||June 6th, 2007|
The Car Buyers Bill of Rights...and Wrongs
by Peter W. Robinson
On July 1st, 2006, a landmark consumer protection bill became law in California. Known as the Car Buyers Bill of Rights, this bill has been more successful at confusing the public than it has been at eliminating predatory dealer practices. In it's final realization, it is an abject example of what can happen when well-meaning consumer groups make unrealistic proposals and settle for impractical solutions. Key features of the bill include:
• Imposing a limit on the interest rate markup allowed to dealers when arranging an auto loan.
• Setting more specific criteria for cars that are to be sold as 'certified'.
• Establishing a two-day return option for buyers of used vehicles.
• Requiring dealerships to disclose to customers, in writing, their credit scores and the source of the information.
The GOOD: Capping the interest rate markup on loans arranged by dealers is the most important feature of this bill. This legislation places a markup limit of 2 1/2% on loans of 60 months or less, and 2% for longer terms. These are fair numbers for all concerned, and are close to the self-imposed limits that many respectable dealers had placed on themselves. It is worth noting that the original proposed legislation sought to eliminate this fee altogether, which would have placed dealers in the position of working as loan brokers without compensation.
The BAD: This legislation was originally aimed at all car dealers, but the 'cooling off period' is available only to used car buyers. So, if your new car does not please you ... too bad! The 'cooling off period' does not apply to new car buyers.
Also, revealing a raw credit score to anyone other than a car loan professional is nothing more than an exercise. It just doesn't mean anything without the inclusion of several other factors.
The UGLY: Talk about "fine print"! Car dealers are allowed to charge for the two-day return option! In other words, instead of creating a protection for buyers who feel they have been victimized, this bill has created another profit source for the dealership!
" Mr. Jones, for only $300 you can have the peace of mind . . ."
For a vehicle priced at more than $10,000, a $500 restocking fee may also be charged. This is assuming that you came back within 48 hours, drove fewer than 250 miles, and were able to comply with all other provisions, stated or not. Very few folks will go through all of that, but many more will pay for the opportunity to do so. It is difficult for people to consider the implications of these "only $5 dollars a month" options when they come flying at them out of the blue. "This is only to protect YOU" or " This is an option the state requires us to offer for your protection". See what I mean?
AS ALWAYS, the best advice is to deal with people you know and trust. The typical car buyer will commit to spending hundreds of thousands of dollars buying cars in their lifetime. It is essential to develop relationships with the sellers of vehicles. Talk to people you know, check with the Better Business Bureau, know where and from whom you will be buying your car before you go out to do it!. DO NOT go driving from lot to lot hoping to find a car that "speaks to you". If the car really could speak to you, it might tell you to run away ...