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Letter to the Editor: Peter Welch Responds to False Claims in Wall Street Journal Article

Published February 13, 2020



Peter Welch


Dear Editor,

For the second time in three months, the Journal has cited fewer than a handful of cases as “proof” that fraud is widespread in the vehicle finance industry – which just so happens to engage in more than 35 million transactions every year.

We’re used to such a ludicrously low “standard of proof” in Washington, but we always thought the Journal held itself to something higher.

Yet here we are again, this time being led to believe – courtesy of the Journal’s sole trial lawyer source – that something called “kicking the trade” is systemic or even common (“Dealerships Give Car Buyers Some Advice: Just Stop Paying Your Loan”).

NADA explained in detail to Journal reporters that there is simply no credible data – none – that this alleged practice is systemic or prevalent in the marketplace. We also explained that the alleged practice ignores the basic economic realities of today’s sophisticated auto financing market.

Banks and finance companies that routinely purchase auto financing contracts from dealers employ sophisticated underwriting tools to accurately determine a retail purchaser’s risk of non-repayment before any transaction is approved. This includes accounting not only for the debt-to-equity ratio on the individual vehicle being purchased, but also for the consumer’s overall debt-to-income ratio.

Neither a customer nor anyone else can make a negative loan balance on an existing car loan disappear from a credit profile by retaining a currently owned vehicle instead of trading it in. The debt and the repayment burden of an existing car loan exists whether it is part of – or separate from – the financing used to purchase a replacement vehicle.

There are many other factors that deter the kind of activity the Journal falsely claimed is widespread – all of which were explained prior to publication. Regrettably, the Journal chose to ignore all of them. Perhaps the facts just got in the way of a good story. Whatever the reason, we sincerely hope there’s a return to the editorial standards your readers expect and deserve.

– Peter Welch

The author is President and CEO of the National Automobile Dealers Association and lives in Falls Church, Va.