Category Archives: Automotive News

CA Auto Bill Wants New Rules For Dealerships

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California lawmakers are are hoping to protect working families by imposing tough new rules on “Buy Here Pay Here” automobile dealerships. Assemblyman Mike Feuer introduced the bill last week saying that it would limit unfair sales and collection practices used by these dealerships. Some of the changes include:

  • Dealerships would be required to display the price of the vehicles on the car where customers can see it.
  • Customers would not be forced to make payments in person at the dealership.
  • Dealers would not be allowed to call personal references after the sale is complete.
  • Dealerships would not be allowed to install GPS trackers or devices that can remotely shut down vehicles.

Lobbyist for the Independent Automobile Dealers Assn. of California, say that enforcement, rather than new regulations, would be a better way to handle problems with Buy Here Pay Here dealers. They say that the new bill would impose additional costs on all dealerships, putting legitimate dealers out of business. In the end, people with bad credit will find it even harder to get an affordable and reliable vehicle.

Federal Bill Increases Recall Fines

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Automobile manufacturers, dealers, rental companies and the U.S. Chamber of Commerce, have lost their fight against a federal bill that will significantly increase automaker fines for companies who delay automobile recalls. Currently, the maximum fine is just over $17 million, but once the bill goes into effect, the fines could go as high as $200 million. According to groups opposing the bill, “The increases are completely out of proportion to the current penalty structure for manufacturers under the Consumer Product Safety Act.” The bill was introduced in response to unintended acceleration recalls by Toyota in 2009-2010. Even though Toyota vehicles were cleared of electronic flaws causing unintended acceleration, the company ended up paying maximum fines for recall delays.

Other provisions of the bill include an increase in the maximum fine for odometer fraud; new regulations for vehicle pedal placement and push-button ignition; an improved recall database and website; and an anonymous complaint hot line for auto workers, dealers and mechanics to report vehicle safety problems.

Alternatives To Buy Here Pay Here Auto Sales

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Studies have shown that low-income people can increase their income, are more involved in the community, and have better access to healthcare when they have their own transportation. It is also estimated that one in four needy families do not have a car. The U.S. Transportation Department plans to spend over $100 billion on roads, bridges, public transit, and rail projects, but has little money allocated to help the poor purchase a car. Some feel that the government actually made it harder with programs like “Cash For Clunkers”. The program resulted in higher priced used automobiles by removing almost 700,000 running vehicles from roads. In some states, people receiving government aid are restricted to how much they can spend on a vehicle, leaving them with an unreliable car or no car at all.

Consumers that need a car, but have bad credit, feel they have no alternative but to turn to Buy Here Pay Here dealers. These dealerships advertise themselves as providing a valuable service to consumers, as they make big profit off the misfortune of others. Prices and interest rates are high, and the chance of having your vehicle repossessed is one in four, allowing the dealership to sell vehicles over and over again.

There is about 160 nonprofit organizations nationwide that try to provide affordable used cars to needy families. Some receive public funds, but for the most part they operate on donations and can help only a small percentage of families that need it. Rep. Gwen Moore (WI-04) has tried for years to get the government to help the poor buy cars. In 2005 and again in 2007, she sponsored legislation to provide $50 million a year for low-income car ownership programs. Both bills were rejected.

Buy Here Pay Here Auto Sales Make Big Profits

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People are finding a good investment in a niche of the used car business known as “Buy Here Pay Here” auto sales. In the last two years, investors have bought more than $15 billion in sub-prime auto securities with the hopes of cashing in on profits that average 38% for each vehicle sold. Two of the biggest, America’s Car-Mart Inc. and Credit Acceptance Corp., have seen the biggest gains well above the regular market.

The Buy Here Pay Here vehicle market focuses on helping people buy a vehicle when they can’t qualify for conventional loans. Because the customer is a risk and can’t get a loan anywhere else, the dealership can get away with selling the vehicle for more than it’s actually worth, charge interest rates up to three times the national average, and use aggressive repossession tactics when the customer defaults. Because Buy Here Pay Here businesses are both auto dealers and consumer lenders, it’s not always clear who has authority over them. As a result, each dealership tends to set their own rules.

Although they’re backed mainly by installment contracts signed by people who can’t even qualify for a credit card, most of these bonds have been rated investment grade, some receiving the highest ratings. But so were the financial strategies that drove the nation’s recent housing bust. “We think that investing in such companies is a ticking time bomb,” according to Joe Keefe, chief executive of Pax World Management, “It has ethical as well as systemic risk implications.”

California Says Hands Free Even At A Stop Sign

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According to a court ruling on Monday, drivers in California who use their non hands free cellphones while stopped at a red light or in a traffic jam will be ticketed if caught. This ruling comes after Richmond driver, Carl Nelson, received a ticket from an officer who saw him using his phone at a stop light in December of 2009. He argued he was not driving because the car was stopped while he made the call. Nelson referred to a 1991 Supreme Court ruling that said the term “drive” requires proof of “volitional movements”. In this case, a man suspected of drunk driving, was found asleep behind his running vehicle while parked on a residential street. Court threw out the case saying that there was no “volitional movement.”

In a 3-0 ruling, judges said that even though Nelson was paused at the time, he was driving on the road in the midst of other moving traffic, and distractions in this situation could create hazards to other drivers on the road. Nelson’s attorney said he plans to appeal to the state’s high court.

Beware of Buy Here Pay Here Auto Sales

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For many people a car is a necessity in life. Even with the best public transportation, daily commutes and errands, are much easier with your own vehicle. As a result, consumers who don’t qualify for conventional loans, may agree to unrealistic terms when purchasing an automobile.

A fast growing corner of the auto market, also known as “Buy Here Pay Here” auto sales, is being advertised as helping the consumer purchase a car, but more often than not, it is the dealership that benefits from the agreement. Buy Here Pay Here lots sold nearly 2.4 million cars nationwide last year, according to CNW Marketing Research. It is estimated that there are more than 33,000 lots nationwide making about $80 billion in loans every year. Some dealerships have been accused of purposefully structuring loans to guarantee the borrower will default. Higher purchase prices, interest rates nearly triple the national average, and aggressive repossession practices make it easy for the dealership to repossess the car and sell it to a new customer at the same high interest rates, and while still pursuing the old borrower for their debt. Some dealerships have been accused of equipping their cars with hidden GPS devices and remote-control ignition blockers to make the repo man’s work easier.

Dealers say they are offering a valuable service for people who can’t get credit for a car. They say they risk never seeing a payment, or the car again. When a buyer does default, repossessing can be a costly hassle. Some cars are never found while others come back so beaten up they have to be junked. “This is not the car business. This is the finance business,” said Ken Shilson, an accountant who founded the National Alliance of Buy Here Pay Here Dealers in Houston. “Not everybody has the stomach for it.”

There have been some crackdowns on Buy Here Pay Here dealerships. In 2004, an Ohio chain settled a federal class action for $21.8 million to customers who say they were misled about their loans. In 2006, the Kentucky attorney general reached a $7.4 million settlement with the nationwide J.D. Byrider chain to settle violations and deceptive sales practices. But these settlements are rare. Buy Here Pay Here businesses are both auto dealers and consumer lenders, it’s not always clear who has authority over them.

You can view the whole story HERE, as reporter Ken Bensinger of the LA Times explains Buy Here Pay Here auto sales and how they can take advantage of people with bad credit while providing a valuable service for someone who needs a car but can’t get credit.

August Car Sales Up In August

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GM sales strong in ChinaThe slowing economy has left consumers wary about making big item purchases, but according to a recent auto data report, automobile sales in August rose almost 8% from a year ago and 1.2% from last month. All of the large automakers have showed sales gains for the year to date, except for Honda and Toyota, whose dealers have struggled to keep inventory since the earthquake and tsunami in Japan early this year. Shortages of small, fuel-efficient cars, like the Chevrolet Cruze and Ford Focus, have also lead to increased prices on both new and used hybrid, electric and compact cars.

G.M. said it remains confident that industry sales will top 13 million vehicles this year, back to 2008 levels, when 13.2 million were sold in the United States. They intend to step up production by adding overtime shifts to plants that build the Chevy Cruze, in an attempt to fill the compact car void plaguing the auto industry. Ford said it hopes to increase its overall production by 9% in the fourth quarter from what is was in 2010.

But analysts feel the automakers are “playing chicken” with the economy. Stockpiling extra inventory while consumer confidence declines could lead to too much inventory and price reductions that could end up hurting the industry in the long run.

Stop Adding Air To Your Tires

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According to Goodyear, the days of manually adding air to under inflated tires could soon be a distant memory. The Goodyear Tire & Rubber Company, with the help of a government grant from the United States Department of Energy, are developing a technology that will enable tires to remain inflated at the optimum pressure without the need for external pumps or electronics. All components of Goodyear’s Air Maintenance Technology (AMT) will be fully contained within the tire.

According to industry research, driving on under inflated tires can decrease your fuel mileage by as much as 3.3%. Properly inflated tires will not only save you money at the gas station, but will lower automobile emissions, give a longer tire life, and will enhance the safety and performance of your vehicle.

Goodyear did not say when this technology would be available at tire retailers, but said the timetable would be accelerated due to recent government research grants in United States and European Union.