Legislature’s hit-and-run attack on car dealers

April 25, 2012

By Katy Grimes

SACRAMENTO — Maybe the California Legislature should just take over state car dealers the way the Obama administration took over General Motors and Chrysler.

That might be better than the Democratic-controlled Legislature driving over the dealers.

Three bills are moving through the Legislature targeting “buy-here pay-here” California auto dealers for alleged predatory sales and lending practices.

AB 1447, by Assemblyman Mike Feuer, D-Los Angeles, is targeting used car dealers who also finance the cars. “According to the author, the typical business model of so-called ‘buy-here, pay-here’ (BHPH) car dealers is to stock and sell older, high-mileage vehicles to consumers who cannot otherwise qualify for conventional auto loans,” the analysis states.

It sounds as if the car dealers are providing a service to those with bad or no credit.

But because the car dealers “maintain and administer their own sales and lease portfolios, they do not have to comply with underwriting and loan policies set by traditional lenders, and thus are free to set financial terms that are significantly higher than conventional auto loans and leases,” Feuer said the dealers are using unfair and abusive business practices.

Used Car Conundrum

Second, AB 1534 by Assemblyman Mike Wieckowski, D-Los Angeles, also targets used car dealers. It seeks to require used car dealers to disclose the fair market value of the cars for sale.

Both Assemblymen just flunked Free Market 1A.

Wieckowski’s bill states that used car dealers have no requirement for used cars to display a retail price on a window label or sticker. “This disparity, the author contends, allows some unscrupulous used car dealers in California to set the price for a car based on information determined after running the customer’s credit report, or otherwise drastically overprice a used vehicle for low-income consumers who cannot afford a new car but are particularly compelled to obtain a car for everyday needs,” the analysis states.

Third, Sen. Ted W. Lieu, D-Torrance’s SB 956 would, according to his Web site, “Impose first-ever regulations on dealers offering Buy Here, Pay Here installment loans by requiring them to obtain a California Finance Lender’s license, which would provide consumers with an array of protections.

“Limit used-car installment loans to a maximum 17.25 percent interest, which would give California the strongest cap in the nation.”

So basically it’s an anti-usury law. But buyers could be burned if, by being closed out of such a loan, they have to use national credit cards with interest rates up to 29 percent to purchase a vehicle.

Lieu said the bill is needed because “buy-here, pay-here dealers are pushing these types of unregulated loans to sell cars for far beyond market value.”

What’s the problem?

A recent series of stories in the Los Angeles Times about used car dealers precipitated the legislation. But one witness  at Tuesday’s Assembly Judicial Committee hearing testified that he has emails from the author of the Los Angeles Times stories admitting that he did not dig deeply or thoroughly investigate the stories, and that most of the anecdotes did not take place in California.

A representative from the National Independent Automobile Dealers Association said that the the stories were “grossly exaggerated” by the Times.

While there are plenty of stories of shady used car dealers, there already are many legal remedies, and even plenty of hungry lawyers willing to take the cases. The DMV investigates complaints about used cars. The Bureau of Automotive Repairs is a very effective agency which takes on car maintenance issues. The Better Business Bureau is required by law to investigate every complaint. And California has a Lemon Law for warranty and auto dealer complaints.

Bills regulate Auto dealers

Testimony and extreme stories of predatory car dealers who took advantage of enlisted military personnel, immigrants, college students and the working poor were shared by proponents of the bills.

But there was no discussion or defense about why the used car dealers put GPS tracking devices in the cars which they finance, or why they install a devise to disable a vehicle when the purchaser has not made the payments. Some car dealers even require the payments to be made monthly in person.

The cost for high-risk credit is always more expensive. It wasn’t that long ago that people with bad credit had to pay cash for cars. That there is even a credit avenue available for those with bad credit is a breakthrough, and one way to build credit back up.

But these lawmakers want to remove all inconvenience, embarrassment and  risk from the car buyer, and instead put it on the back of the auto dealers, who are performing a service, albeit costly, and with strings attached.

And, instead of seeking legal remedy from unscrupulous used car dealers, Feurer and Wieckowski’s bills would apply to all used car dealers.

Specifically, AB 1447 “seeks to establish a number of basic, common-sense consumer protections for vehicles  purchased or leased from BHPH dealers, including, importantly, a 30-day minimum warranty and restrictions on the use of GPS technology to track a buyer’s whereabouts and the use of  ignition shutdown technology to remotely disable the buyer’s vehicle.”

AB 1534 specifically “would require an automobile dealer to affix a label on any used vehicle being offered for sale that states the ‘reasonable market value’ of that vehicle, defined as the average retail value based on the condition, mileage, year, make, and model of the vehicle as determined within the last 30 days by a nationally recognized pricing guide.”

Free market lost on Legislators

The ensuing discussion about the used car dealers focused solely on the victims–the car purchasers–and not at all on the rights of the business owners or the risk auto dealers take by even allowing car buyers who are credit risks to purchase from them.

Both of these bills seek to take all responsibility out of the hands of the purchasers in order to find fault with the car dealers.

The used car market has always been challenging. But for a responsible, patient person, used cars can be a fantastic deal.

Chances are that the “victims” of these car deals did not do prior research on the used car before stepping on the car lot. Chances are they did not go to the dealer armed with pricing information, maintenance questions, and questions about the car’s history. I am willing to bet that 99 percent of the used car deals at issue were made the same day the purchaser walked onto the used car lot and heard, “I can put you in this car today.”

Car Pricing Is Not a Mystery

AB 1534 would require a sticker on the car listing the “reasonable market value” of the car.

“Why not publish the wholesale purchase price the dealer paid,” asked Assemblyman Roger Dickinsen, D-Sacramento. Dickinsen also flunked Free Market 1A.

The answer is because car dealers purchase a car at a wholesale price, and sell it at a retail price. They are in the business to make a profit. Selling cars is not a free service for the good of the community.

For anyone willing to take just a little time when making a car purchase, Kelly Blue Book is an industry standard for car pricing. It’s easy to find car values. And it doesn’t take a smart phone to do it. Those without computers can go to the public library and use their machines.

Auto Trader is another big used car sales and pricing resource. There is N.A.D.A., the National Auto Dealers Association, Edmunds and Galves.

Preying Upon Our Military

Testimony about the vulnerability of young military enlisted falling prey to car dealers is nothing new. For decades, military men and women have made disastrous auto loans. Barry White, director of the Navy-Marine Corps Relief Society office, told the story of a 20-year-old sailor, a single mother who spent $3,000 on a car that quickly broke down, and couldn’t afford to spend the estimated $3,000 on repairs.

White also told the story of a young male enlistee who made such a bad auto loan deal, that White stepped in to help do a work-out. But the young man wanted the car so badly, he rejected the work-out, and continued to buy the car.

That scenario is the most common of car deals.

Anti-business, Nanny Laws

Wieckowski’s bill does not differentiate between new and used car dealers, and would require that all cars have “reasonable market value” sticker. But for the thousands of cars in many new car lots, together with regularly changing values, this bill poses a real problem.

The California New Car Dealers Association was among several dealer representatives opposed to the bills. “This is a logistical nightmare for dealers that were never identified as part of the problem,” said Mike Belote, a lobbyist for the new car dealers association. Belote said AB 1534 should be amended to apply only to “buy-here, pay-here” car sales.

Feurer’s bill could end up hurting the very people he claims to be protecting by interfering with their ability to purchase cars, even with bad credit.

Each of these bills only serves to save us from ourselves, and is nothing more than more California Nanny legislation.

It’s not difficult to imagine that if those in California with bad credit can no longer purchase a car, their only remaining option is mass transit. Is that the real goal?


Write a comment
  1. Beelzebub
    Beelzebub 25 April, 2012, 11:41

    For God sakes. It’s a witchhunt against smokers, minutemen and now car dealers. The sad truth is that I (and most other citizens) would trust the word of a used car dealer much more (and faster)than we’d trust the word of a snake oil peddling politician. The snake oil peddlers can not only market their products with bald-faced lies and misrepresentations – they can literally FORCE to you buy the product against your very will.

    You come to my house to buy a used car and you can freely look under the hood, kick the tires, drive it on the freeway, and I’ll even let you take it to your friendly mechanic (as long as I can be there during the inspection)and do a thorough examination from bumper to bumper. But once you cut the check and drive it away – it’s YOURS. Don’t come back and say that I tried screwed you when you had every damn opportunity to do your homework. The same should go for used car dealers – and even with financings. STUPIDITY AND INCOME STATUS ARE NO EXCUSE!!! So every damn stupid decision in California is now actionable??? HAH! I burnt my damn pancake this morning on the stove and had to toss it out!!! I WANT TO BE MADE WHOLE!!! IN FACT, I DEMAND IT!!! HAH! 😀

    Reply this comment
  2. Bob
    Bob 25 April, 2012, 11:47

    Speaking of cars, can you guys do a report on the smog check program?

    Talk about a rip-off. I have a LEV (low emission vehicle) and I still have to get it smogged every 2 years. I also have another vehicle that is pre-1996 and I have to pay extra to have that smog checked. because of its age.

    Every time I have the checks the vehicles pass with flying colors. It seems just a way for the auto shops and state to make an easy buck and increase control over our lives.

    I know other states have gotten rip of smog checks entirely but not Colliefornia (as Ahnode calls it).

    Reply this comment
  3. Beelzebub
    Beelzebub 25 April, 2012, 12:41

    Bob, a word to the wise. I recommend you take your cars to a test only facility since the ones who both test and repair have an incentive built in for your cars to fail. They say the machines are gimmick and tamper proof. I say BS. They told us the same thing about Wall Street years ago and look what happened. They told us the free market was the great equalizer. Sure, and I’m the King of Sheeba.

    Anyway, your beater probably has to go to a test only site. Just run the highest octane available for about a week prior to the test and you should okay. But the test and repair shops will almost inevitable show a code violation that will require a new sensor (or some other part) so that you can pass and get your registration. All of them are in on it, bob. Unless your mom owns a shop the odds are always against you.

    Reply this comment
  4. Rogue Elephant
    Rogue Elephant 25 April, 2012, 13:39

    Yes, drying up the used car market is one way to get the poor out of their cars and into mass transit (benefiting the transit unions).

    Then, the working poor will spend even more time in transit, to and from work, and will be unable to care for their children. And who will care for their children? Why, we’ll need to provide a (unionized) state-run daycare industry to offer cradle-to-grave indoctrination to produce generations of docile, dumbed-down, and dependent sheeple. (It takes a village, you know.)

    Reply this comment
  5. Wayne Lusvardi
    Wayne Lusvardi 25 April, 2012, 14:15

    Car buyers can easily find an auto broker to negotiate a fair purchase price for a car.

    I have a boutique new and used auto car dealer as a tenant in a property I own. They are quite good at getting the best deal for the car buyer.

    No legislation needed.

    Reply this comment
  6. Beelzebub
    Beelzebub 25 April, 2012, 14:40

    Remember that huge failure of a program called “Cash for Clunkers”? It turned out to be a HUGE documented scam! That program totally screwed low income people since it removed perfectly good used cars from the marketplace. It drastically lowered the quantity of used cars and subsequently the prices went higher. And those are the cars that low income earners need. 90% of them were not gross polluters. Don’t let them feed you that crap. Perfectly good used cars were being destroyed or sold off into the secondary market after the fact by scam artists. I bet Perata and his pals were ‘all in’ on the ‘Cash for Clunkers’ scam too! heh. They aren’t the least bit interested in helping the poor and the ignorant. On the contrary – they do everything they can to screw them! They are flim-flam artists! Follow the money!!! Who is raking in the cash on these legislative scams??? There is your answer!!! 😉

    Reply this comment
  7. queeg
    queeg 25 April, 2012, 15:19

    Remember every restrictive California is cheered and welcome by criminals and underground entrepenuers….

    Eventually no goods or services will be rung up on sales registers…ala Italy and Greece….

    Less taxes folks!!!

    Reply this comment
  8. queeg
    queeg 25 April, 2012, 15:20

    California lsw

    Reply this comment
  9. queeg
    queeg 25 April, 2012, 15:20


    Reply this comment
  10. Richard Rider
    Richard Rider 25 April, 2012, 15:37

    Hmmm, I wonder what this will do bill to the resale value of cars — and to people who want to sell their used cars? Fewer used car dealers, less competition — both to BUY people’s used cars, and to SELL them used cars.

    Hmmmm indeed.

    Reply this comment
  11. Beelzebub
    Beelzebub 25 April, 2012, 15:43

    “Eventually no goods or services will be rung up on sales registers…ala Italy and Greece….”

    You are probably too young to remember the old savings bonds advertisement with the flag waving in the background – “Support America – Buy Savings Bonds!”


    Today an honest advertiser would say “Support America – Go Galt!”

    Bond buying only puts the nation further into debt. Going Galt forces the nation to look at it’s balance sheet and make changes – as painful as they might be. That is the ONLY viable solution here. It is the ONLY way to turn the ship around. What they are doing now is a complete failure and that old brick wall is getting bigger and bigger in the speeding car’s windshield!

    I speak only the truth. I am not owned by any political party, corporation or political/social/religious ideology.

    I approve of this message.

    Reply this comment
  12. Bob
    Bob 25 April, 2012, 17:16

    Yup Mr. Bub, your smog check ideas are good ones.

    I’ve been fortunate all these years as I haven’t had problems like some garage trying to sell bogus repairs in order to pass the test.

    But every other year I’m having to pay in excess of $120 for these tests that are a complete waste of money and time. It is a real hassle and just one more example of how the Colliefornia politicians and bureaucrats screw the little guy.

    Reply this comment
  13. Beelzebub
    Beelzebub 25 April, 2012, 19:09

    “But every other year I’m having to pay in excess of $120 for these tests that are a complete waste of money and time”

    Yep. They’ve created a brand new industry, Bob. An industry you can’t avoid if you have a car registered in your name. And no doubt the lobbyists for the auto repair industry is showering the pols with huge payoffs to make the pollution standards stricter and stricter making it damned near impossible to pass a smog test. If you flunk you are looking at a minimum bill of $300. Also, I read that the state has run out of money on the subsidy program for low-income folks who flunk the test. They used to make the low-income fella pay $100 bucks or so out of pocket and the state would pick up the rest of the bill up to and including ($500?) or so. Now the poor folks are crap out of luck. If they can’t find the money to get it repaired they have to junk it. Another example of the the poor people get screwed by the pols. The pols won’t lower the pension payments – but they will screw a poor person right into the ground. And these are LIBERAL pols who claim that they are for the little guy!!! HAH! 😀

    Another tip: They sell a product you put into your tank at the auto parts stores that give a money-back guarantee your car will pass a smog test (as long as you follow the instructions). I can’t remember the name….but you can ask the guy at the counter. It’s not cheap – like $12-$15 or so but if you have a beater and are worried about flunking the test go check it out.

    Reply this comment
  14. Second Hand Cars Derby
    Second Hand Cars Derby 26 April, 2012, 02:57

    To purchase a brand new car may be a tough decision for the people who have tight financial schedules it is not very tough situation.

    Reply this comment
  15. Bob
    Bob 26 April, 2012, 17:24

    Well Mr. Bub, my 1992 truck passed smog with only a tiny fraction of the max pollution allowed. And I did not even need to use any of your suggestions.

    So another $65 and two hours of my time down the toilet. Thanks Colliefornia! Thanks Jerk Brown! Thaks DemoNcrats!

    And my registration went up. But I guess I should not complain too much because I asked the mechanic how much it costs to register his 2009 F150 and he said $600 a year!

    The Colliefornia gummit is nothing but a criminal organization!!!

    Reply this comment
  16. Beelzebub
    Beelzebub 27 April, 2012, 08:26

    “Well Mr. Bub, my 1992 truck passed smog with only a tiny fraction of the max pollution allowed”

    You got a rebuilt engine in that puppy, Bob? That rather impressive. I love old trucks, btw. I saw an old Ford truck (probably a 1950’s type) drive down the street the other day and almost had an orgasm on the spot.

    You are probably smart going to a reputable shop that charges a higher price ($65) for a smog check. I have an old beater too and usually take it to a test-only place that charges $40. Luckily it has always passed – but the carbon emissions were on the borderline the last time.

    Since yours passed with flying colors they should not require you to test at a test-only shop. That’s wrong. You should have a choice. Test-only always charges more.

    Reg fees should have come down when Arnold’s temp taxes expired. But I noticed the same thing. Mine either stayed the same or went up a bit. Unless you nail it down these gov asset thieves will steal you blind!

    Reply this comment
  17. Bob
    Bob 27 April, 2012, 10:57

    Actually, the engine is the original. It has 150K miles on it but that’s not alot for a 20 year old truck.

    Even though I don’t drive it much I am glad I have it. You never know when you will need a truck to haul things. My mom died last summer and there were all kinds of things I needed to move. A few years ago a friend of mine got into a real jam and had to move some things on very short notice or lose them and I was able to help.

    And actually the mileage isn’t too terribly bad. I can get 20 to 22 mpg on the highway.

    Reply this comment
  18. Beelzebub
    Beelzebub 27 April, 2012, 11:30

    Let me tell you how screwy the system is, Bob. It’s not just the government.

    The hinges on the toilet seat broke. They are not permanently attached. They are easily removed and replaced with a phillips. I went to home depot to buy a set. They don’t carry them and told me to call the manufacturer. I did. The manufacturer told me that they don’t sell replacement hinges. I was fit to be tied. I asked “So you are telling me that I have to throw away a perfectly fine toilet seat because you refuse to sell me a set of hinges?” There was silence on the other end of the phone and then she said “Let me speak to my supervisor”. About 5 minutes later she came back on the line and told me that she would send me a new set of hinges for $5 but that I would have to fill out a form to indemnify and hold harmless the manufacturer if I hurt myself while replacing the hinges. I was dumbfounded. If I’m lying I’m flying, Bob. Our entire system has been hijacked. Top to bottom.

    Reply this comment
  19. Bob
    Bob 27 April, 2012, 17:28

    I’m sorry to hear about your toilet, Mr. Bub.

    But it is very illustrative as this whole society is in the crapper.

    Every institution in this country is corrupt.

    It didn’t take long for me to form that conclusion either. It all started with the crappy public schools I had to attend as a child.

    Reply this comment
  20. Beelzebub
    Beelzebub 28 April, 2012, 10:35

    It took me many years to rid myself of the indocrination, lies, misrepresenttions and propoganda the filled my head during my school aged years (including college), Bob.

    If one doesn’t regurgitate their lies and answer the right lie on their multiple guess tests – he will flunk and get set you back a grade or two. They would call him ‘intellectually challenged’ when, in fact, he was the smartest kid in the class! 😉

    Reply this comment
  21. Bob
    Bob 28 April, 2012, 11:28

    I tell ya Bub, it’s not just the indoctrination.

    I considered myself lucky if I could just make it through the day without getting verbally or physicially assaulted at the government run youth propaganda camps.

    When I was in 3rd grade my nose was so badly broken by an older “student” that to this day I still can’t breath out of it properly. I bled for hours.

    A while back, my neighbor’s 2nd grade kid had his fingers broken by another “student.” The assaulter was suspended for 2 days and considered it a vacation.

    So 40 years later nothing has changed. Why is this tolerated? Imagine what would happen if a business tolerated assaults on its customers, especially children. Yet that is normal at the gummit “schools.”

    Government “education” is a disgrace and furthers child abuse yet the idiot Amerikan public continually demands more and more money for this corrupt and evil system instead of its abolition.

    Reply this comment
  22. Beelzebub
    Beelzebub 29 April, 2012, 07:54

    “The assaulter was suspended for 2 days and considered it a vacation”

    Must have been one from the protected class. Was he enrolled in ESL by chance? What’s the punishment if they break another kid’s neck? No free lunch for a week?

    Reply this comment

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