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Car dealers stop deceptive ads

By Tara Baukus Mello ·
Wednesday, March 28, 2012
Posted: 6 am ET

The Federal Trade Commission, or FTC, has recently cracked down on five car dealerships for deceptive advertising online. The dealers, said the FTC, violated regulations for stating that they would pay off a consumers' trade-in regardless of the amount owed.

In reality, the dealers were not absorbing any difference between the car's trade-in value and the owner's loan balance, but were taking the negative equity and rolling it into the new loan, the FTC said. As a result, it's possible for a car buyer to not fully understand that they are effectively taking out a car loan for a higher amount than the price of the car, making them upside down on the new car.

Four of the 5 dealers were new-car dealers, while one sold only used cars. They are:

  • Billion Auto Inc. of Sioux Falls, S.D., which owns multiple franchises in South Dakota and Iowa.
  • Key Hyundai of Manchester LLC in Vernon, Conn.
  • Hyundai of Milford LLC in Milford, Conn.
  • Ramey Motors Inc. of Princeton, W.V., which owns multiple franchises in West Virginia, Virginia and Tennessee.
  • Frank Myers AutoMaxx LLC, a used-car dealership in Winston-Salem, N.C.

The FTC said that the ads ran online on the dealers' websites, as well as on YouTube.

Here is an example of an ad one of the dealers was running, cited by the Washington Post: "I want your trade no matter how much you owe or what you’re driving. In fact I'll pay off your trade when you upgrade to a nicer, newer vehicle."

Tara Baukus Mello writes the cars blog as well as the weekly Driving for Dollars column, providing both practical financial advice for consumers as well as insight into the latest developments in the automotive world. Follow her on Facebook here or on Twitter @SheDrives.

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