State studies narrowing definition of 'new' car

June 14, 1991|By Kim Clark

In an attempt to crack down on car dealers who advertise and sell "new" cars that have been previously sold or driven, state officials are drafting regulations that would, for the first time, clearly define just what a "new" auto is.

State Motor Vehicle Administration officials say that within a few weeks they expect to publish proposed regulations that will set time and mileage limits for "new" cars, potentially forcing autos that have, for example, been delivered and returned the next day to be advertised as "used."

State consumer advocates hope that besides making sure that car buyers know what they're getting, the regulations will stop the increasingly common sales tactic of letting buyers drive home in their cars of choice before the purchase has been financed or completed, a method called "spot delivery."

Many car dealers around the state are fighting the MVA's proposal, insisting that there is nothing wrong with selling as "new" a car that someone has returned or has been driven as many as 8,000 miles.

While most dealers concede that the existing definition of a new car is unclear and could benefit from some regulation, many argue that state officials are overreacting in their zeal to protect car buyers, since state laws already require dealers to reveal information about a car's mileage and any damage.

Further tightening the definition of a new car will make life tougher for already troubled car dealers and end up increasing car buyers' costs, they warn.

Besides, they say, some customers like "spot deliveries."

The industry-government debate over what is a new car has been raging since January and is turning out to be one of the most heated auto-sales controversies in years, said Ron Forbes, head of the MVA's dealer investigation unit and one of the backers of the change.

In fact, he said, the state's first proposal, which would have declared "used" any car that was out of thedealership's control for more than two hours, or any demonstrator driven more than 6,000 miles, got so much opposition from Maryland dealers that the MVA's attorneys are now working on a compromise.

The compromise, which Mr. Forbes expects to be published in a few weeks, would allow dealers to let potential customers keep cars for several hours.

The MVA might also relax the proposed mileage limit for demonstrators, Mr. Forbes said.

The compromise rules would make Maryland tougher on dealers than Virginia, which matches Maryland's current vague definition, but would still keep Maryland easier on dealers than Pennsylvania, which declares a car used after 500 miles, Mr. Forbes said.

The new regulations will be reviewed by a committee of the state legislature and probably won't be made effective for several more months, he said.

Mr. Forbes said he hopes the tight rein on cars that have left the dealers' control for several hours will stop dealers from sending customers home in cars they haven't technically bought yet.

"We want to break the cycle of spot deliveries," he said.

According to Mr. Forbes, dealers like to send customers home in cars, even if all the formalities of a sale haven't been completed, in order to make customers think they've bought cars, and thus prevent them from shopping at other dealerships.

Mr. Forbes said that he wants to stop spot deliveries for the same reason dealers like them -- because they tend to prevent car buyers from shopping for a better deal.

He said that the proposed rules would eliminate most spot deliveries, since salesmen would be afraid that if the deal fell through, they'd have to take the car back and sell it at a discount as used.

And that's why car dealers don't like the strict definition.

A new car loses about 20 percent of its value as soon as it is declared "used," and dealers can't afford to swallow that loss, explained George Hatcher, president of Easton Ford on the Eastern Shore.

When customers go car shopping "it's like a fever," he said, explaining that most people want to drive home from a dealership in new cars, even if the banks are closed and financing can't be arranged. "If you let a person walk out of the door, they'll walk into some other dealership," he said.

"It seems as though every time we turn around, the state is trying to make it more and more difficult for car dealers to do business," Mr. Hatcher complained.

Gerard Murphy, president of an association of Washington-area new-car dealers, said that limiting the number of miles or number of hours a car can be used before losing its "newness" will be a hassle for dealers and will hurt car buyers.

Dealers afraid of having to sellwhat they consider new cars as used won't allow extensive test drives or let a customer try a car overnight, he said. In addition, declaring a demonstrator with, say, 9,000 miles on it a used car would mean a buyer would have to borrow at a higher rate of interest.

Mr. Murphy said that the dealers would rather simply be required to tell consumers how cars got the mileage on the odometer.

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