(July 15, 2004) California Chamber-opposed “job killer” legislation to dramatically alter vehicle sales in California will be heard by the Senate Appropriations Committee August 2.

AB 1839 (Montañez; D-San Fernando) severely limits credit sources for the purchase of personal vehicles and could bankrupt many car dealers by prohibiting car dealers from receiving any profit on certain types of sales.

The Chamber has labeled AB 1839 a “job killer” because it will have a negative effect on California’s vehicle sales industry and could ultimately cause car dealerships in the state to close their doors.

“We believe that AB 1839 will increase consumer confusion at the cost of purchasing and financing new and used vehicles,” said Erika Frank, Chamber legislative advocate and general counsel. “This bill not only interferes with one’s contract rights, but will also place an undue financial burden on both the car dealer and on the purchaser.”

AB 1839 seeks to mandate a three-day cancellation provision on all used car purchases in the state of California requiring car dealers to allow vehicle returns for a refund after the vehicle has been driven. 

Under the current law, car dealers have the flexibility to offer some type of contractual based used vehicle return policy.  Current law also provides consumers with a host of contract rescission rights when the dealer is guilty of wrongdoing. 

AB 1839 also seeks to significantly regulate dealer financing of new and used vehicles, thereby eliminating credit sources for consumers.  If the intent of this bill is to ensure that consumers do not pay in excess of what they should, restricting financing charges will not accomplish this goal. 

Many consumers are able to obtain financing through car dealers that they could not obtain via direct loans from banks or credit unions.  If dealers are unable to receive competitive prices for the sale and assignment of conditional sale contracts, it stands to reason that many of these financing sources for consumers will not be available. 

This bill mandates that dealers charge the same finance charge within a 30-day period to all vehicle purchasers. As a result, dealers will be forced to charge the same rate for a 30-day period even if a lower rate is available.  This provision not only hampers car dealers’ ability to provide affordable financing to consumers, but also places consumers at a financial disadvantage.

Action Needed
The Chamber is urging all members to contact the Senate Appropriations Committee and urge a “no” vote on AB 1839. 

For more information on AB 1839 or to view the entire “job killer” list, please visit our website at www.calchamber.com.