WASHINGTON, D.C. -

The American Financial Services Association submitted a letter to the New Mexico attorney general’s office Thursday outlining concerns about a proposed rule that imposes what the organization believes are “unnecessary and burdensome” inspection requirements regarding the age and condition of a vehicle.

These requirements could fall on finance companies involved in wholesale remarketing activities as well as the sale of off-lease vehicles to dealers and lessees.

In the letter, AFSA highlighted how it believes the rule’s broad definition of “seller” unnecessarily includes finance companies engaging in these transactions. The association insisted the buyers described are not likely to derive significant benefits from the proposed rule.

AFSA manager of state government affairs Susan Sullivan wrote that association members believe the proposal would benefit from greater clarity as to the definition of “seller.”

“We understand and support the rule’s intent to protect buyers from unfair and deceptive practices involving the misrepresentation of the age or condition of a motor vehicle in motor vehicle sales transactions,” Sullivan wrote.

“The broad definition of ‘seller’ proposed would impose unnecessary and burdensome requirements on finance companies involved in wholesale remarketing activities and/or the sale of ‘off-lease’ vehicles to dealers and lessees,” she continued.

Sullivan explained that the broad definition of “seller” as written would cover remarketing sales of vehicles by finance companies.

“These sales are most often completed through private auctions open only to dealers,” Sullivan told the New Mexico attorney general’s office in the letter addressed to Assistant Attorney General Lori Chavez.

“As the purchasing dealers buy vehicles at auction expressly for the purpose of resale and are therefore generally very skilled at assessing the condition and value of these vehicles, purchasing dealers would likely derive little benefit from the protections promised by the proposed rule,” Sullivan continued.

“Complying with the proposed requirements would require finance companies to enhance their pre-auction vehicle inspections, thus adding to the cost of remarketing vehicles, and in-turn driving up vehicle prices AFSA believes that the proposed requirements would provide little or no benefit in this context, while the potential burden that may be imposed on finance companies could be significant,” Sullivan went on to say.

Sullivan tried to inform New Mexico’s attorney general about how when a leased vehicle is returned, a representative of the lessor is generally not present as the lessor typically relies on a dealer to process the return.

“Therefore, complying with the proposed rule’s requirements could impose significant costs and delays on the sale of off-lease vehicles to both dealers and lessees, as leasing companies would likely have to hire more personnel to conduct these transactions and meet the additional disclosure and inspection requirements,’ Sullivan said.

“With respect to the sale of off-lease vehicles to dealers, given their experience with assessing and purchasing vehicles, dealers will likely not enjoy significant benefits from the proposed rule,” she continued.

With respect to the sale of off-lease vehicles to lessees, AFSA emphasized the proposed rule should also expressly exempt sales of leased vehicles to lessees who elect to purchase the leased vehicle at the end of the lease term.

“Lessees are not likely to derive significant benefits from the proposed rule because lessees should already be well aware of the age and condition of the leased vehicle as they have had possession of the vehicle for the term of the lease,” Sullivan said.

“Leasing can be a more affordable way for consumers to drive vehicles with the latest safety and emissions equipment,” she continued. “Monthly payments can be lower than payments associated with financing the purchase of a vehicle, thus providing an attractive alternative to some consumers. Imposing these unnecessarily burdensome disclosure and inspection requirements on the sale of off-lease vehicles could result in an increase in the cost of leasing, for no appreciable benefit to either purchasing dealers or lessees.

Sullivan closed her letter with one last point.

“To prevent this unnecessary and costly burden on financial institutions, and thus their customers, we respectfully request the proposed rule be amended to expressly exempt finance companies engaging in wholesale remarketing activities and transactions in which a leased vehicle is sold to the lessee at the end of their lease term,” she concluded.

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