The unintended consequence.
That’s what Jeff Carlson, the 2016 chairman of the National Automobile Dealers Association, said NADA is trying to prevent through its policy work in Washington, D.C.
The Colorado Ford and Subaru dealer said many of the federal government’s regulatory and policy moves related to the car business have good intentions, but could end up hurting consumers.
This plank of NADA’s platform was part of a wide-ranging emailed Q&A between Carlson and Auto Remarketing three weeks prior to the dealer association’s annual convention.
“NADA’s policy engagement efforts all have a common theme — and that’s protecting consumers from the unintended consequences coming out of Washington, D.C., and informing other key stakeholders about the tried-and-true benefits of the dealer franchise system,” Carlson said when asked about NADA’s goals and focus for 2016.
“A major focus of NADA continues to be encouraging dealers to adopt the NADA/NAMAD/AIADA Fair Credit Compliance Program as the best way to address the issue of fair credit risk in auto financing,” he said.
“This voluntary compliance program was structured to reflect a program by the U.S. Department of Justice that fully addresses fair credit risk in auto lending, while preserving the dealer discounts that are the hallmark of competition and consumer savings in the marketplace,” Carlson said.
(More on Carlson’s chairmanship goals below)
Policymaking and regulatory issues were also a key point when Carlson addressed the biggest hurdles for dealers. Auto Remarketing asked him what he sees as the biggest challenges for franchised dealers in 2016, and how these might be used as opportunities.
“There are many federal regulatory issues today that could hurt our customers with higher costs. Whether it’s eliminating competition in the auto finance market or enacting an overly broad and counterproductive recall policy, there are a number of ideas emanating out of Washington, D.C. that, while well-intentioned, could result in negative unintended consequences,” Carlson said. “In these areas, NADA is working hard to protect consumer rights, consumer choice and consumer savings.
“Vehicle affordability must be a bedrock principle for national policymakers. Affordability expands consumer choice and drives consumer acceptance,” he said. “Consumer acceptance drives fleet turnover. And fleet turnover achieves the desired results of economic growth, improved fuel efficiency and safer vehicles on our roadways that we all want.”
What’s needed to fix recall process
Going back to one of Carlson’s policy points — that of vehicle recalls — it’s safe to say the auto industry has never seen anything like the current recall environment. Citing data from the National Highway Traffic Safety Administration, Carfax said in a recent analysis that more than 51 million recalls were issued in 2015, more than any year prior.
The same bit of analysis from Carfax, released in February and reported on by Auto Remarketing, says there were over 47 million vehicles in the United States that had at least one unrepaired safety recall, at the time of the report.
Numerous parties, be they government- or auto industry-based, have received criticism related to recalls, whether it’s their timeliness, execution or otherwise.
Suffice to say, the actual process and logistics behind the reporting, fixing and adjusting to recalls has arguably had its challenges.
Some, like AutoNation, have responded by not selling any vehicle under an open safety recall.
We asked Carlson what NADA plans to do to help make the recall process smoother for dealers.
“The nation’s franchised new-car dealers are the solution to completing safety recalls, and fully support achieving a 100-percent recall-completion rate. But we all have to remember that not every recall presents the same level of urgency to the driving public,” Carlson said.
“In fact, the vast majority of recalls are for minor compliance issues that present virtually no imminent safety risk to the driver, passenger or other drivers,” he said.
“So, why is it counterproductive from a safety standpoint to treat all recalls the same? Because studies show that prohibiting the sale of any used vehicle subject to any open recall, including the most minor of recalls, could drive down the value of trade-ins by literally thousands of dollars,” he said.
“And if we devalue trade-ins, we automatically give consumers an economic incentive to turn to private market sales, where evidence clearly shows that the recall completion rates plummet. Plus, when a consumer’s trade-in is devaluated, it becomes more expensive for that consumer to purchase a newer, safer car.
“So rather than adopting an overly broad recall policy that would be harmful to consumers and detrimental to goal of fixing recalls, a far better approach would be creating a system that properly differentiates truly dangerous recalls from minor ones,” Carlson said. “Dealers also support data-driven policies that empower consumers, including NHTSA’s public awareness campaign aimed at reminding cars owners that they may have a safety recall.”
Additional NADA goals
Beyond policy and regulatory issues, Carlson said NADA aims to continue giving dealers the training tools they need — through programs at NADA Academy, NADA University Online, NADA 20 Group and its annual convention — to adapt to changes in the car business.
NADA is also aiming to bring younger generations of dealers and dealership managers into the “grassroots legislative advocacy” process with their respective dealer associations.
For additional coverage of the NADA Convention & Expo, see Auto Remarketing's Special Convention Issue.