Washington area car dealers, stung last month by Better Business Bureau criticism of their advertising, agreed yesterday to compile a voluntary code of ethics aimed at eliminating such advertising practices as false indications of discounts and financing.

"Our purpose . . . is to compile a code that is credible, that has meaning for consumers and that is workable for dealers," said Don Beyer, chairman of the advertising committee for the Automotive Trade Association, National Capitol Area (ATANCA), a trade group that consists of about 160 dealerships representing about 90 percent of local dealers. Representatives of about 70 dealerships -- "the ones who dominate the ads," Beyer said -- attended ATANCA's two-hour meeting.

"It was a good discussion, a tough discussion," he said. "We arrived at a general consensus on the language we want and we are putting together a proposal to send out to our membership."

Beyer said that ATANCA wants "something comparable to the Montgomery County code," worked out last year by county consumer officials and local auto dealers. It contains strict rules for advertising discounts, list prices and other promotional terms.

A formal written code for all Washington area dealers could be adopted by the ATANCA board as early as mid-March and would take effect immediately, Beyer said.

However, Beyer said he was "reluctant to go into too many specifics" about the code until the board approves a final version.

Also, it isn't clear what would happen if some dealers refuse to comply with all provisions of the voluntary code.

Beyer said the dealer association will "encourage compliance through peer pressure, persuasion and leadership example." If some dealers still don't heed the voluntary guidelines, Beyer said, "there would be some discussion and we would make the point that this is a dealer-evolved code and an important thing for them to do."

Dealer interest in an advertising code comes on the heels of a widely publicized Jan. 18 memo sent to new car dealers by Douglas W. Tindal, president of the Metropolitan Washington Better Business Bureau. The memo said the organization had reviewed local auto advertising and found "serious problems relating to the accuracy and believability of many of these ads."

Tindal said yesterday he doesn't want to comment on the ATANCA code until he sees the final version. "They dealers are in the process of coming up with a final recommendation," he said. "And I get a distinct feeling that it is something that we can live with, but I would want to see the specifics just in case."

He said there are signs that the ads have improved since he sent his memo which listed 11 examples of problems and asked that "any offending dealerships take immediate action to correct them."

Here are examples of improvements cited by Tindal:

* Kline's ads originally featured "base prices" for cars and then in fine print told the consumer that those prices didn't include options. In more recent ads, Kline's advertised prices have included options.

* Rosenthal's ads have dropped the claim, "We'll give you what you paid for it, in full!"

* Capitol Datsun ads have stopped saying, "We will not be undersold."

"The ads indicate a trend that ads are changing," Tindal said. "They aren't perfect yet, but they are going in the right direction."