State legislators have closed a loophole in a New York dealer licensing law that let leasing companies retail new vehicles without a franchise.
The new statute limits new-car sales to franchised dealers except for a handful of lessors. Under the law, which takes effect next Feb-ruary, a few leasing companies will be allowed to continue to sell new vehicles as part of a compromise struck to pass the legislation, which has been on dealers' legislative agenda for three years.
For years, as many as eight independent leasing companies have used their low overhead to undercut franchised dealers on new-vehicle prices. New York state has had a generic dealers license that was vague enough to let auto lessors get by with selling new vehicles.
The lessors generally would acquire excess inventory from franchised dealers, set up showrooms and advertise a broad selection of makes for sale or lease. Some touted themselves as 'any-car stores.'
'Leasing companies were selling and leasing the cars (acquired from new-car dealers) as new cars. They did not take title to the cars. The law did not require them to take title,' explained Stuart Rosenthal, attorney for the Greater New York Automobile Dealers Association. 'They were able to sell the vehicles as new cars.'
Although some new-car dealers were willing to dump excess inventory or boost their sales numbers by selling to any-car stores, most franchised dealers wanted to stop lessors from retailing new vehicles.
'They have no overhead and no shop,' explains the general manager of a Honda store who asked not to be named. 'They can sell the car for less than we do. We have to drop our price to compete with them.'
At least one lessor who asked to remain anonymous said he was happy with the amended law. The lessor said he will be able to keep selling new vehicles under the amendments. Although he cannot open more any-car stores, he had no plans to expand the concept.
The law also bars franchised dealers from off-site sales.