Hole in the no-loan argument
|Jim Henry is a special correspondent for Automotive News|
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Don't look now but NADA is trying to bring the F&I office into its fight against CAFE standards. The dealer association is suggesting that F&I managers won't be able to get financing for millions of customers if the Obama administration has its way.
The thinking was outlined in a study released by NADA last week.
The study, citing government estimates, said meeting the proposed Corporate Average Fuel Economy standards could hike retail prices by $3,000 per vehicle. The standards increase from model years 2017 to 2025, when CAFE will top out at 54.5 mpg.
According to the study, the price hike would knock millions of U.S. consumers out of the new-car market because they couldn't qualify for an auto loan large enough to cover the cost of meeting fuel-economy standards.
The obvious hole in that argument is that if customers can't qualify for a higher loan, they'll simply buy something cheaper. Everybody can't afford a Cadillac; that's why they make Chevrolets.
But the auto-loan argument deserves to be taken seriously, said Doug Greenhaus, NADA chief regulatory counsel for environment, health and safety issues. There's no disputing higher new-car prices would price at least some buyers out of the new-car market and into thirstier used cars. For those buyers, the new CAFE standards would have unintended consequences, he said in a phone interview on Monday.
If NADA is right, F&I managers might as well just stay in bed.
You can reach Jim Henry at email@example.com.