Alaska editorial: Require auto dealers to tell consumers the details

Posted: Sunday, April 16, 2006

This editorial appeared in the Anchorage Daily News:

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Most auto dealers - like most businesses - are honest. The sticker lists all the charges, and buyers can subscribe to any of several services that will tell them the cost of the car and advise them how to bargain for the lowest price. Banks and credit unions regularly compete for loans for new cars and trucks, and consumers can do a lot to help themselves get the best deal on a new vehicle.

But there are some dealers - just like there are some people in any profession - who try tilting the advantage in their favor. And because of that, car buyers need effective consumer protection laws to ensure they get the full details about what they're paying.

Four state House members - a Republican and three Democrats - are sponsoring legislation that would require auto dealers to disclose a couple of important facts to prospective car and truck buyers:

• All dealer fees, including the so-called "documentation preparation fee," would have to be disclosed in both the advertised and negotiated price of a vehicle. A dealer would not be allowed to add in the fee after the sales price was settled, as if it was some sort of required, non-negotiable government or third-party fee, when it is merely an add-on for the dealer.

More confusing to some shoppers is that the fee often is included with a small-print asterisk, telling buyers that the advertised price doesn't include things such as licensing fees, which are required by law. The misleading implication is that documentation fees are somehow required by law and are non-negotiable.

• Dealers also would have to disclose details of the "dealer reserve" to any buyer who arranges financing through the dealer. The reserve, as it's called, is the difference between the interest rate the dealer can get for the customer and the actual, higher interest rate charged to the customer. The dealer gets to keep the difference.

Dealers defend the practice as a reasonable charge for handling the customer's financing or to help a buyer with poor credit get a loan. But some dealers don't tell the customer about the interest-rate mark-up. This bill would require that dealers tell buyers, in writing, if the dealer gets to keep anything from the financing deal. ...

The bill is waiting for a vote by the full House, and would then move to the Senate. There are almost five weeks left in the legislative session - time enough to pass the bill.

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