A few dealerships using obsolete computers could have problems, but when the clock strikes midnight on Dec. 31, captive finance companies virtually guarantee they will be able to process car loans.
Large financial institutions in particular are expected to be immune to the so-called Y2K bug, which will affect older computers that cannot read dates from 2000 and beyond.
'The captive finance companies are ready,' said Liz Huber, a Los Angeles attorney with Hudson Cook LLP, a law firm in Crofton, Md., that specializes in auto finance. The firm has several of the captives as clients. 'They have been working on this for quite a while.'
On the dealership side, vendors said only a handful of the dealer population uses out-of-date computers. And at least some of these systems are expected to be upgraded before the end of the year.
The auto finance business is expected to sail into 2000 with little problem.
FIRST TO UPGRADE
Within the auto industry, the finance business was one of the first sectors to prepare for the Y2K computer bug.
Because car loans can extend 60 months or more, auto finance companies had to upgrade their computers as early as 1995, to process dates beyond 2000.
As a whole, the banking industry had little choice but to upgrade early because it is heavily regulated.
'Bank regulators are very diligent. They started three to four years ago putting together the schedule of events required to take place,' said John Russell, chief Y2K communications officer for Bank One Corp. of Columbus, Ohio.
For example, federal regulators set a deadline of June 30, 1999, for all federally insured financial institutions to use computer programs that have been fixed and tested to work properly in 2000. These banks also were required to develop detailed contingency plans in case Y2K problems do crop up.
'I believe the banking industry will pass the Y2K test with flying colors,' wrote John Hawke Jr., the federal controller of the currency, in a letter to the editor sent to news organizations around the country. 'Banks have made a firm commitment to ensure that their customers maintain access to bank accounts and account information. And that commitment is as good as money in the bank.'
To keep pace with federal requirements, Bank One spent $350 million renovating its software. The bank dedicated 300 staff members to work on the Y2K problem, Russell said.
The banks are not alone in spending millions of dollars to ensure that computers work at the close of the year. Ford Motor Credit Co., for example, spent $25 million to upgrade and repair systems and develop contingency plans, part of a three-year, $375 million overall Y2K program for parent Ford Motor Co. General Motors Accep-tance Corp. anticipates spending a total of $75 million to beat the Y2K bug.
'We were first aware of the Y2K problem in the early 1990s. We formed a task force in 1994 and began making changes to legacy (older) systems,' said Linda Nesmith, Y2K program manager for Ford Credit. 'We feel very confident we are ready to go. We do not expect to experience any problems.'
Financial institutions are viewing Y2K and its potential to cause power outages as they would a snowstorm. Their records are backed up on archives, and some say they have generators that can carry them indefinitely through blackouts.
Dealers' F&I offices are not expected to hit a glitch at the turn of the century. Although there are a few old computer systems in operation, not many dealers are using them.
For example, the 8500 system from ADP Dealer Services of Hoffman Estates, Ill., will not be able to run in 2000. The old hardware platform ADP sold 15 years ago is in operation at just 12 dealerships.
'They are scheduled for replacement' by December, said Joel Shuflin, an ADP spokesman.
Shuflin said he expects one common glitch in the F&I office. Some laser-generated forms assume a 20th century date. The space provided to fill in the year reads: '19__.' The defect is easily corrected, he said.
Some dealerships also might be using old systems years after they have ended their relationship with a computer vendor.
If a dealership stopped paying service fees and lost touch with a vendor, the vendor would not have notified the store that its system will fail in 2000, said Paul MacDonald, a Hays, Kan., computer consultant who works with the National Automobile Dealers Association.
For all their preparations, the financial institutions have not communicated their Y2K plans fully to their dealers, according to MacDonald.
'The manufacturers and the captives and big banks still have not told the dealers what their contingency plans are,' MacDonald said. 'What happens if there are problems with electronic funds transfer? How will they make payments? Do we go back to manual drafts?'
Some financial institutions said they have been open with their dealer customers and have tested how their systems will interact with dealer systems after Jan. 1.
But MacDonald still believes the message is not getting through to retailers. NADA is looking for written assurances from captives and manufacturers that their systems are certified for Y2K compliance.
Said MacDonald: 'I have not seen one letter come from any manufacturer saying that the systems are 100 percent certified.'