Uneasy Rhetoric

On January 1, 2006, a new law will go into effect that will make it a little harder for used car dealers to rip you off. The law is a textbook example of policy compromise. It’s a watered down version of what it could be, but it’s a step in the right direction.

The legislation requires car dealers to give consumers a two-day “cooling off” period during which they could return a used car for a full refund. Dealers would be allowed to charge consumers a $250 nonrefundable fee for the privilege of this cooling off period, and they would also be allowed to charge a $500 restocking fee. Doesn’t sound like a very good deal, does it?

It does if you look at it this way: the Legislature has just given used car dealers a new marketing tool:

“Come see me today and I won’t charge you for your waiting period!”

Sure, some dealers may be concerned about people serially buying and returning cars, but I’m willing to bet that will be a very, very small problem. Naturally, that means we will hear about the “epidemic” of buy-and-return consumers when it happens twice.

Any dealer who is willing to stand behind the cars he sells should be willing to waive the fee, and any dealer who is not willing to waive the fees will never get my business.

The details from The Bee:

The main provisions of Assembly Bill 68, so-called Car Buyer’s Bill of Rights

Creates two-day “cooling off” option for buyers to return used cars bought for $40,000 or less for full refund. Dealers could charge an upfront, nonreturnable fee of up to $250 and a return “restocking” fee of up to $500.

Restricts markup on dealer-provided financing to 2.5 percent for loans up to 60 percent, 2 percent for longer loans.

Increases a dealer’s standard for selling used cars as “certified” and makes it a misdemeanor to sell as “certified” cars that don’t comply with the standards.

Requires dealers to disclose credit scores to customers who apply for dealer-assisted financing, and to disclose loan fees upfront.

Prohibits “loan packing,” the practice of adding hidden charges.