Terms of Endearment: Advertising 101 for Auto Dealers

Not all is fair in love, war and sometimes – business.
Recently, the Federal Trade Commission (FTC) took action against two auto dealer groups for violating its administrative orders. The violations were related to advertising the cost of buying or leasing a car in a rather deceptive and misleading way.

Before we go into the details of civil penalties, and how they can cost your business hundreds of thousands, one thing is clear: Don’t lie and cheat for bigger sales. The auto industry has been on a steady rise in 2014; things are looking up for auto dealers. So while advertising your business, don’t rely on gimmicks and go easy on the small print. Be sure that your current and potential customers will notice.

Too Good to be True

What caught FTC’s attention and why? One of the auto dealer groups in question was Billion Auto, a chain of 20 family-owned dealerships in three states. What FTC found offensive to customers was the way the dealership presented material costs and terms of vehicle finance and lease offers.
For example, their ads mostly focused only on a few attractive terms. The rest of the details were buried in fine print or masked with attention-grabbing visuals and rapid-fire audio delivery.

The complaint against Billion Auto included other violations, such as:

• Promotion of low monthly payments, annual percentage periods, and finance periods as if they pertained to sales, while they were valid only for leases.
• Unclear, and often quite limiting, conditions who could qualify for discounts.
• Significant added costs.

To settle the FTC’s charges, the dealership and its partner advertising company had to pay $360,000 in civil penalties.

Better Safe Than Sorry

As an auto dealer, you need to be aware of all specific disclosures when it comes to finance and lease. The rules of that game are mandated by the Truth in Lending Act (TILA) and Regulation Z and the Consumer Leasing Act (CLA) and Regulation M.

Or you can follow some common sense practices and stay out of trouble:

• Don’t twist material facts regarding the cost and terms of financing or leasing new vehicles.
• State clearly the amount or percentage of any down payment, period of payment, along with the amount of any finance charge.
• Define all terms of payment.
• List the annual percentage rate (APR), and specify under what conditions it may be increased.
• Don’t use a photo of a vehicle that is not the same make or year as the one being offered for the price or terms advertised.
• Don’t advertise a vehicle that you know to be salvaged; that has been flooded, or was formerly a police vehicle or a taxi cab, without identifying that fact in the advertisement.

Providing accurate and clear information will help your customers make up their minds quickly. In addition, it will solidify your reputation as a fair player.

The World of Advertising

There are a few basic rules to follow when you promote your business. Don’t deviate from them if you want to gain your customers’ trust. Here they are:

A. When you do print advertisement, make sure the disclosed information is in a proper location and type size. The print has to be in contrast with the background against which it appears, so the customer can notice it and read it without a strain.

B. When recording an audio for an electronic medium, do it in the appropriate volume and cadence, so it’s easy for the customer to hear and comprehend it.

C. If you are making a video, again, it has to be done in the right volume, cadence, and shades. If it’s too distracting with lots of action in it, you will quickly lose viewers’ attention. It also needs to appear on the screen long enough for the viewer to see it or read any information provided in it.

D. In a radio advertisement, choose the right volume and tone of voice. If you are describing payment and lease conditions, state them slowly and clearly, so that anyone can hear them. Or because the time is limited, give all of your contact details for more information.

E. In all advertisements, what you say or write has to be in understandable
language and syntax. If there are inconsistencies, contradictory messages, or hard-to-grasp payment and lease conditions, your ad will have little value to your business.

Even though it’s expected that most advertising companies would advise you about the basics of lawful and fair advertising, you also must know what can harm or boost your business.

How Do YOU Advertise?

Many would argue that the best advertisement equals excellent customer service, and there’s no need for spending money on elaborate advertising. Do you agree with this formula?
What have you found to work best for you business?

Share your experience in the comments below, so other fellow dealers can pick your brains, or give you useful tips if you are out of ideas.