The Truth About Dealer Add-Ons: How the FTC's New Rules Protect You

February 12, 2025 • Beat the 4 Square Team
Consumer Protection
FTC CARS Rule dealer add-ons consumer protection car buying rights mandatory fees

The Truth About Dealer Add-Ons: How the FTC's New Rules Protect You

The Federal Trade Commission's new Combating Auto Retail Scams (CARS) Rule, effective July 30, 2024, fundamentally changes how dealerships can charge you for add-on products and services. For the first time, federal law specifically addresses many of the profit-padding tactics that have cost consumers billions.

Here's what you need to know about your new rights and how to use them.

What the FTC CARS Rule Actually Says

Section 463.4: Prohibited Misrepresentations

The rule prohibits dealers from:

  • Misrepresenting that any charge or add-on is required by law when it's not
  • Failing to disclose material terms of financing or leasing
  • Making false claims about add-on products or services

Section 463.5: Required Disclosures

Dealers must now:

  • Provide clear, prominent disclosures about optional add-ons
  • Distinguish between required fees and optional products
  • Allow consumers to decline optional add-ons

What Counts as an "Add-On" Under the CARS Rule

Clear Add-Ons (Always Optional):

Extended Warranties and Service Contracts:

  • Mechanical breakdown insurance
  • Powertrain protection plans
  • Maintenance packages
  • Electronic component coverage

Insurance Products:

  • GAP insurance
  • Credit life insurance
  • Disability insurance
  • Theft protection insurance

Vehicle Protection Services:

  • Paint protection (ceramic coating, sealants)
  • Fabric protection (Scotchgard-type treatments)
  • Rust-proofing or undercoating
  • Window tinting

Security and Anti-Theft:

  • Alarm systems
  • GPS tracking devices
  • VIN etching
  • Wheel locks

Appearance and Accessories:

  • Floor mats and accessories
  • Nitrogen tire filling
  • Trim packages
  • Aftermarket modifications

Gray Area Items (Dealer Discretion):

Documentation and Processing Fees:

  • Legal if: Reasonable and actually performed services
  • Questionable if: Excessive ($500+) or pure profit

Market Adjustments:

  • Legal if: Clearly disclosed as dealer markup
  • Questionable if: Presented as required or unavoidable

Prep and Delivery Fees:

  • Legal if: Actual services performed
  • Questionable if: Duplicated or inflated

Understanding "No Benefit to the Consumer" Language

The FTC's Standard

The CARS Rule focuses on misrepresentation rather than value judgments. However, the FTC considers add-ons problematic when they:

  • Provide no actual service (pure profit items)
  • Duplicate existing coverage (unnecessary insurance)
  • Are grossly overpriced compared to alternatives
  • Are misrepresented as required or beneficial

Examples by Category:

No/Minimal Consumer Benefit:

  • VIN etching for $300 (costs dealer $5)
  • Nitrogen tire filling for $200 (marginal benefit)
  • "Dealer prep" fees with no actual service
  • Market adjustments without justification

Questionable Benefit:

  • Extended warranties at 300% markup
  • GAP insurance at 500% markup
  • Paint protection applied incorrectly or cheaply

Legitimate Benefit (if reasonably priced):

  • Properly applied ceramic coating
  • Comprehensive extended warranty at fair price
  • GAP insurance for underwater loans

Add-Ons That ARE Worth the Cost (Sometimes)

Extended Warranties - Worth It If:

  • Priced within 25% of manufacturer warranty
  • Covers major components (engine, transmission, A/C)
  • Backed by reputable company with good claims history
  • You plan to keep the car beyond basic warranty

Red flags:

  • Markup over 200% of cost
  • Exclusions for common problems
  • Difficulty filing claims

GAP Insurance - Worth It If:

  • Priced under $500 total
  • You put less than 20% down
  • Loan term exceeds 60 months
  • Vehicle depreciates rapidly

Red flags:

  • Priced over $700
  • Duplicate of existing coverage
  • Not needed for large down payments

Paint Protection - Worth It If:

  • Professional ceramic coating properly applied
  • Priced under $800 for quality work
  • Includes maintenance products and instructions
  • You keep cars long-term in harsh climates

Red flags:

  • Simple wax or sealant for $500+
  • Applied by untrained staff
  • No maintenance instructions

How to Request Add-On Removal in Writing

Email Template for Add-On Removal

Subject: Add-On Removal Request - [Your Name] - [Deal Date]

Dear [Finance Manager/Sales Manager],

Per the FTC CARS Rule (Section 463.5), I am requesting the removal 
of the following optional add-ons from my vehicle purchase:

Vehicle: [Year Make Model VIN]
Purchase Date: [Date]

ADD-ONS TO REMOVE:
1. Extended Warranty - $[amount]
2. Paint Protection - $[amount]  
3. GAP Insurance - $[amount]
4. [Any other optional products]

I understand these are optional products and choose to decline them.
Please provide:

1. Updated purchase agreement without these items
2. Revised out-the-door pricing
3. New payment calculation (if financing)
4. Written confirmation of removal

Under FTC CARS Rule 463.5, I have the right to decline optional 
add-ons. Please process this request immediately.

Thank you,
[Your Name]
[Your Phone]
[Email]

Purchase Order #: [if available]

Text Message for Quick Removal

Hi [Finance Manager], per FTC CARS Rule I'm removing these optional 
add-ons from my deal:
- Extended warranty ($X)  
- Paint protection ($X)
- GAP insurance ($X)

Please send updated contract without these items. Thanks.
[Your name]

In-Person Script

"Under the FTC CARS Rule, I have the right to decline optional add-ons. Please remove [specific items] from my contract and provide updated pricing."

If they resist:
"The FTC CARS Rule Section 463.5 specifically states these are optional. I'm choosing to decline them. Please update my paperwork accordingly."

Your Rights Under the CARS Rule

Before Signing:

Right to Clear Disclosure:

  • Dealers must clearly identify what's optional vs. required
  • Add-ons must be prominently disclosed
  • You must be told you can decline optional items

Right to Opt-Out:

  • No dealer can require optional add-ons
  • You can decline any or all optional products
  • Dealer cannot make sale contingent on accepting add-ons

Right to Accurate Information:

  • Dealers cannot misrepresent products or services
  • Claims about benefits must be truthful
  • Pricing must be clearly disclosed

After Signing:

Right to Cancellation (varies by state):

  • Some states provide cancellation periods
  • Extended warranties often have cancellation rights
  • GAP insurance may be cancellable

Right to File Complaints:

  • FTC complaint process for CARS Rule violations
  • State attorney general complaints
  • Better Business Bureau reports

Scripts for Pushing Back Against Mandatory Add-Ons

For "Required" Add-Ons:

Dealer: "This paint protection is required for all our vehicles."

Your Response: "The FTC CARS Rule prohibits representing optional add-ons as required. Please remove this from my contract."

For "Dealer Policy" Claims:

Dealer: "It's our policy that all financed vehicles must have GAP insurance."

Your Response: "Under federal law, you cannot require optional insurance products. I'm declining this coverage."

For "Protection" Pressure:

Dealer: "You really should protect your investment with these products."

Your Response: "I understand they're available, but I'm choosing to decline all optional add-ons."

For Package Deals:

Dealer: "These items come as a package - we can't remove individual items."

Your Response: "The CARS Rule gives me the right to decline optional products. Please itemize and remove the ones I don't want."

Common CARS Rule Violations

What to Watch For:

Misrepresentation of Requirements:

  • Claiming optional items are legally required
  • Saying financing requires certain add-ons
  • Implying manufacturer requires specific products

Failure to Disclose:

  • Not clearly labeling items as optional
  • Hiding add-ons in payment calculations
  • Bundling optional and required items

Refusal to Remove:

  • Claiming they "can't" remove optional items
  • Making sale contingent on accepting add-ons
  • Charging "cancellation fees" for declining

How to File CARS Rule Complaints

FTC Complaint Process:

  1. Go to reportfraud.ftc.gov
  2. Select "Auto-related fraud"
  3. Specify "CARS Rule violation"
  4. Provide detailed information:
    • Dealership name and location
    • Specific violations
    • Documentation (contracts, emails)
    • Financial impact

State-Level Complaints:

State Attorney General:

  • Consumer protection division
  • Auto dealer licensing board
  • Motor vehicle department

Documentation to Include:

  • Purchase contract
  • Add-on pricing sheets
  • Written communications
  • Evidence of misrepresentation

Using the CARS Rule for Better Deals

Negotiation Leverage:

"I'm familiar with the FTC CARS Rule. Please provide a contract showing only required fees and optional add-ons clearly marked."

This signals:

  • You know your rights
  • You won't accept deceptive practices
  • You expect compliance

Pre-Purchase Strategy:

  1. Research common violations at target dealerships
  2. Print relevant CARS Rule sections to bring with you
  3. Prepare standard opt-out language
  4. Know complaint process if needed

During F&I Process:

"Before we start, I want to confirm you'll comply with FTC CARS Rule requirements for add-on disclosures."

This sets expectations and puts them on notice.

The Bottom Line

The FTC CARS Rule gives you unprecedented protection against deceptive add-on practices, but you need to know how to use these rights effectively.

Key Takeaways:

  1. Optional add-ons cannot be presented as required
  2. You have the absolute right to decline any optional product
  3. Dealers must clearly disclose what's optional vs. mandatory
  4. Violations can be reported to the FTC
  5. Written requests for removal carry legal weight

Remember: The CARS Rule doesn't eliminate add-ons, but it requires honest disclosure and gives you the power to decline them. Use this power wisely.

Action Steps:

  1. Learn the rule before shopping
  2. Use written communication for removal requests
  3. Document any violations
  4. File complaints when appropriate
  5. Share your experience with other consumers

The CARS Rule levels the playing field, but only if you understand and use your new rights. Don't let dealers continue old practices that are now illegal under federal law.