Car buyers are frequently hit with thousands of dollars in opaque add-on fees, as the auto industry continues finding ways to work around regulations.
A car's trunk is open, with a long, itemized receipt trailing out of it.
Summary of Key Points
The US Federal Trade Commission (FTC) is preparing to launch an enforcement crackdown on non-compliant car dealerships, targeting deceptive online discount advertising and hidden fees.
The FTC previously sent warning notices to over 200 dealerships, demanding they stop posting online vehicle ads that feature fake discounts and conceal thousands in mandatory add-on charges.
However, not all dealers have complied with the regulatory demands.
Multiple services that assist consumers and dealers with price negotiations report that pricing opacity remains widespread in the industry.
Chicago-based car buying platform CoPilot analyzed 500 vehicle transactions it facilitated between December last year and April this year, finding that 59% of the deals included optional fees not disclosed in the online advertised price.
"The price consumers see online is most often not the out-the-door price they'll pay to drive the car home," said Michaela Beck, CoPilot's co-founder and head of product.
The research focused primarily on the used car market, but Beck noted that even after the FTC warnings, the same tactics are rampant in new car sales.
Another car buying service, CarEdge, analyzed price sheets from over 10,000 new and used car dealerships, discovering that nearly 40% had a significant gap between their online advertised price and the itemized final price.
Zach Shefska, CEO of CarEdge, added that this only includes dealers willing to provide a written itemized quote, as the vast majority do not offer any breakdown. "The problem of deceptive pricing online is deeply entrenched."
Illustrative Case Study
In late April, a CoPilot client was interested in a nearly new Dodge Charger. A dealership in Pennsylvania advertised it online for $35,490.
However, after 21 emails exchanged over three days, the consumer learned the vehicle's actual base price was $40,025, plus a $490 documentation fee. This Mitsubishi dealer in Quakertown offered a deal: a $2,000 discount if financing was arranged through the dealership.
The store's sales manager explained that the online price was based on "qualifying offers," and the website disclaimer stated not all customers would qualify. When the consumer insisted on the online price, the dealer refused to budge.
"The online price is a corporate advertising strategy," the sales manager told the client. "The price I'm giving you is competitive with the market for this vehicle." Follow-up inquiries to the sales manager and the dealership went unanswered.
A spokesperson for the National Automobile Dealers Association (NADA) stated that feedback from numerous dealers indicates overall industry compliance is improving, but online vehicle pricing is influenced by multiple factors.
"The FTC's request for the industry to advertise an all-inclusive price online is a reasonable one," the spokesperson said. "But in many cases, dealers can't comply by changing their ads alone—manufacturers, online platforms, and third-party vehicle listing sites are all involved in the ad placement." The spokesperson added that the association is working closely with the FTC to educate dealers, manufacturers, and related platforms on compliance policies.
Christopher Muffareh, Director of the FTC's Bureau of Consumer Protection, also noted that many dealers have proactively improved pricing transparency.
"The industry's overall response to reform is positive, but there are still a few bad actors," Muffareh said.
Regulators have provided an adjustment period for the industry, during which they will publish official FAQs, with formal enforcement and penalties to follow after the grace period ends.
In March, the regulator issued an industry-wide warning, clearly defining several deceptive marketing practices that constitute violations.
Adam Crowell, Chief Legal & Strategy Officer at automotive compliance consultancy KPA, pointed out that the core change in the new rules is that online advertised prices must include all mandatory fees, excluding only sales tax and registration.
The FTC's warnings about hidden fees are not empty threats.
In April, the agency announced a settlement and penalty case that clearly outlined the high cost for violators: Maryland-based Lindsay Automotive Group, selling Chevrolet, Ford, and Chrysler vehicles, was ordered to pay up to $75 million in consumer redress and a $3.1 million civil penalty for deceptive pricing and forcing unrelated add-on services.
"That penalty scared a lot of dealers. It's a significant amount," said Scott Painter, CEO of car buying platform TrueCar.
Inquiries to Lindsay Automotive Group were not returned.
Common Types of Hidden Fees
The most common fee charged by dealers, and often not included in the online price, is the documentation fee for processing the purchase paperwork.
This charge has long been an industry norm, with many US states capping the allowable amount; some dealers also charge a separate, smaller electronic filing fee.
Dealers list dozens of so-called "mandatory" fees: charges for anti-theft device installation, paint protection coating, window VIN etching, and for accessories like door edge guards and floor mats.
Beck mentioned that used car transactions often include a "reconditioning fee"—even though cleaning and refurbishing are necessary steps for selling a used car, dealers charge for it separately.
Last month, a CoPilot user inquired about a certified pre-owned Subaru Outback advertised online for $41,064. The itemized quote from Landers McLarty Subaru in Huntsville, Alabama, showed an additional $899 documentation fee, a $550 certification inspection fee, and a $3,250 certified extended warranty package.
The dealership did not respond to requests for comment.
Dealer Sales Tactics
The core strategy for most dealers is to lure customers to the lot with a low advertised price. Once a customer has invested time viewing the car, they are more likely to passively accept various add-on charges and services.
"A consumer finds a car they like, gets lured to the dealership by the low online price, and then finds out the price is $4,000 or $5,000 more because the dealer has pre-installed all these add-ons," said Joe Belmont, general manager of Infiniti of Clarendon Hills near Chicago. "They tell the customer it's not optional, that it came from the factory that way, and you have to pay for it."
Belmont said his dealership offers add-ons like paintless dent repair as optional, but charges a uniform documentation and electronic filing fee.
The new rules require advertised prices to include all mandatory fees, but implementation is challenging: most consumers filter for the lowest price on aggregate comparison sites like Cars.com, CarGurus, and Autotrader.
Belmont admits that dealers who advertise the full, all-in price honestly lose their competitive edge, while opportunistic dealers who use lowball prices to generate leads and then add fees in-store more easily capture customers. Major online platforms state they have implemented controls to curb deceptive listings. For example, Kelley Blue Book and Autotrader have temporarily removed listing tags like "Great Price" or "Deal."
Painter explained that on the TrueCar platform, most dealers have not eliminated various fees but have instead rolled those costs directly into the advertised online price.
"The advertised price has gone up slightly overall, but all dealers have done it. Dealers still need to make a profit; it's just a different way of charging for it."
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