Tariffs and Pricing: The New Compliance Challenge

With the 25% tariff on imported vehicles and automobile parts now in effect, dealers across the country are absorbing significant cost increases. While the business challenge is obvious, the compliance risk is just as serious. How you communicate these price changes to consumers will determine whether the FTC comes knocking.

The Tariff Details

On March 26, 2025, President Trump signed a proclamation under Section 232 of the Trade Expansion Act of 1962 imposing a 25% tariff on imported automobiles and automobile parts. The tariff on finished vehicles took effect April 3, 2025, with automobile parts following on May 3, 2025. For vehicles from Japan, South Korea, and Germany, the full 25% applies to total value. Under USMCA, vehicles and parts from Mexico and Canada are tariffed only on their non-U.S. content, provided manufacturers file a certification of value.

The downstream effect is straightforward: vehicle costs are rising, and dealers must decide how to pass those costs along without running afoul of federal and state advertising laws.

FTC Act Section 5: The Legal Standard

Section 5 of the FTC Act prohibits “unfair or deceptive acts or practices.” For auto dealers, the current enforcement standard is all-in pricing: any price you display must be the total amount a consumer will pay, excluding only government-mandated taxes, title, and registration fees. A practice is “deceptive” if it is likely to mislead a reasonable consumer and is “material,” meaning it would affect the purchase decision. A $5,000 surprise surcharge at the point of sale is the textbook definition of material deception.

The ‘Surcharge’ Trap

When costs rise, dealers are tempted to add “Market Adjustment” or “Tariff Surcharge” stickers to vehicles. This is where compliance gets dangerous.

The Monroney sticker, required by the Automobile Information Disclosure Act of 1958, can only be generated by the manufacturer. Altering or removing it before delivery is a federal offense carrying a $1,000 fine per vehicle. Dealers who want to add tariff-related price increases must use a Supplemental Sticker (addendum) placed adjacent to the Monroney label. This is legal, but advertising a price lower than the combined total (MSRP plus the adjustment) is classic bait-and-switch.

NADA issued formal guidance in early 2025 advising dealers not to list a “tariff surcharge” as a separate line item at checkout. Their recommendation: integrate tariff-related cost increases into the advertised price from the start of the customer interaction. This approach complies with both the FTC’s all-in pricing standard and the growing number of state junk fee bans.

FTC Enforcement History: They Mean Business

The FTC has a proven track record of going after dealers for deceptive pricing:

• Leader Automotive Group (2024): $20 million settlement for hidden fees and deceptive pricing practices.
• Napleton Automotive Group (2022): $10 million settlement for junk fees and discriminatory markups.
• Passport Automotive Group (2022): $3.3 million settlement for deceptive “certification” fees and racial pricing disparities.
• Coulter Motor Company (2024): Consent order for deceptive online pricing.

These are not hypothetical risks. The FTC is actively litigating against major dealer groups, and Asbury Automotive Group is currently facing an administrative complaint for “payment packing,” the practice of bundling undisclosed add-on products into monthly payments.

Online Pricing: The Dot-Com Disclosure Standard

The FTC’s Dot-Com Disclosures guidance requires that online pricing be “clear, conspicuous, and unavoidable.” Key requirements:

• Disclosures must be placed as close as possible to the claim they qualify. A “Tariff Surcharge” buried in footer text does not count.
• Essential disclosures cannot be hidden behind a hyperlink; they must appear on the same page, viewable without scrolling on mobile devices.
• “See dealer for details” is not a compliant disclosure. If the advertised price does not reflect what the consumer will actually pay, the ad is deceptive.

The FTC’s 2022 “Bringing Dark Patterns to Light” report specifically flagged drip pricing (revealing fees only at checkout) and bait-and-switch formatting as deceptive practices. Tariff surcharges that appear only in the F&I office fall squarely into the drip pricing category.

State Junk Fee Laws: A Growing Patchwork

Federal law is not your only concern. Multiple states have enacted or are enacting all-in pricing requirements:

• California SB 478 (effective July 1, 2024) prohibits advertising a price that does not include all mandatory fees.
• Minnesota HB 3438 (effective January 1, 2025) requires all-in pricing.
• Massachusetts Junk Fee Rule (effective September 2, 2025) imposes similar requirements.
• Connecticut expanded its Attorney General’s authority in 2025 to cover pricing during “economic disruptions.”

Texas and Florida still largely limit price gouging enforcement to “necessities” during declared disasters, using broader UDAP statutes for auto pricing instead.

Inventory Feed Compliance

Your website is only one piece of the puzzle. Third-party listing platforms like CarGurus, Cars.com, and Autotrader pull pricing data from your DMS feed. If your DMS reflects one price and your addendum sticker reflects another, you are advertising a deceptive price at scale across every platform that syndicates your inventory.

Ensure your DMS pricing is updated to reflect all-in costs before it feeds to third-party platforms. Audit your listings weekly during periods of rapid price fluctuation.

F&I Product Pricing: Same Rules Apply

The same transparency principles apply to F&I add-on products. If tariff-driven cost increases cause you to raise prices on service contracts, GAP insurance, or protection packages, those prices must be clearly disclosed before the customer enters the finance office. Surprising a customer with inflated add-on pricing after they have committed to a vehicle purchase is the exact pattern the FTC targeted in the Asbury complaint.

The Bottom Line

Transparency is your best defense. In a volatile market, the dealers who are the most honest with their pricing will win the long-term trust of both customers and regulators. Integrate tariff costs into your advertised price, update your DMS feeds, train your sales team, and audit your third-party listings. The cost of compliance is a fraction of the cost of a $20 million FTC settlement.