Tighter regulations are costing dealers millions—here’s what’s driving the crackdown

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Welcome to The Breakdown, an analysis of auto retail’s top trends, moves, and insights—in under 5 minutes.

Compliance might not be the most thrilling topic in auto retail.

But the regulatory landscape is changing fast and getting more aggressive in a lot of different ways.

And while only a few bad actors drive most of the headlines, everyone pays the price.

To find out what’s really going on, I spoke with compliance experts, dealer association leaders, and operators who identified three critical areas that are costing dealers millions of dollars in fines…

State-level enforcement is reaching its most intense level in decades.

Earlier this month, Michigan regulators suspended LaFontaine Chevrolet Buick GMC of St. Clair's dealer license and issued the store a $25,000 fine for selling loaner vehicles as "new" without retitling them as "used" under Michigan law.

However, Max Muncey, director of corporate comms at LaFontaine Auto Group, told me this wasn’t a malicious scheme, but a clerical error that affected a handful of customers out of thousands. And it only took 24 hours for Michigan to reverse the suspension.

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“Michigan is a little behind the times when it comes to how these cars are classified,” he said. “Not saying that we did nothing wrong. Obviously, there was paperwork error, but to say that there's imminent harm to the general public and there's an ongoing fraud… to say it's a little out of line would be an understatement.”

Max Muncey
LaFontaine Automotive Group

Chris Cleveland, co-CEO of ComplyAuto, told me when President Trump rolled back federal oversight, state attorneys general stepped in to ramp up the scrutiny.

But it's not really a red vs blue issue. Utah, Oklahoma, Arizona, Minnesota, Kansas are doling out some of the stiffest punishments around.

And not to mention, for the first time in his career, Alan Haig, CEO of Haig Partners told me acquisitive dealers are choosing stores based on state politics. One of his dealer clients in Hawaii won’t even consider a California store (gee, wonder why…)

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The California CARS Act is rewriting the standard for consumer protection in auto retail.

When the FTC CARS rule got struck down by the Fifth Circuit, California enacted its own version, which takes effect on October 1, 2026.

And Cleveland told me the California version is "a lot more clear and well thought out than the FTC CARS rule. The CNCDA did a really good job working with the state to clean it up."

And there certainly was a lot of clean-up to be done...

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“We rolled up our sleeves and worked with Senator Allen and the bill sponsors over several months," Brian Maas, president of the CNCDA told me. ”What started out as a carte blanche 10-day return policy became a much narrower three-day return for vehicles under $50,000 with a mandatory restocking fee.”

Brian Maas
CNCDA

But one of the bill's provisions stayed the same: eliminate payment packing via very very thorough disclosure requirements.

Payment packing is a practice where a dealership inflates a customer's monthly car payment by adding hidden or undisclosed products, fees, and charges. It’s often done to maximize dealership profitability, but it's also used by certain F&I managers to sneakily line their own pockets.

Either way, dealers know it creates a poor customer experience and reinforces negative stereotypes.

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The reality: When California adopts something in consumer protection, it almost always spreads to other states, especially blue ones. Which means dealers should be preparing now, for what Cleveland calls, an unavoidable eventuality.

Chris Cleveland
ComplyAuto

He also walked me through a three-step F&I process that stops payment packing before it even starts:

Disclose the base payment and the payment with add-ons on every deal. Give the customer a final payment quote that accurately reflects both numbers. If it’s disclosed upfront and documented, any ambiguity is gone.
The base payment on the F&I menu and accept/decline sheet must match what's on the desking sheet. Have the customer initial or sign next to that base payment to create a clear paper trail.
All products need to be listed and itemized. And include a clear disclaimer that optional products aren't required. Have the customer sign or initial next to that disclaimer.

I know, I know… seems excessive. But one dealer group out in Arizona got dinged for payment packing to the tune of $2.6 million. They’ll have to sell a hell of a lot of cars to make that back.

Advertising missteps are leaving dealers exposed in very public ways.

Under the California CARS Act, dealers won't be able to advertise MSRP-only on new cars anymore. Every new car will need an actual advertised price that includes everything except doc fees, taxes, and government fees.

And regulators know exactly where to look: dealer websites. Ultimate visibility, ultimate exposure, all public.

But it's not just state regulators watching. Google recently announced stricter advertising policies.

Now, dealers using Google Ads must clearly disclose full costs and payment models before and after purchase. The policy bans bait-and-switch tactics, price exploitation, and misleading "free trial" promotions.

So, many dealers, especially the ones operating in multiple states, are making sure their third-party tools meet the appropriate advertising regulations and pricing disclosures (spoiler: many don’t).

Looking ahead: One day soon, dealers will likely need to send customers a full set of disclosures before the transaction even starts (price breakdowns, optional product disclaimers, everything) and customers will need to acknowledge receipt before moving forward. Just like at the bank.

That world is coming faster than most dealers think, and the stores that don’t build this muscle today, will probably be answering subpoenas tomorrow.