Dealers are constantly looking for ways to get an edge in the digital age, yet many continue to follow the same sales and advertising practices that they’ve been using for decades. The problem is that the game has changed and consumers have access to much more information and choices than ever before. In the past the dealer controlled all of the information, but today it’s just the opposite. Any information you offer is now carefully scrutinized and validated by a vast amount of online data. As a result, the likelihood of old-school sales practices backfiring has increased substantially.

So what type of “old-school” practices am I talking about? How about pricing vehicles without disclosing that there are rebates that most people don’t qualify for; trade-in values where the selling price is increased; trade under-allowances; withholding information on phone pops and internet leads (“just get ‘em in”); write-ups and F&I presentations (four-squares & payment packing); bait & switch advertising; and non-disclosure of vehicle histories and add-on fees?

I have spoken to many people who think this new-fangled transparency talk is just nonsense. After all, we’ve been doing business the same way for decades and it’s been wildly successful. If it ain’t broke we’d be stupid trying to fix it.

I get it. I’ll be the first to admit that I spent most of my career as a poster child for the “but we’ve always done it this way” mindset. My thinking has changed though. I’ve had the privilege of meeting some amazingly-smart automotive thought-leaders who have taught me that there’s more to success then the “whatever it takes to make a deal” mentality. While the business-as-usual way of thinking sure is comfortable, I’ve come to realize that it’s probably not the key to long-term success. So before you discount the idea of transparency in your dealership, you may want to consider these 10 potential benefits.

Increase Lead Conversion - The ultimate goal is still to “get ‘em in” and close the deal, but for an increasing number of shoppers, transparency is the only thing that will get them in. Not being upfront about details used to have its benefits. Up until recently, the salesperson could control the selling process because he or she controlled the information. Today, it’s just the opposite - consumers have all the information they need at their fingertips. If you resist answering customer’s questions, chances are you’ll never hear from them again.

Increase Closing Ratios - Higher levels of satisfaction with the selling process result in higher closing rates and higher sales. A recent survey by Maritz Research of over 163,000 Americans found that 64.0% are completely satisfied when one person with pricing authority negotiates a car deal vs. 20.7% when two or more with no pricing authority are involved.

Improve Your Reputation (your REAL reputation, not necessarily the one you “manage” online) - A dealership’s reputation is difficult, if not impossible, to maintain when staff members depend on “old school” practices. Customers often make decisions during a vehicle sale transaction that they come to regret after the “ether has worn off”. You can be sure they’re telling somebody about the transaction.  Or perhaps they’re telling thousands of people online?

Avoid Legal Problems - State & federal regulators frequently target “non-transparent” dealer practices as unfair and deceptive. These practices include bait and switch advertising, failure to sell at advertised prices, payment packing, vehicle history disclosures, yo-yo financing, improper fee disclosure, and misleading pricing.

But it ain’t illegal if you don’t get caught, right?

The new reality is that “getting “caught” is no longer likely to be just a fine and slap on the wrist. Regulators now have a new trick up their sleeve - using the media to humiliate those dealers caught in order to intimidate others. There’s plenty of political capital in going after car dealers for ambitious regulators. These regulators want press, and the tougher and more far-reaching the press the better. As a result, the severity of the offenses is often exaggerated (think about what the FTC did to those 5 unfortunate dealers last year). You need to ask yourself what the cost of that kind of negative publicity would be.

Increase Customer Satisfaction - Lack of transparency and old school tactics invariably diminish the customer experience. Nobody likes surprises. Sure, you made the deal but are your customers truly satisfied with your processes or do you just wear them down?

At the end of the day higher customer satisfaction translates into more repeat and referral business.

Increase Customer Loyalty - Customers only have loyalty if you earn it from them.

Transparent processes help build customer loyalty and retention. You’ll find that customers will be willing to spend more when they feel they’re buying from a business they can trust.

Your Customers Have Unprecedented Access to Information in Real Time - A recent JD Power report highlights a growing trend called 'Showrooming' where prospects sitting in your showroom are actually price competing your deal with another dealership using their mobile devices. Consumers not only have more access to information but also have access to more dealers. In the past, consumers were limited to dealers in their local area. The increase in the amount of information available to consumers has brought consumers a quick and easy way to analyze not only different prices via internet quotes but also to identify who they want to do business with. Customers simply have too many choices and will quickly discard dealers they feel are hiding something. Holding back information will only make them trust you less.

Reduce Chargebacks – What happens after the ether wears off and the customer goes home and reads the contract? I’ve found that the percentage of chargebacks and cancellations is directly related to transparency in sales and finance processes. For instance, staff members who participate in payment packing typically have a much higher chargeback rate. Once customers figure out that the “protection package” wasn’t really only a “few extra bucks a month”, they want to know why. You can only hope they don’t ask an attorney that question.

You’ll Stand Out From Your Competition – Let’s face it, there just aren’t a great number of dealers who are transparent yet. Progressive dealers can easily differentiate themselves by marketing their transparent processes and demonstrating their honesty. Consumers will respond - after all, how many consumers prefer old-school tactics?

Transparency is what consumers have been begging for so why not treat them the way they want to be treated? – Here’s a hint: it’s happens to be the right thing to do. In my opinion, subjecting customers to old-school processes doesn’t give them the respect they deserve. Just because you can doesn’t mean you should.

The good news is that transparency can be the pot of gold at the end of the rainbow. A transparent business model can greatly enhance your sales, reputation, customer retention, and bottom line. But first you must find the vision and courage it takes to break down deep-rooted stereotypes and embrace transparency.

I’ve said it before and I’ll say it again: Transparency is not a dirty word but complacency is. Do you have the vision and courage it takes to embrace transparency and go from being good to being great?

Dealers are constantly looking for ways to get an edge in the digital age, yet many continue to follow the same sales and advertising practices that they’ve been using for decades. The problem is that the game has changed and consumers have access to much more information and choices than ever before. In the past the dealer controlled all of the information, but today it’s just the opposite. Any information you offer is now carefully scrutinized and validated by a vast amount of online data. As a result, the likelihood of old-school sales practices backfiring has increased substantially.

So what type of “old-school” practices am I talking about? How about pricing vehicles without disclosing that there are rebates that most people don’t qualify for; trade-in values where the selling price is increased; trade under-allowances; withholding information on phone pops and internet leads (“just get ‘em in”); write-ups and F&I presentations (four-squares & payment packing); bait & switch advertising; and non-disclosure of vehicle histories and add-on fees?

I have spoken to many people who think this new-fangled transparency talk is just nonsense. After all, we’ve been doing business the same way for decades and it’s been wildly successful. If it ain’t broke we’d be stupid trying to fix it.

I get it. I’ll be the first to admit that I spent most of my career as a poster child for the “but we’ve always done it this way” mindset. My thinking has changed though. I’ve had the privilege of meeting some amazingly-smart automotive thought-leaders who have taught me that there’s more to success then the “whatever it takes to make a deal” mentality. While the business-as-usual way of thinking sure is comfortable, I’ve come to realize that it’s probably not the key to long-term success. So before you discount the idea of transparency in your dealership, you may want to consider these 10 potential benefits.

Increase Lead Conversion - The ultimate goal is still to “get ‘em in” and close the deal, but for an increasing number of shoppers, transparency is the only thing that will get them in. Not being upfront about details used to have its benefits. Up until recently, the salesperson could control the selling process because he or she controlled the information. Today, it’s just the opposite - consumers have all the information they need at their fingertips. If you resist answering customer’s questions, chances are you’ll never hear from them again.

Increase Closing Ratios - Higher levels of satisfaction with the selling process result in higher closing rates and higher sales. A recent survey by Maritz Research of over 163,000 Americans found that 64.0% are completely satisfied when one person with pricing authority negotiates a car deal vs. 20.7% when two or more with no pricing authority are involved.

Improve Your Reputation (your REAL reputation, not necessarily the one you “manage” online) - A dealership’s reputation is difficult, if not impossible, to maintain when staff members depend on “old school” practices. Customers often make decisions during a vehicle sale transaction that they come to regret after the “ether has worn off”. You can be sure they’re telling somebody about the transaction.  Or perhaps they’re telling thousands of people online?

Avoid Legal Problems - State & federal regulators frequently target “non-transparent” dealer practices as unfair and deceptive. These practices include bait and switch advertising, failure to sell at advertised prices, payment packing, vehicle history disclosures, yo-yo financing, improper fee disclosure, and misleading pricing.

But it ain’t illegal if you don’t get caught, right?

The new reality is that “getting “caught” is no longer likely to be just a fine and slap on the wrist. Regulators now have a new trick up their sleeve - using the media to humiliate those dealers caught in order to intimidate others. There’s plenty of political capital in going after car dealers for ambitious regulators. These regulators want press, and the tougher and more far-reaching the press the better. As a result, the severity of the offenses is often exaggerated (think about what the FTC did to those 5 unfortunate dealers last year). You need to ask yourself what the cost of that kind of negative publicity would be.

Increase Customer Satisfaction - Lack of transparency and old school tactics invariably diminish the customer experience. Nobody likes surprises. Sure, you made the deal but are your customers truly satisfied with your processes or do you just wear them down?

At the end of the day higher customer satisfaction translates into more repeat and referral business.

Increase Customer Loyalty - Customers only have loyalty if you earn it from them.

Transparent processes help build customer loyalty and retention. You’ll find that customers will be willing to spend more when they feel they’re buying from a business they can trust.

Your Customers Have Unprecedented Access to Information in Real Time - A recent JD Power report highlights a growing trend called 'Showrooming' where prospects sitting in your showroom are actually price competing your deal with another dealership using their mobile devices. Consumers not only have more access to information but also have access to more dealers. In the past, consumers were limited to dealers in their local area. The increase in the amount of information available to consumers has brought consumers a quick and easy way to analyze not only different prices via internet quotes but also to identify who they want to do business with. Customers simply have too many choices and will quickly discard dealers they feel are hiding something. Holding back information will only make them trust you less.

Reduce Chargebacks – What happens after the ether wears off and the customer goes home and reads the contract? I’ve found that the percentage of chargebacks and cancellations is directly related to transparency in sales and finance processes. For instance, staff members who participate in payment packing typically have a much higher chargeback rate. Once customers figure out that the “protection package” wasn’t really only a “few extra bucks a month”, they want to know why. You can only hope they don’t ask an attorney that question.

You’ll Stand Out From Your Competition – Let’s face it, there just aren’t a great number of dealers who are transparent yet. Progressive dealers can easily differentiate themselves by marketing their transparent processes and demonstrating their honesty. Consumers will respond - after all, how many consumers prefer old-school tactics?

Transparency is what consumers have been begging for so why not treat them the way they want to be treated? – Here’s a hint: it’s happens to be the right thing to do. In my opinion, subjecting customers to old-school processes doesn’t give them the respect they deserve. Just because you can doesn’t mean you should.

The good news is that transparency can be the pot of gold at the end of the rainbow. A transparent business model can greatly enhance your sales, reputation, customer retention, and bottom line. But first you must find the vision and courage it takes to break down deep-rooted stereotypes and embrace transparency.

I’ve said it before and I’ll say it again: Transparency is not a dirty word but complacency is. Do you have the vision and courage it takes to embrace transparency and go from being good to being great?

California recently joined New York in requiring that all sales commission pay plans be in writing. This may seem like common sense since many dealers realize that from a legal and practical standpoint, all commission agreements should be in writing whether it’s required or not.

Even if you already utilize written pay plans, the questions are how well are they drafted and do they offer the dealership adequate protection? Verbal commission payment agreements or poorly drafted pay plans can lead to legal trouble and employee dissatisfaction. Complaints from commissioned employees often include the dealership failing to disclose the proper cost of the vehicles and various products sold, failing to reveal the method and manner in which the pay is calculated, failing to properly justify chargebacks, and failing to comply with pay plans.

Not surprisingly, aggressive plaintiff’s attorneys smell blood in the water and actively encourage lawsuits by employees (and former employees) who claim that they were improperly compensated or charged back. These lawsuits allege dealers are intentionally violating pay plans to reduce commissions paid to the employees.

A number of recent cases involve claims that the terms of the pay plans were unclear and manipulated by dealers to cheat employees. Since judges typically have little understanding of the auto industry, they may feel that the agreement is ambiguous and find for the plaintiff. For instance, a pay plan that simply states that the salesperson will be paid "25% of front-end gross" or which fails to itemize each of the items that are not included in the commission calculation can be a ticket to disaster. It’s likely that a judge’s opinion of what constitutes commissionable gross profit will differ greatly from the dealer’s.  Without proper disclosures, he or she may decide that “gross profit” simply means the difference between the sale price and the price originally paid for the vehicle.

The absence of written pay plans, or poorly-written plans that create confusion or ambiguity, makes it extremely difficult for a dealer to defend against legal challenges.

To avoid these issues, it’s vital that your pay plans explain exactly how commissions are calculated, when they are “earned”, and how they can be charged back.

Best Practices for Bulletproof Pay Plans

Clearly Define Commissionable Amounts - Comprehensive pay plans are important for every commissioned employee in every department of the dealership, but for illustration purposes I’ll use a vehicle salesperson’s pay plan as an example. When a commission agreement provides compensation based on a percentage of profit, the formula for calculating the cost of the vehicle for commission purposes should be clearly defined and any costs or adjustments that may be added to the original cost of the vehicle should be carefully itemized. These items may include:

• Reconditioning (at retail rates, not dealer cost)
• Lot damage
• Dealer trade fees
• Transportation fees
• Lender fees
• CPO fees
• Trade-in over-allowances
• Goodwill adjustments
• Pack (non-commissionable reserve)
• Uncollected fees or payments from the customer
• Market condition adjustments

In addition, it should be clearly stated if items like holdback or dealer cash are included in the commission calculation.

Chargebacks - Laws in many states prohibit employers from taking back any portion of an employee’s wages previously paid to the employee. In order for chargebacks to be allowable, a commission agreement may need to delay the time when a commission is “earned” to allow for cancellations or refund requests. In this case, commissions paid to employees are an "advance" and are not actually earned until a deal is complete and a specified time period expires. The pay plan should define clearly when the deal is closed and when the employee is deemed to have earned the commission. 

Pay Plan Development - In many industries, commission calculations are very straightforward. For instance, a commission that is simply a percentage of the selling price of a product or service is easy to define and calculate.  Of course, dealership pay plans tend to be much more complicated than that. Ideally, commissioned pay plans should be drafted, or at least reviewed, by qualified labor law attorneys familiar with the auto industry. Input from the dealership staff is vital in order to ensure that the attorneys are aware of all of the elements involved in the commission and chargeback calculations.

Distribution - A system should be put in place to ensure proper distribution and updates of pay plans. The pay plans should be signed by the employee and the dealership.

Language - Pay plans should be drafted in plain language and be as easy to understand as possible. If an employee is confused by it, chances are a judge or juror will be too. Management should take the time to carefully explain all elements of the agreement to employees and answer any questions completely and honestly.

Transparency - Full transparency is essential to avoid employee concerns and misunderstandings. Managers should not avoid questions about how pay is calculated or chargebacks determined. If a staff member questions a commission calculation or chargeback, management should share any and all documentation. The worst thing that can happen is that the information is not shared until a plaintiff’s attorney subpoenas it.

Terminated Employees - Be sure to carefully determine and promptly pay any commissions due to terminated employees. Plaintiff’s attorneys love disgruntled former employees and frequently try to springboard their complaints into class action lawsuits.

California recently joined New York in requiring that all sales commission pay plans be in writing. This may seem like common sense since many dealers realize that from a legal and practical standpoint, all commission agreements should be in writing whether it’s required or not.

Even if you already utilize written pay plans, the questions are how well are they drafted and do they offer the dealership adequate protection? Verbal commission payment agreements or poorly drafted pay plans can lead to legal trouble and employee dissatisfaction. Complaints from commissioned employees often include the dealership failing to disclose the proper cost of the vehicles and various products sold, failing to reveal the method and manner in which the pay is calculated, failing to properly justify chargebacks, and failing to comply with pay plans.

Not surprisingly, aggressive plaintiff’s attorneys smell blood in the water and actively encourage lawsuits by employees (and former employees) who claim that they were improperly compensated or charged back. These lawsuits allege dealers are intentionally violating pay plans to reduce commissions paid to the employees.

A number of recent cases involve claims that the terms of the pay plans were unclear and manipulated by dealers to cheat employees. Since judges typically have little understanding of the auto industry, they may feel that the agreement is ambiguous and find for the plaintiff. For instance, a pay plan that simply states that the salesperson will be paid "25% of front-end gross" or which fails to itemize each of the items that are not included in the commission calculation can be a ticket to disaster. It’s likely that a judge’s opinion of what constitutes commissionable gross profit will differ greatly from the dealer’s.  Without proper disclosures, he or she may decide that “gross profit” simply means the difference between the sale price and the price originally paid for the vehicle.

The absence of written pay plans, or poorly-written plans that create confusion or ambiguity, makes it extremely difficult for a dealer to defend against legal challenges.

To avoid these issues, it’s vital that your pay plans explain exactly how commissions are calculated, when they are “earned”, and how they can be charged back.

Best Practices for Bulletproof Pay Plans

Clearly Define Commissionable Amounts - Comprehensive pay plans are important for every commissioned employee in every department of the dealership, but for illustration purposes I’ll use a vehicle salesperson’s pay plan as an example. When a commission agreement provides compensation based on a percentage of profit, the formula for calculating the cost of the vehicle for commission purposes should be clearly defined and any costs or adjustments that may be added to the original cost of the vehicle should be carefully itemized. These items may include:

• Reconditioning (at retail rates, not dealer cost)
• Lot damage
• Dealer trade fees
• Transportation fees
• Lender fees
• CPO fees
• Trade-in over-allowances
• Goodwill adjustments
• Pack (non-commissionable reserve)
• Uncollected fees or payments from the customer
• Market condition adjustments

In addition, it should be clearly stated if items like holdback or dealer cash are included in the commission calculation.

Chargebacks - Laws in many states prohibit employers from taking back any portion of an employee’s wages previously paid to the employee. In order for chargebacks to be allowable, a commission agreement may need to delay the time when a commission is “earned” to allow for cancellations or refund requests. In this case, commissions paid to employees are an "advance" and are not actually earned until a deal is complete and a specified time period expires. The pay plan should define clearly when the deal is closed and when the employee is deemed to have earned the commission. 

Pay Plan Development - In many industries, commission calculations are very straightforward. For instance, a commission that is simply a percentage of the selling price of a product or service is easy to define and calculate.  Of course, dealership pay plans tend to be much more complicated than that. Ideally, commissioned pay plans should be drafted, or at least reviewed, by qualified labor law attorneys familiar with the auto industry. Input from the dealership staff is vital in order to ensure that the attorneys are aware of all of the elements involved in the commission and chargeback calculations.

Distribution - A system should be put in place to ensure proper distribution and updates of pay plans. The pay plans should be signed by the employee and the dealership.

Language - Pay plans should be drafted in plain language and be as easy to understand as possible. If an employee is confused by it, chances are a judge or juror will be too. Management should take the time to carefully explain all elements of the agreement to employees and answer any questions completely and honestly.

Transparency - Full transparency is essential to avoid employee concerns and misunderstandings. Managers should not avoid questions about how pay is calculated or chargebacks determined. If a staff member questions a commission calculation or chargeback, management should share any and all documentation. The worst thing that can happen is that the information is not shared until a plaintiff’s attorney subpoenas it.

Terminated Employees - Be sure to carefully determine and promptly pay any commissions due to terminated employees. Plaintiff’s attorneys love disgruntled former employees and frequently try to springboard their complaints into class action lawsuits.

There’s no doubt that the right advertising program can make you plenty of money. But as they say, it’s not how much money you make but how much you get to keep that counts. Auto dealers are a favorite target of regulators hunting for advertising violations and are often blindsided by expensive fines, lawsuits and bad publicity. While the various laws and regulations covering automotive advertising can be confusing, it can be helpful to understand how lawmakers view advertising in general and what triggers their wrath.

1. It’s all about the big picture. An advertisement as a whole may be misleading although every sentence separately considered is literally true. The key is to make sure your message is clear, truthful, easy to understand, and not subject to multiple interpretations.
2. Even though the meaning of statements in an ad seems obvious to you, it may still be considered deceptive. Statements susceptible to both a misleading and a truthful interpretation are typically considered to be misleading by regulators. A good example is when the FTC recently cited a number of dealers for ads stating “we’ll pay off your trade no matter how much you owe”. While this statement may be technically true, lawmakers are of the opinion that these ads imply that the dealer will buy the trade for the amount the customer owes, regardless of its real value. Advertising is considered deceptive if the ad has a “tendency or capacity to mislead the public” or from “reasonable inferences that may be drawn from an ad”. It is vital to clearly and conspicuously disclose any material facts, including limitations, disclaimers, qualifications, conditions, exclusions or restrictions.
3. Disclaimers in themselves won’t always protect against advertising violations. A disclaimer must not contradict, confuse, unreasonably limit, materially modify a principle message, or substantially change the meaning of any advertised statements. Your disclosures should be made in a clear and conspicuous manner to minimize the possibility of misunderstanding by the consumer public. Be sure that all disclaimers are clearly and conspicuously displayed and not buried away in difficult-to-read fine print or a difficult-to-find links on websites.
4. Despite your best intentions, you may be held accountable for advertising errors. If an ad is deemed deceptive, an advertiser has liability regardless of whether there was intent to deceive.
5. Be aware that advertising laws apply to all forms of advertising, including radio, television, print, electronic, direct mail, flyers, billboards, showroom and other dealership displays, and the Internet (including social media).
6. There’s no safety net in the “but everybody does it this way” mindset. The fact that others were, are, or will be engaged in like practices will not be considered a defense in a legal action.
7. If the first contact with a consumer is secured by deception, a violation may occur even though the true facts are made known to the buyer before he enters into the contract of purchase or lease. For instance, in the above example with the “we’ll pay off your trade no matter how much you owe” ads, the dealers were found to be in violation even though they disclose that negative equity is added to the amount financed at the time of sale.
8. Regulators frequently cite dealers for advertising violations even though there are no customer complaints. Since statements and representations in advertisements are evaluated based on their tendency to deceive, no actual harm to consumers need occur for there to be a violation.
9. Bait & Switch advertising is a hot button with lawmakers and must be avoided. It is unlawful to advertise for sale any vehicle that the dealer does not intend to sell because the true intention is to switch the customer to another vehicle.  No customer should be encouraged to not purchase the advertised vehicle, nor should there be any acts attempted by the sales staff to prevent the sale.
10. Don't forget your digital marketing. Websites, videos, email, and even social media are considered advertising mediums and may be targeted by regulators. In fact, the “we’ll pay off your trade…” violations were found on the cited dealers’ websites and YouTube videos by the FTC. Don’t assume that your website provider is utilizing language that is acceptable in your particular state or including all of the required disclosures. Check to determine if all necessary disclosures are present and clearly and conspicuously displayed on the site.

Depending on the dealership, advertising and marketing may be handled by any number of people such as sales managers, internet staff, or a marketing department. Any employee involved in advertising should be properly trained. In addition, you should never assume that advertising agencies or vendors know all the laws and regulations governing advertising compliance. This is particularly true of companies based in other states, such as internet and direct mail providers. The primary responsibility for compliance lies with the dealership, not the vendor. According to the law, a dealer has the duty to investigate the accuracy of any statements made in advertising.

If you’re not sure, don’t guess! It makes sense to have your advertisements reviewed, and edited if necessary, by someone knowledge before publication. It may cost a few bucks, but it’s a small price to pay.

There’s no doubt that the right advertising program can make you plenty of money. But as they say, it’s not how much money you make but how much you get to keep that counts. Auto dealers are a favorite target of regulators hunting for advertising violations and are often blindsided by expensive fines, lawsuits and bad publicity. While the various laws and regulations covering automotive advertising can be confusing, it can be helpful to understand how lawmakers view advertising in general and what triggers their wrath.

1. It’s all about the big picture. An advertisement as a whole may be misleading although every sentence separately considered is literally true. The key is to make sure your message is clear, truthful, easy to understand, and not subject to multiple interpretations.
2. Even though the meaning of statements in an ad seems obvious to you, it may still be considered deceptive. Statements susceptible to both a misleading and a truthful interpretation are typically considered to be misleading by regulators. A good example is when the FTC recently cited a number of dealers for ads stating “we’ll pay off your trade no matter how much you owe”. While this statement may be technically true, lawmakers are of the opinion that these ads imply that the dealer will buy the trade for the amount the customer owes, regardless of its real value. Advertising is considered deceptive if the ad has a “tendency or capacity to mislead the public” or from “reasonable inferences that may be drawn from an ad”. It is vital to clearly and conspicuously disclose any material facts, including limitations, disclaimers, qualifications, conditions, exclusions or restrictions.
3. Disclaimers in themselves won’t always protect against advertising violations. A disclaimer must not contradict, confuse, unreasonably limit, materially modify a principle message, or substantially change the meaning of any advertised statements. Your disclosures should be made in a clear and conspicuous manner to minimize the possibility of misunderstanding by the consumer public. Be sure that all disclaimers are clearly and conspicuously displayed and not buried away in difficult-to-read fine print or a difficult-to-find links on websites.
4. Despite your best intentions, you may be held accountable for advertising errors. If an ad is deemed deceptive, an advertiser has liability regardless of whether there was intent to deceive.
5. Be aware that advertising laws apply to all forms of advertising, including radio, television, print, electronic, direct mail, flyers, billboards, showroom and other dealership displays, and the Internet (including social media).
6. There’s no safety net in the “but everybody does it this way” mindset. The fact that others were, are, or will be engaged in like practices will not be considered a defense in a legal action.
7. If the first contact with a consumer is secured by deception, a violation may occur even though the true facts are made known to the buyer before he enters into the contract of purchase or lease. For instance, in the above example with the “we’ll pay off your trade no matter how much you owe” ads, the dealers were found to be in violation even though they disclose that negative equity is added to the amount financed at the time of sale.
8. Regulators frequently cite dealers for advertising violations even though there are no customer complaints. Since statements and representations in advertisements are evaluated based on their tendency to deceive, no actual harm to consumers need occur for there to be a violation.
9. Bait & Switch advertising is a hot button with lawmakers and must be avoided. It is unlawful to advertise for sale any vehicle that the dealer does not intend to sell because the true intention is to switch the customer to another vehicle.  No customer should be encouraged to not purchase the advertised vehicle, nor should there be any acts attempted by the sales staff to prevent the sale.
10. Don't forget your digital marketing. Websites, videos, email, and even social media are considered advertising mediums and may be targeted by regulators. In fact, the “we’ll pay off your trade…” violations were found on the cited dealers’ websites and YouTube videos by the FTC. Don’t assume that your website provider is utilizing language that is acceptable in your particular state or including all of the required disclosures. Check to determine if all necessary disclosures are present and clearly and conspicuously displayed on the site.

Depending on the dealership, advertising and marketing may be handled by any number of people such as sales managers, internet staff, or a marketing department. Any employee involved in advertising should be properly trained. In addition, you should never assume that advertising agencies or vendors know all the laws and regulations governing advertising compliance. This is particularly true of companies based in other states, such as internet and direct mail providers. The primary responsibility for compliance lies with the dealership, not the vendor. According to the law, a dealer has the duty to investigate the accuracy of any statements made in advertising.

If you’re not sure, don’t guess! It makes sense to have your advertisements reviewed, and edited if necessary, by someone knowledge before publication. It may cost a few bucks, but it’s a small price to pay.

Since my post last week, Trust Me, I’m Your Vendor, I’m happy to say that some automotive marketing companies have reached out for advice on how to protect their dealer clients from advertising violations. This is a very positive step and I applaud them.

That’s all well and good, but dealers need to keep in mind that not all vendors are quite so diligent about protecting their clients from legal exposure. Regulators have made it abundantly clear that they simply don’t like overly-aggressive dealer marketing campaigns. They’ve also indicated that they feel the primary responsibility for advertising compliance lies with the dealership, not the vendor.  

Unfortunately, I don’t see that there’s much we can do about it in today’s consumer-centric environment. The reality is that there’s plenty of political capital in chasing car dealers.

The bottom line is that dealerships need to be proactive in protecting themselves. In a perfect world, all vendors would go out of their way to ensure complete compliance with all state and federal regulations - but we’re simply not there yet.

So here’s my contribution to the cause. I’ve compiled a list, from actual enforcement actions, of mailer and staffed event violations cited by regulators. There may be more, but you definitely want to keep an eye out for these Red Flags:

• Falsely representing that vehicles are from sources such as rental car company bankruptcies, bank repossessions, or fleet liquidations when the vehicles sold came from the dealers’ usual inventories.
• Falsely representing that a sale is being sponsored or conducted by a bank, lending institution, fleet, repossession, or liquidation company.
• Using deceptive promotions, including mailers that state “Urgent Recall-Official Notice” or otherwise imply it is from a government agency.
• Misrepresenting the number of vehicles offered at an advertised price.
• Ads that create a false sense of urgency.
• Ads that guarantee credit approval.
• Ads that guarantee a minimum trade-in value.
• Using words, phases or initials in ads that aren’t easily understood by consumers or using a font size that’s difficult to read.
• Staffed Event personnel raising vehicle prices to enable them to offer "better" deals.
• Staffed Event personnel using very aggressive sales tactics designed to maximize profit, not to offer lower-than-usual prices to consumers.
• Staffed Event salespeople and managers illegally selling automobiles without proper state licensure or without state licenses to handle insurance sales.
• Hiding the costs of extra products in payment quotes, an illegal practice called “packing.”
• Adding charges for extra products and services that were not authorized or desired by consumers.
• Negotiating a verbal or informal sales or lease agreement then changing the contract terms without a customer’s knowledge or consent.
• Advertising with the intent to not sell the vehicles as advertised.
• Misrepresenting the amount of and reasons for price reductions.
• Misrepresenting the selling price of vehicles.
• Failing to state the odds of a winning a prize, the value of that prize, and all material conditions required to obtain a prize.
• Advertising “free” merchandise and prizes without adequately disclosing that consumers would need to pay shipping, handling or other fees.
• Failing to properly disclose dealer documentary or other fees.
• Making statements that the dealer could not substantiate through its business records.
• Failing to provide disclosures required by the federal Truth in Lending Act.
• Offering a rebate that is not associated with a manufacturer or failing to disclose material terms in conjunction with a rebate offer.
• Use of simulated checks where prohibited or failing to include voiding language on the simulated checks.
• Failing to disclose limitations related to ability to obtain credit or related to the condition of a trade-in vehicle.
• Advertising “free” merchandise with the purchase of a vehicle.
• Failing to include state-required disclosures.
• Selling vehicles above the advertised price.
• Advertising vehicles that had already been sold, resulting in a “bait and switch” scheme.
• Advertising false savings such as 75 percent off the MSRP on a used vehicle or that vehicles would be sold at 95 percent off the original price without defining the “original price.”
• Statements such as “Your current loan will be paid off NO MATTER WHAT YOU OWE”.
• Making misleading statements about the availability of financing such as “$0 DOWN DELIVERS!
• Failing to disclose conditions or restrictions related to sales offers.

While regulations and “hot buttons” vary by state, keep in mind that attorneys general frequently compare notes with their peers, so you never know when your state’s AG is going to get a bee in his or her bonnet about a new issue. If you see any of the above Red Flags or you’re not completely certain that all statements made are true and not potentially misleading, it’s time to slow down and have the campaign reviewed by a qualified professional.

Remember, if you’re writing the check, you’re responsible. Good luck and good selling!

Since my post last week, Trust Me, I’m Your Vendor, I’m happy to say that some automotive marketing companies have reached out for advice on how to protect their dealer clients from advertising violations. This is a very positive step and I applaud them.

That’s all well and good, but dealers need to keep in mind that not all vendors are quite so diligent about protecting their clients from legal exposure. Regulators have made it abundantly clear that they simply don’t like overly-aggressive dealer marketing campaigns. They’ve also indicated that they feel the primary responsibility for advertising compliance lies with the dealership, not the vendor.  

Unfortunately, I don’t see that there’s much we can do about it in today’s consumer-centric environment. The reality is that there’s plenty of political capital in chasing car dealers.

The bottom line is that dealerships need to be proactive in protecting themselves. In a perfect world, all vendors would go out of their way to ensure complete compliance with all state and federal regulations - but we’re simply not there yet.

So here’s my contribution to the cause. I’ve compiled a list, from actual enforcement actions, of mailer and staffed event violations cited by regulators. There may be more, but you definitely want to keep an eye out for these Red Flags:

• Falsely representing that vehicles are from sources such as rental car company bankruptcies, bank repossessions, or fleet liquidations when the vehicles sold came from the dealers’ usual inventories.
• Falsely representing that a sale is being sponsored or conducted by a bank, lending institution, fleet, repossession, or liquidation company.
• Using deceptive promotions, including mailers that state “Urgent Recall-Official Notice” or otherwise imply it is from a government agency.
• Misrepresenting the number of vehicles offered at an advertised price.
• Ads that create a false sense of urgency.
• Ads that guarantee credit approval.
• Ads that guarantee a minimum trade-in value.
• Using words, phases or initials in ads that aren’t easily understood by consumers or using a font size that’s difficult to read.
• Staffed Event personnel raising vehicle prices to enable them to offer "better" deals.
• Staffed Event personnel using very aggressive sales tactics designed to maximize profit, not to offer lower-than-usual prices to consumers.
• Staffed Event salespeople and managers illegally selling automobiles without proper state licensure or without state licenses to handle insurance sales.
• Hiding the costs of extra products in payment quotes, an illegal practice called “packing.”
• Adding charges for extra products and services that were not authorized or desired by consumers.
• Negotiating a verbal or informal sales or lease agreement then changing the contract terms without a customer’s knowledge or consent.
• Advertising with the intent to not sell the vehicles as advertised.
• Misrepresenting the amount of and reasons for price reductions.
• Misrepresenting the selling price of vehicles.
• Failing to state the odds of a winning a prize, the value of that prize, and all material conditions required to obtain a prize.
• Advertising “free” merchandise and prizes without adequately disclosing that consumers would need to pay shipping, handling or other fees.
• Failing to properly disclose dealer documentary or other fees.
• Making statements that the dealer could not substantiate through its business records.
• Failing to provide disclosures required by the federal Truth in Lending Act.
• Offering a rebate that is not associated with a manufacturer or failing to disclose material terms in conjunction with a rebate offer.
• Use of simulated checks where prohibited or failing to include voiding language on the simulated checks.
• Failing to disclose limitations related to ability to obtain credit or related to the condition of a trade-in vehicle.
• Advertising “free” merchandise with the purchase of a vehicle.
• Failing to include state-required disclosures.
• Selling vehicles above the advertised price.
• Advertising vehicles that had already been sold, resulting in a “bait and switch” scheme.
• Advertising false savings such as 75 percent off the MSRP on a used vehicle or that vehicles would be sold at 95 percent off the original price without defining the “original price.”
• Statements such as “Your current loan will be paid off NO MATTER WHAT YOU OWE”.
• Making misleading statements about the availability of financing such as “$0 DOWN DELIVERS!
• Failing to disclose conditions or restrictions related to sales offers.

While regulations and “hot buttons” vary by state, keep in mind that attorneys general frequently compare notes with their peers, so you never know when your state’s AG is going to get a bee in his or her bonnet about a new issue. If you see any of the above Red Flags or you’re not completely certain that all statements made are true and not potentially misleading, it’s time to slow down and have the campaign reviewed by a qualified professional.

Remember, if you’re writing the check, you’re responsible. Good luck and good selling!

The news broke this week about a Louisiana marketing company that has been permanently banned from automobile advertising and marketing in North Carolina. Since Arizona, Iowa, Kentucky, Maryland, Oregon and Pennsylvania joined North Carolina in bringing the case, there will likely be repercussions for the vendor in other states as well.

On the surface, it looks like a shady operator got his just rewards. I agree and I think that’s good news for the auto industry. But let’s look a little further and see how dealers can be affected by these vendors.

This same marketing company was busted by the state of Washington back in 2007. In that case, the dealer ended up paying almost twice the amount in penalties and legal fees as the marketing company did. In addition, the dealer had to sign a Consent Decree with the Attorney General that stated among other things: “Any violation committed after the date of entry of this Consent Decree of any of the injunctive terms of this Consent Decree shall constitute a violation of an injunction for which civil penalties of up to $25,000 per violation may be sought by the Attorney General”. In other words, any advertising missteps this dealer makes will cost it dearly. This injunction is permanent by the way.

So, the shady operator pays a fine and continues business as usual with other dealers in other states. Meanwhile, the dealer pays through the nose, gets his reputation trashed, and has the AG breathing down his neck forever. Just doesn’t seem right.

In a statement about the case, Assistant Attorney General Mary Lobdell said: “Washington dealers need to be upfront and honest in their advertisements and should carefully select the companies they hire to promote their business. All companies that do business in Washington must know and operate in accordance with Washington laws. Both dealers and ad firms can be found in violation of Washington laws if their promotions fail to include all legally required disclosures. Some marketing firms, especially those located in another state, may not be familiar with Washington’s car dealer and consumer protection laws. If these companies use promotions that mislead or deceive interested buyers, both the marketing firm and the dealer may be found in violation of Washington laws.”

It doesn’t surprise me that so many dealerships sign up for these promotions and blindly believe that the vendor is following the law and covering their back. I must confess I was guilty of the same thing back in my dealership days. Perhaps it’s the excitement of fantasizing about how many cars you’re going to sell? I get it – been there, done that.

This post is not meant to villainize vendors.  I can attest to the fact that there are plenty of good marketing companies and ad agencies out there that practice due diligence. I work with a number of vendors in reviewing advertisements for compliance before they reach the public. Quite simply, this should not be an option. Dealers should insist that their vendors prove that they are following state and federal advertising regulations every time. It just makes good business sense.

The news broke this week about a Louisiana marketing company that has been permanently banned from automobile advertising and marketing in North Carolina. Since Arizona, Iowa, Kentucky, Maryland, Oregon and Pennsylvania joined North Carolina in bringing the case, there will likely be repercussions for the vendor in other states as well.

On the surface, it looks like a shady operator got his just rewards. I agree and I think that’s good news for the auto industry. But let’s look a little further and see how dealers can be affected by these vendors.

This same marketing company was busted by the state of Washington back in 2007. In that case, the dealer ended up paying almost twice the amount in penalties and legal fees as the marketing company did. In addition, the dealer had to sign a Consent Decree with the Attorney General that stated among other things: “Any violation committed after the date of entry of this Consent Decree of any of the injunctive terms of this Consent Decree shall constitute a violation of an injunction for which civil penalties of up to $25,000 per violation may be sought by the Attorney General”. In other words, any advertising missteps this dealer makes will cost it dearly. This injunction is permanent by the way.

So, the shady operator pays a fine and continues business as usual with other dealers in other states. Meanwhile, the dealer pays through the nose, gets his reputation trashed, and has the AG breathing down his neck forever. Just doesn’t seem right.

In a statement about the case, Assistant Attorney General Mary Lobdell said: “Washington dealers need to be upfront and honest in their advertisements and should carefully select the companies they hire to promote their business. All companies that do business in Washington must know and operate in accordance with Washington laws. Both dealers and ad firms can be found in violation of Washington laws if their promotions fail to include all legally required disclosures. Some marketing firms, especially those located in another state, may not be familiar with Washington’s car dealer and consumer protection laws. If these companies use promotions that mislead or deceive interested buyers, both the marketing firm and the dealer may be found in violation of Washington laws.”

It doesn’t surprise me that so many dealerships sign up for these promotions and blindly believe that the vendor is following the law and covering their back. I must confess I was guilty of the same thing back in my dealership days. Perhaps it’s the excitement of fantasizing about how many cars you’re going to sell? I get it – been there, done that.

This post is not meant to villainize vendors.  I can attest to the fact that there are plenty of good marketing companies and ad agencies out there that practice due diligence. I work with a number of vendors in reviewing advertisements for compliance before they reach the public. Quite simply, this should not be an option. Dealers should insist that their vendors prove that they are following state and federal advertising regulations every time. It just makes good business sense.