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April 2, 2012
FTC Slaps Dealers for Online Ads By Ted Craig
Rush - Dated Material
A group of high profile used-car dealers found their major commitment to marketing brought unwanted attention from the Federal Trade Commission. The FTC settled with five dealers for online commercials that feature promises to pay off loans on consumer’s trade-ins. The regulators claim these ads, all of which appeared on YouTube, were deceptive. The FTC’s complaints allege that despite the dealers’ claims, consumers still end up being responsible for paying the difference between the trade-in loan balance and the vehicle’s value. The complaints charge that the dealers’ representations that they will “pay off” what the consumers owe are false and misleading, and violate the FTC Act.
Each dealer agreed to take down the ads and avoid such promotions in the future. The dealers named in the FTC’s complaints were: Billion Auto, Inc., in Sioux Falls, S.D.; Frank Myers AutoMaxx, LLC, in WinstonSalem, N.C.; Key Hyundai of Manchester LLC and Hyundai of Milford LLC, located in Vernon and Milford, Conn., respectively, and which advertise jointly; and Ramey Motors, Inc., in Princeton, W. Va. No consumers complained about the videos. The FTC initiated investigation following comments by consumer advocates at a series of roundtables conducted last year, according to FTC attorney Robin Thurston. The dealers avoided paying any fines for their violations, but there’s been a cost in negative publicity. The national and local press picked up on a press release the FTC issued about the settlements with the title, “FTC Takes Action To Stop Deceptive Car Dealership Ads.” Tracy Myers, owner of Frank Myers AutoMaxx, was surprised by the tone of the release. It proved the opposite of the polite settlement negotiations with the regulatory agency. “It was factual, but very sensationalized,” Myers said of the release. Continued on page 3
"Credit upside down? Need a new car? Go to Billionpayoff.com. We want to pay off your car." "Uncle Frank wants to pay [your trade] off in full, no matter how much you owe." "I want your trade no matter how much you owe or what you're driving. In fact I'll pay off your trade when you upgrade to a nicer, newer vehicle." "Ramey will pay off your trade no matter what you owe . . . even if you're upside down, Ramey will pay off your trade." Graphic by Tim Montie PHRASES THAT COST: The FTC found the use of these phrases in online advertisements to be deceptive advertising.
Consumers Want Fuel Efficiency
Kelley Blue Book reports that used compact-car values are on the rise and could reach the same 20 percent gains seen in 2011. According to Kelley Blue Book, values of used fuel-efficient compacts increased a modest 0.4 percent in February. However, values picked up significant momentum during the last weeks of the month. In the last week of February, used compacts increased 1.3 percent, while hybrid cars increased a more substantial 3.6 percent. Values of fuel-efficient vehicles will only remain elevated as long as fuel prices remain high, so if fuel prices were to ease, expect values to return to normal levels. Kelley Blue Book advises dealers to stock up on inventory sooner rather than later, since values likely will increase sharply during the next 30 to 60 days. There has been some good news for trucks. Increased activity in the construction business could mean more contractors buying vehicles. Gas prices tend to drive away casual buyers, but contractors can be a more important market, especially for used vehicles.
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