By: David Barkholz

To help dealers avoid violations under new rules that ban below-invoice ads, Toyota will establish an ad pre-approval and consulting process that dealers can access ahead of running ads.

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Toyota told dealers assembled at a national dealer meeting this week that they would no longer be permitted to advertise vehicle prices below invoice.

Toyota is implementing the prohibition beginning Jan. 1 and will begin enforcing the new ad covenants on April 1, Toyota confirmed in a statement Thursday.

As Automotive News reported last month, Toyota is following in the footsteps of Honda with its below-invoice advertising ban to help hold retail prices and prevent bait-and-switch tactics.

Those include enticing customers with extremely low prices, then pleading that the particular vehicle isn’t available when the customer comes to the store or the low price was based on a laundry list of undisclosed incentives for which the customer doesn’t qualify.

Honda has banned below-invoice pricing for years.

Toyota dealers who violate the rule will be issued a warning for a first offense, according to a dealer who attended a session at Toyota's national meeting, where the ad covenants were detailed.

Then, for a second offense, the store could forfeit factory marketing incentives of up to $450 per vehicle for the entire month during which the offense occurred, said the dealer who asked not to be named.

In an email, Toyota spokesman Aaron Fowles said all violations would be investigated by Toyota. To help dealers avoid violations, Toyota is setting up an ad pre-approval and consulting process that dealers can access ahead of running their ads, he said.

Several Toyota dealers interviewed last month about the impending ad covenants said they favored the approach to help hold prices and improve margins on new vehicle sales.

Some opponents opined the ad covenants bordered on price fixing and would be particularly injurious to one-price dealerships that won’t haggle on price online or at the store.

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