Significant Changes to the Used Car Rule Made on November 11, 2016

The FTC has amended the Used Car Rule which deals with the use of Buyers Guides.  These changes are significant and dealers should take care to comply or risk significant fines.  The Used Car Rule, as revised, still requires the dealer to display a Buyers Guide in the window of all used vehicles; however, significant changes which are effective January 27, 2017 have been made to the language/disclosures that are required to be made on the Buyers Guide.

The new rules modify the description of an “As-Is” sale and add boxes to the front of the Buyers Guide for the dealer to check to indicate the status of any manufacturer or third-party warranty and the availability of a service contract.

Additionally, catalytic converters and air bags have been added to the list of potential major defects.  Further, statements are to be included in the Buyers Guide that inform the customer to obtain a vehicle history report, that direct the customer to check for open recalls and that advise the customer to ask for a Spanish-language version of the Buyers Guide (This statement is included in Spanish on the English-language version of the guide.)

Dealers are allowed to use their unused stock of Buyers Guides (for up to one-year from the effective date) but should use Buyers Guides that comply with the new rules once that supply is depleted.

Dealers can get more information from the FTC's "Dealer's Guide to the Used Car Rule," which is available at www.ftc.gov/tips-advice/business-center/guidance/dealers-guide-used-car-rule.  Further, "Fillable" versions of the Buyers Guide in English and Spanish are also available at FTC.gov.

About the Author(s)
Rex is a Principal of HBK CPAs & Consultants and directs the firm’s Dealership Group. He has worked extensively in the dealership industry since 1984 as a department manager, a general manager and an owner, as well as providing tax, accounting and operational consulting services exclusively to dealers as an independent CPA. This experience includes working closely with hundreds of dealers from coast-to-coast since 1987 on creative tax planning and financial statements issues. He provides clients with a wide range of transaction work services, and consults for them in specialty areas such as operations, government regulatory compliance, valuations and M&A feasibility studies. Rex is active in many professional associations. He is the current Chairman of the BDO Dealership Industry Group, contributes articles and commentary to dealership industry publications, is frequently called upon to speak to industry associations and conferences, provides expert testimony, and is regularly quoted by industry and the general media.
Hill, Barth & King LLC has prepared this material for informational purposes only. Any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or under any state or local tax law or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Please do not hesitate to contact us if you have any questions regarding the matter.

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