FTC dealer advertising rules: 2026 FAQs and cases

This article is general information only, not legal advice. For advertising compliance questions specific to your dealership, consult a qualified attorney.

In March 2026, the Federal Trade Commission sent warning letters to 97 auto dealership groups across the United States. The message was blunt: the price you advertise must be the total price — including all mandatory fees — that the customer will actually pay.

If you sell cars in the US, or you are a UK dealer watching how American regulators treat dealer advertising, this article covers where FTC enforcement stands as of October 2026: the legal standard, what happened to the CARS Rule, the guidance and the enforcement cases, and what all of it means for listing photos — including AI-generated imagery. It is part of a wider series on what is and is not allowed in dealer photography — AI car photos for dealers: what's allowed and what works is the umbrella guide.

The short answer

• What rules apply? Section 5 of the FTC Act, which prohibits deceptive practices. The dealer-specific CARS Rule was vacated in January 2025 and withdrawn in February 2026.
• What is the FTC enforcing? Price transparency: the advertised price must be the actual price, excluding only charges the government requires. It warned 97 dealer groups in March 2026 and published FAQs for the trade in September.
• Does it cover photos? Yes. The FAQs say that for used cars, buyers can reasonably expect the photo to show the exact car for sale.
• Who else enforces it? State attorneys general, who joined the FTC in the Lindsay and Manchester City Nissan cases.

The standard: Section 5 of the FTC Act

The foundation of US dealer advertising law is Section 5 of the Federal Trade Commission Act, which empowers the FTC to prevent "unfair or deceptive acts or practices in or affecting commerce."

What counts as deceptive is set out in the FTC's Policy Statement on Deception (October 1983), which is still the operating test. The Commission will find deception where there is:

1. A representation, omission, or practice that is likely to mislead the consumer — and a photo is a representation, just as much as a price or a written claim.
2. Judged from the perspective of a consumer acting reasonably in the circumstances.
3. That is material — meaning it is likely to affect the consumer's decision to buy.

Note what is not in the test: intent. You do not have to mean to deceive anyone. If the overall impression your advert creates is likely to mislead a reasonable buyer about something that matters to the purchase, that is enough.

The CARS Rule: announced, vacated, withdrawn

In December 2023, the FTC announced the Combating Auto Retail Scams (CARS) Rule — a dealer-specific rule banning bait-and-switch tactics and hidden junk fees, with civil penalties attached.

It never took effect. Here is the timeline as it actually played out:

• 27 January 2025 — the US Court of Appeals for the Fifth Circuit vacated the rule, granting a challenge brought by the National Automobile Dealers Association and the Texas Automobile Dealers Association. The court found the FTC had skipped a procedural step its own regulations required when making the rule. (NADA press release, January 2025)
• February 2026 — the FTC formally withdrew the CARS Rule in the Federal Register to conform with the court's decision. (Federal Register, 12 February 2026)

So the CARS Rule is not in effect and has been withdrawn. But — and this is the part some dealers got wrong — the rule was vacated on procedural grounds, not because the conduct it targeted became legal. Everything the CARS Rule was written to catch is still reachable under Section 5. The enforcement record since proves it.

What enforcement actually looks like

The 97 warning letters (March 2026). The FTC's letters warned dealer groups nationwide that advertised prices must be the total price including all mandatory fees, and listed the practices it considers illegal: advertising a price that does not reflect all required fees, advertising a price built on rebates or discounts not available to all consumers, advertising a price that leaves out an additional required down payment, conditioning the advertised price on dealer financing, requiring add-on purchases not reflected in the price, and advertising unavailable or non-existent vehicles. "The FTC will remain focused on monitoring auto dealerships," the Bureau of Consumer Protection director said in the announcement. (FTC press release, March 2026)

The FAQs (September 2026). On 15 September 2026, FTC staff published Automobile Industry Pricing Transparency: FAQs. They repeat that the advertised price must be "the actual price that any consumer can walk in and pay to purchase the vehicle, excluding only charges that the government requires the consumer to pay", and cover document fees, rebates and discounts, negotiation and optional items, cars in transit, and photos. They are staff views, not binding on the Commission, but they are the clearest statement of what the FTC expects. (FTC press release, September 2026)

Passport Automotive Group (2022). A Washington DC-area dealer group agreed to pay more than $3.3 million to settle FTC allegations that it advertised vehicles as "certified" or "reconditioned" at specific prices, then added hundreds or thousands of dollars in fees at the point of sale. (FTC press release, October 2022)

Lindsay Automotive Group (2026). The FTC and the Maryland Attorney General settled allegations that the group advertised deceptively low prices and then charged most buyers substantially more. More than $75 million in charges to consumers between April 2020 and December 2025 may be eligible for refunds, and the group pays a $3.1 million civil penalty to Maryland. (FTC press release, April 2026)

Manchester City Nissan (August 2026). The FTC and the state of Connecticut secured a $4 million settlement for consumer redress, over allegations that included charging buyers to "certify" cars the dealership had already advertised as certified pre-owned. The proposed order requires the maximum total price, excluding only government charges, to be the most prominent item in its adverts. (FTC press release, August 2026)

Greenway Auto Group (October 2026). This one shows what happens after a warning letter. Greenway received one of the March letters. According to the FTC's complaint, it responded by adding "false assurances of price transparency" to its websites while still advertising vehicles for thousands less than their actual prices — more than $3,350 over the advertised price, on average, in over 92% of transactions. Greenway agreed to settle, and under the proposed order its adverts must prominently show the actual price. (FTC press release, October 2026)

Lindsay and Manchester City Nissan also show the second front: state attorneys general. Maryland was a co-plaintiff with its own penalty, and Connecticut sued alongside the FTC. State consumer protection offices can bring dealer advertising cases with the FTC or on their own. The practical takeaway: the CARS Rule ending did not reduce the number of regulators watching dealer adverts.

What this means for photos and AI imagery

Every case above is about price. But the deception standard is not a pricing rule — it covers any representation in an advert, and listing photos are representations.

The September FAQs now say so directly. A representative photo is acceptable only if it is "truly representative of the vehicle being sold" and a reasonable buyer would understand it as illustrative, which is more common for new cars and cars in transit. For used cars, the FAQs go further: "Because antique or used cars are rarely identical as they often differ in condition, it is reasonable for consumers to expect the photo to show the exact car offered for sale." (question 11)

Run the Section 5 test against a vehicle photo. Is it likely to mislead a reasonable buyer about something material? A photo that conceals visible damage, shows a different trim or colour, or presents features the car does not have fails that test the same way a hidden fee does. The misrepresentation standard does not care whether the misleading image came from a camera, an editing suite, or an AI model.

That is the honest frame for AI-edited imagery. The car in the output is not a representation of your vehicle — it is your photograph of that vehicle, composited into a new setting, with nothing about the car generated or altered. Check each output against the original before publishing all the same: a difficult shot can cut imperfectly, and under Section 5 the advert is the dealer's to answer for. If the photo a buyer sees matches the car they will find, changing the background does not misrepresent anything. We cover the full reasoning in are AI-edited car photos misleading? — and if you want the disclosure question specifically, should dealers disclose AI-edited photos? takes it head on.

If you are weighing up an AI photo tool and want straight answers about how the output works, the Motuva FAQ covers it without the gloss.

The short version

The CARS Rule is gone — vacated in January 2025, withdrawn in February 2026. The deception standard that matters never went anywhere. Section 5 reaches every claim in a dealer advert, photos included. The 2026 warning letters, the September FAQs and the Lindsay, Manchester City Nissan and Greenway settlements show the FTC and state AGs are actively using it. Advertise the real price. Show the real car — for a used car, the exact one. Check AI output against your original before it goes live.

This article is general information only, not legal advice. US dealers should refer to the FTC's automobile industry guidance at ftc.gov and the FTC Policy Statement on Deception. For advice specific to your dealership, consult your own attorneys.

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