An American Action Forum analysis of information the Federal Trade Commission is using to justify its plan for new car dealership rules indicates a cost-benefit ratio "potentially closer to even, if not on the net-cost side" — not the overwhelming benefit the agency cites.
The Sept. 1 report by Dan Goldbeck, senior regulatory policy analyst for the center-right think tank, draws upon the 2020 Cox Automotive Car Buyer Journey cited by the FTC in its regulation proposal.
The Cox study found customers spend 15 hours researching, shopping and buying a car. The transparency the FTC has planned to introduce would cut 20 percent from that total, the agency contends. It estimates those three hours would be worth $66.60, based on a valuation consumers put on their time spent away from work.
Using a conservative extrapolation of how quickly the new regulations would take effect, the FTC calculates society as a whole would realize a $31.08 billion benefit between 2022 and 2032.
Goldbeck said the same Cox study estimated customers spent two hours and 50 minutes at a physical dealership, depending on vehicle. He argues the FTC regulations would only materially affect what Cox estimated to be 32 minutes negotiating a price, for "all other aspects of this estimated 'visit' are rote aspects of the process that largely fall outside the scope of the new requirements."
If the FTC's rules knock 30 minutes off the negotiation time, society would only recoup $5.2 billion over the decade, he said.
Cox's two-hour, 50-minute figure included 48 minutes looking at vehicles and talking to sales personnel at the dealership where the transaction occurred. The study also found shoppers spent one hour and 49 minutes visiting other sellers and nine hours and 29 minutes researching and shopping online. According to the FTC, some of this time might be saved by the transparency the agency has proposed.
"The Commission assumes that, as a result of the proposed rule provisions prohibiting misrepresentations and requiring price transparency, each consumer who ends up purchasing a vehicle will spend 3 fewer hours shopping online, corresponding with dealerships, visiting dealer locations, and negotiating with dealer employees per motor vehicle transaction," the FTC wrote.