that the add-on was optional and the buyer could purchase the vehicle without it. When a dealer quoted a monthly payment, the rule would have required disclosure of the total amount the buyer would pay over the life of the loan at that payment.6Federal Register. Motor Vehicle Dealers Trade Regulation Rule
Prohibited Misrepresentations
Dealers would have been barred from misrepresenting:
- Price and financing terms, including monthly payments that don’t reflect the true loan amount.
- Rebates and discounts, particularly when a discount factored into the advertised price isn’t actually available to every buyer.
- Vehicle condition and history, including whether a car is new or used.
- Government affiliation or endorsement.
The rule also included protections aimed at service members, prohibiting false claims about military affiliation, misleading statements about moving a financed vehicle across state lines or overseas during deployments or a permanent change of station, and false statements about repossession protections under the Servicemembers Civil Relief Act.7Military Consumer. Servicemembers Combating Auto Retail Scams
Ban on Worthless Add-Ons
The rule would have banned charging for add-on products that provide no real benefit, in two categories. The first was physically ineffective products, such as nitrogen-filled tires where the nitrogen concentration doesn’t meaningfully exceed regular air (roughly 78% nitrogen), or theft-deterrent products that don’t actually prevent or deter theft.8Federal Trade Commission. Combating Auto Retail Scams Trade Regulation Rule The second was redundant coverage, meaning service contracts or warranties duplicating protection already provided by the manufacturer’s warranty. If a factory warranty covers the powertrain for five years, a separate powertrain contract for the same period would have violated the rule.
Express Informed Consent
Every charge on a buyer’s contract would have required express informed consent, meaning the buyer had to specifically agree to each individual charge before the dealer could collect it. The rule explicitly targeted dark patterns in dealer paperwork, such as burying an add-on charge in a thick stack of closing documents.5Federal Trade Commission. 16 CFR Part 463 – Combating Auto Retail Scams Trade Regulation Rule
What Protections Car Buyers Still Have
The withdrawal doesn’t leave car buyers without recourse. Several protections remain in place.
Section 5 of the FTC Act
Section 5 broadly prohibits unfair or deceptive acts or practices in commerce, and the FTC has used it against auto dealers for decades.9Federal Trade Commission. A Brief Overview of the Federal Trade Commission’s Investigative, Law Enforcement, and Rulemaking Authority The practical difference is enforcement posture: Section 5 cases are brought individually against specific dealers after the fact, rather than setting industry-wide rules in advance. The CARS Rule would have given the FTC a faster path to penalties because violating a trade regulation rule triggers automatic liability, while standalone Section 5 cases require proving the conduct was deceptive. The agency remains active. In March 2026, it warned 97 dealership groups about deceptive pricing practices.
Civil penalties for Section 5 violations currently reach up to $53,088 per violation, following the most recent inflation adjustment.10Federal Trade Commission. FTC Publishes Inflation-Adjusted Civil Penalty Amounts for 2025
The Used Car Rule
The FTC’s Used Car Rule, in effect since 1985, requires dealers to display a Buyers Guide on every used vehicle they offer for sale. The guide must disclose whether the dealer offers a warranty, and if so, its duration, what it covers, and what share of repair costs the dealer will pay.11Federal Trade Commission. Used Car Rule The CARS Rule litigation had no effect on this rule.
State Consumer Protection Laws
Several states have enacted laws targeting the same dealer practices the CARS Rule addressed, including California, Minnesota, Colorado, Virginia, and Massachusetts, with bills introduced in roughly a dozen more. Coverage and enforcement vary widely, so check with your state attorney general’s office for the protections that apply where you live.
How To Report Dealer Misconduct
If a dealer misleads you about pricing, adds charges to your contract without your agreement, or pressures you into add-ons, you can report the conduct to the FTC at ReportFraud.ftc.gov.2Federal Trade Commission. FTC Announces CARS Rule to Fight Scams in Vehicle Shopping The FTC doesn’t resolve individual complaints, but reports feed enforcement databases the agency uses to identify patterns and build cases. For individual relief, a complaint to your state attorney general’s consumer protection division or a consultation with a consumer rights attorney is more likely to produce a direct result.