Two major pieces of legislation in New Jersey and neighboring Pennsylvania are laying the groundwork for the future of car buying in those states. PA has passed a bill allowing Tesla to sell direct, but limits the brand to 5 locations, while NJ has legislation in the works that automakers are calling "anti-consumer."
Previously, the Pennsylvania legislature was considering a bill that would grant Tesla unlimited direct sales in the state. This prompted quick protests from the major auto manufacturers who claimed that this would give Tesla an unfair advantage. The automakers are realizing the advantage of a direct sales model and feel that Tesla should not have unlimited exclusive rights to sell their cars outside of the franchise system. Automotive News reports that last week PA lawmakers reached a compromise, granting Tesla direct sales within the state but limiting the number of stores the brand can open.
While the PA legislature seems to have found a way to satisfy both sides of the issue, a new bill in NJ has automakers calling it the "most onerous, anti-consumer and anti-business regulations in the country."
The bill, sponsored by state Assembly Majority Leader Lou Greenwald (D-Camden), makes 10 changes to the 43 year old "Franchise Practices Act." The dealers claim that these updates are necessary because the current system puts a burden on their operations and forces them to pass costs onto the customers.
The majority of the the bill impacts the legal and business relationship between the dealerships and manufacturers. However, there is one key point that could have serious implications for consumers.
• Manufacturers, who often have their own finance companies, would be barred from forcing dealers to use their finance terms, and from offering incentives to buyers that aren't offered by institutions not affiliated with the car company. Manufacturers say this will put an end to car loans that start with a zero-interest rate.
Dealerships must offer financing options from both the manufacturer and whatever financial institutions the dealership is affiliated with. I mentioned in my financing post, dealerships legally do not have to disclose to you the rate in which you were approved for, and therefore can give you a loan with a higher interest. This tactic allows them to pocket the difference. If you are a customer with excellent credit you would most likely qualify for the ultra low interest rates offered by the manufacturer. This bill would make it so the dealership would have the choice in whether or not to offer you that product.
Manufacturers such as: Volvo, Subaru, Mercedes-Benz, Maserati, Jaguar-Land Rover, BMW and Ferrari all have their North American corporate offices in NJ and use the state's ports for importing vehicles. They are threatening to take business elsewhere if the bill passes.
Despite the car-makers' corporate presence in the Garden State, it is dollars and donations that can swing power from one side to the other. North Jersey.com examines the disparity in political contributions between the dealership lobby and those representing the automakers-
...the car dealers, led by their trade-group and lobbyist, New Jersey Coalition of Automotive Retailers, or NJCAR, have their own power and influence - fueled by political campaign contributions that totaled about $328,000 to both parties in 2012 and 2013.
The seven car manufacturers that have their North American headquarters in New Jersey, however, made few donations over the same time period.
Of course it is not shocking to find out that an interest group would essentially "buy" their way into beneficial legislation. However, it is important for consumers to be aware exactly how much influence is being leveraged into laws that may not be in the best interest of the car-buyer.
(Photo Credit: Kzenon/Shutterstock)
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