California Gov. Arnold Schwarzenegger
The so-called Car Buyers' Bill of Rights takes effect July 1, 2006.
The law imposes a ceiling of 2.5 percentage points on dealer markups of wholesale interest rates on vehicle loans of 60 months or less. For longer loans, the law mandates a cap of 2.0 percentage points.
The measure requires detailed new disclosures to prevent "payment packing." That practice occurs when dealerships include finance and insurance products in a vehicle purchase contract without a customer's knowledge. Dealerships also will be required to make credit scores and their explanations available to consumers.
Referring to the interest caps in the law, David Hyatt, COO of public affairs for the National Automobile Dealers Association, says his organization does not believe "legislation is a way to address issues of pricing.
"When it comes to the question of the caps, the industry already is responding," Hyatt said.
The bill of rights also allows vehicle buyers to purchase from dealerships a contract cancellation option. This agreement would permit a buyer to return a used vehicle priced at less than $40,000 to a dealership within two days of the sale, for any reason. The cancellation option can cost as much as $250.
NADA's Hyatt says, "We'll have to adopt a wait-and-see" attitude on the law's return provision.
"I think that one will take some time to find out if it is effective or not," Hyatt said.
The bill of rights also tightens the legal definition of "certified" used vehicles. Such vehicles cannot have frame damage or rolled-back odometers.
You may e-mail Gail Kachadourian at [email protected]