A touch on advertising.
By: Ross Buell & Charles Campbell
Advertising is essential to conducting business as a dealership. It requires a significant amount if skill to create adds that will entice customers and still meet federal, state, and local regulations. Take the example shown below:
At first glance, this add looks terrific. However, upon further inspection, this add violates the “Truth in Lending Act” on various fronts. Lets examine what is incorrect, and in potential violation of the Truth in Lending mandates.
1) The statement, “No matter what you owe” implies that the consumer may no longer be responsible for the remaining balance owed on the trade-in. When in fact, that negative equity will be added to the credit balance of the purchased RV, or require out of pocket funds, as part of the “Down Payment”. A better approach would be, “We will pay top dollar for your trade-in” or “We will give you the best price possible …”, If in fact you do. This would not be representative of a misleading or untruthful add.
2) The statement showing 3 year/ 36,000 mile warranty, does not disclose that the warranty has limitations, or that it is available for review at the dealership. Disclosure, prior to the sale of the RV, is required by federal mandate.
3) The statement, “1.5% Financing for 4 years”, does not properly disclose the condition that it is an Annual Percentage Rate, (APR). It also does not disclose that financing under these terms are available only on “on approved credit”. The federal Truth In Lending Act (TILA) outlines what is necessary in order to disclose an interest rate and/or payment.
4) When a reduced price is advertised, the previous price must have been offered to the public for a reasonably significant time frame. Be ready to prove it. If the reduced price includes a rebate from the manufacture, or any other incentive, these must be properly disclosed to the consumer.
And finally, It is a good idea to identify how many vehicles are available at the advertised offer. Identifying them via the vin number is the best practice because it leaves no question on which vehicles are offered. This also deals with “Bait and switch” advertising which is prohibited by federal law. This is where a dealer is advertising a vehicle, or service, they don’t have, or doesn’t intend to actually sell. They do this with the intention to sell a different vehicle or service. No advertisement should be published with the intent to move a customer from one product to another, and never if the dealership does not actually have that product. Placing the customer into a situation where they can be switched from the advertised product to another is a violation and will be addressed by the FTC.
Below is a better example of the previous add;
1) The statement, “No matter what you owe” has been replaced with, “We will pay top dollar for your trade-in”. This statement is not misleading or untruthful, (As long as you do “pay top dollar” as stated in the add.)
2) The statement showing 3 year/ 36,000 mile warranty, now discloses that the warranty has limitations, and that it is available for review at the dealership. The consumer only needs to go see the sales department staff.
3) The statement, “1.5% Financing for 4 years”, has been replaced with ” 1.5% Financing APR on approved credit”. this statement discloses the condition that it is an Annual Percentage Rate, (APR). And, that financing under these terms are available only “on approved credit”.
4) The add is now disclosing that the asking price of $85,999 was determined after the $5,000 manufacturer rebate and $5,000 consumer down has been applied to the RV.
Advertising can be tricky and it requires diligence, consistency, knowledge of federal, state, and local regulations, and, because advertising can violate regulations even without intent, review of the statements to ensure they are truthful and descriptive before publication.