Wednesday, March 18, 2015

March 2015 SDADA Column

One of my mantras when I am working on a glass of good bourbon and a fine cigar is to "never allow the truth to derail a good story". It's usually good for a laugh. It's always justifies my embellishment!

Somehow though, it is not quite as funny when the Department of Justice abides by the same premise. In May 2009, the U.S. Justice Department looked at the economic effects of state franchise laws that ban on direct sales of vehicles by manufacturers to consumers. The author of the Justice Department report, economist Gerald Bodisch, used the example of a direct sales model, a GM program in Brazil, whereby a consumer could order a Chevrolet Celta online. He opined about how wonderful this program was.

There was only one problem with this report - the program ended in 2006 because it was too costly. That is a full three years before the report by the DoJ was filed. This earned the Department of Justice four Pinocchios from the Washington Post.

Silly me. I did not expect that it would be acceptable for the Justice Department to embellish. I wonder what kind of bourbon Mr. Bodisch drinks. It would appear that it's something in the 100-proof plus range! Cheers!

CFPB's Richard Cordray Takes Tough Questions From Congress

I don't know if you've seen this video of Richard Cordray, director of the Consumer Financial Protection Bureau, testifying before members of Congress who expressed serious concerns about the CFPB’s guidance on dealer-assisted financing. It is worth a couple minutes of your time to see that the CFPB's behavior has garnered bipartisan dismay. (Watch Rep. Roger Williams (R-Texas), a car dealer, tell a story of what really happens in the showroom.)

Members on both sides of the aisle noted that the agency has overstepped its jurisdiction and continues to ignore an important Charles River Associates study that questions the CFPB’s testing methodology. The flawed methodology is being used in the CFPB’s overreaching guidance of auto loans, yet Cordray refused to discuss the CFPB’s reasoning in dismissing the study.

NADA Supports Efforts to Disapprove NLRB Ambush Rule

In December, the National Labor Relations Board (NLRB) issued the "ambush" election rule which shortens the time between when union organizers ask for a union election and when that election must take place. The rule forces companies to allow these elections to occur as soon as 11 days after they're notified. The rule's new timeframe limits an employer's ability to communicate with employees prior to the election. The rule also requires employers to provide, within two business days of an election direction, employees' personal telephone numbers and e-mail addresses.

NADA opposed this rulemaking in a number of ways, through filing multiple sets of comments and our involvement with the Coalition for a Democratic Workplace (CDW). CDW filed a lawsuit in the United States District Court for the District of Columbia to stop the implementation of this rule and coordinated multi-industry Senate and House letters in support of S.J. Res.8., which NADA signed. S.J. Res. 8 is a joint resolution nullifying this rule through the use of the Congressional Review Act. On March 4, the Senate approved S.J. Res. 8 by an almost party line vote of 53-46. The House is expected to take the measure up on March 18. The President's advisors announced on March 3 that they will recommend a veto of the resolution. Congress would need a two-thirds majority to override a presidential veto.

NADA believes that the current election timeframe is reasonable and allows employees to hear from both the union and the employer before making a decision. The NLRB's rule upsets this balance by putting employers at a disadvantage. Contact NADA Legislative Affairs if you are interested in learning more about the upcoming vote in the House by sending an email to

Monday, March 2, 2015

Don't Park That Cash in Your Leased Vehicle

Leasing your next vehicle may be a more attractive option than it has ever been before. I have posted previously about the leasing. Driven by high residual values and low lease (interest) rates, lease payments currently allow you to drive more vehicle for the money than purchasing does.

Leasing also afford the car buyer to avoid a long-term commitment. When you sign a lease, you’re essentially financing the vehicle for a set period of time and when the lease is up, you return the vehicle to the lessor and move on. This can be an attractive option for anyone who isn't interested in keeping a vehicle for the long haul or those who want to trade up for a new model every few years.

I am often asked about down payments on a lease. Most manufacturer-advertised lease payments include a down payment. It is usually in the fine print at the bottom of the television screen and flashes up so fast you cannot read it. It may be at the bottom of the page in print so small you need a microscope to decipher it or speed read at the end of the radio commercial faster than you can listen!

In order to guarantee customers the lowest and most attractive payment possible, these ads include a sizable down payment up front. Typically, this money goes towards paying a portion of the vehicle lease up front. But ponying up all that cash early on doesn't always work in your favor.

While a down payment may lower your lease payment, there is some risk that comes with putting money down to lower your payments. Often this down payment money comes from the equity in the vehicle that you may be trading. While it seems logical to roll this money into the next vehicle, it is not necessarily the best thing to do.

If the leased vehicle is stolen or totaled in an accident during the first few months of the lease, the insurance company would reimburse the leasing company only for the value of the car. They will not reimburse you for the money you put down. Not only would you be short a vehicle but you’d also be out your down payment money.

Paying less up front or even nothing at all may make your monthly payment a little higher but you wouldn't have to worry about coming up short if something were to happen to your leased vehicle. If you have the discipline to do so, you can put your money in an investment account and benefit from it growing rather than spending it to reduce your payments. You always have that money to fall back on in case you have trouble making a payment some month.

Leasing is a very good option for most prospective vehicle buyers. But you must structure the lease in the manner that is most beneficial to your situation. Let me strongly caution against putting money down on your leased vehicle.