Blumenthal Proposal Would Deflate Value of Customer Trade-Ins
BY BILL FOX
July 27, 2015
Imagine what would happen if dealers could only offer a fraction for their customer's trade-ins, or could not even send the trade-in vehicle to auction. This could be a dark reality if the Sen. Richard Blumenthal (D-Conn.) used car amendment, which would ground all recalled vehicles at dealerships until remedied, is passed.
When a food recall is issued, the product under recall is immediately removed from commerce and tossed from retail shelves. This is not the way it works for a recall involving automobiles. When a particular vehicle is under open recall, that doesn't necessarily mean it requires the drastic step of grounding the vehicle. While there are at least 46 million vehicles currently under open recall, the truth is many recalls don't require the vehicle being taken out of service. Furthermore, recall notices are often issued even though there is nothing an owner or dealer can do to resolve the problem because of a lack of auto parts.
And some recalls are due to minor causes, such as a printing error in the owner's manual.
The Blumenthal amendment to the highway bill (H.R. 22) currently being considered by the Senate proposes to ground all used vehicles sold at a dealership under open recall. (Private sales would remain unregulated.) The amendment would effectively slash the trade-in value of some recalled vehicles while removing cars from the road needlessly-and the reason could be for something as minor as a warning sticker that may peel off the sun visor. This amendment would cripple the used car market, leaving consumers with diminished trade-in values or fewer options because cars would be grounded indefinitely until parts became available. This would be devastating for consumers, dealers and automakers.
Franchised auto dealers play a critical role in ensuring that recalled vehicles are repaired.
Proposals that ground all vehicles under open recall at a dealership miss the mark: they don't differentiate between recalls involving a serious defect and those with a negligible impact on safety. Time and time again, they prove to be overly broad measures that do not require the drastic step of grounding cars. A recent survey of 2,100 vehicle recalls revealed that 80 percent of them do not come with any recommendation from the manufacturer or the National Highway Traffic Safety Administration to stop operating the vehicle.
NADA is advocating for a better solution. A more viable approach would be to improve the recall process by differentiating between truly dangerous defects in which vehicles should be immediately taken off the road versus trivial issues where there is no harm to driver safety or the public good.
Policies should be tailored to boost consumer recall response and completion rates. The average vehicle recall completion rate is 75 percent. America's dealers support a 100 percent completion rate and we urge NHTSA to improve the recall process by designing a database that handles multiple VIN requests as a single inquiry.
Dealers should call their Senators today at 202.224.3121 and tell them to vote “No” on Sen. Blumenthal's ill-conceived amendment. This amendment would diminish in an instant the trade-in value of millions of vehicles, while not guaranteeing one recalled vehicle gets fixed.
Bill Fox is 2015 NADA chairman and a multi-franchise dealer in upstate New York.