National Automobile Dealers Association chairman Forrest McConnell reiterated his arguments this week against points made by federal regulators, especially the Consumer Financial Protection Bureau. McConnell emphasized in remarks to the Automotive Press Association in Detroit that dealers compete fiercely against each other on vehicle pricing, financing and service, which reduces costs for consumers.

“Competing with the dealer down the street or on the Internet benefits car buyers across the nation,” McConnell said.

As a percentage of total sales in the new, used and service/parts departments, NADA declared that net pretax profit at franchised dealerships was just 2.2 percent in 2013.

“Our manufacturers benefit from a high return on capital in making vehicles, as opposed to the low margin of selling them, because dealers bear the cost and risks of these investments — at virtually no cost to the manufacturer,” he said.

McConnell, a Honda and Acura dealer from Montgomery, Ala., said there’s a simple reason why manufacturers use dealers to sell new vehicles.

“The franchised dealer network is the most competitive, the most cost-effective and most pro-consumer model for buying and selling new cars and trucks,” McConnell said.

“If manufacturers sold directly to customers, there would be zero competition in pricing vehicles, parts and service,” he continued. “Car buyers would be stuck paying the full sticker price — because there would be no ‘same-brand dealership’ to shop and compare prices.”

McConnell added that dealer-assisted financing, which is optional, increases competition for buyers, and the retail finance rate offered by dealers is often more competitive than a bank or credit union.

“We work with multiple lenders who compete for the dealers’ business by offering us low financing rates,” McConnell said.

“The bottom line is this: dealer-assisted financing provides car buyers with the ability to get a discounted auto rate from the dealer,” he continued. “And low rates mean lower car payments for our customers. But the government is trying to take away a customer’s right to get that discount.”

NADA maintained that the controversy with the CFPB has been ongoing since March of last year when the agency issued its guidance on indirect auto lending. McConnell and the association contend the bureau took the wrong direction by attempting to eliminate the flexibility of dealers to discount financing rates offered to their customers by pressuring finance companies to switch to a flat-fee compensation system.

“We can all agree on one thing: We are all against discrimination. There’s no room for it in this business or any other business,” McConnell said.

But what we can’t agree on is the CFPB’s insistence on a flat-fee model — which eliminates a customer’s right to get a discount,” he continued.  “Right now, dealers are incentivized to select the lender that offers us the lowest available rate. The current system works because it forces banks to compete and offer dealers low rates to get their business.

"Next, dealers have to discount those rates to beat the competition or meet a customer’s budget. Those two competitive factors drive rates lower for our customers,” McConnell went on to say.

Then the NADA chairman asked the gathering in the Motor City a question.

“What happens to customers if the current system changes to flat fees? Lenders will want to pay higher flats to get business. Not lower interest rates. That would give dealers the incentive to select the lender that offers the highest flat fee. That doesn’t help car buyers save money,” McConnell said.

Back in January, NADA developed an optional Fair Credit Compliance Policy and Program for dealerships, which was released in partnership with the National Association of Minority Automobile Dealers and the American International Automobile Dealers Association.

“We’ve come up with a solution to address all the risks the CFPB talks about — a dealer following the program sets a standard starting point for dealer reserve,” McConnell said.

“This gives a dealer who adopts the program the ability to discount the finance rate when there is a legitimate business reason — like helping a customer fit a monthly payment plan into his or her budget,” he continued.

McConnell closed his appearance by mentioning that since March of last year the industry — from dealers to finance companies — and Congress have worked to bring greater transparency and accountability to the CFPB.

“There haven’t been many issues lately where members of Congress have seen eye to eye,” McConnell said. “But the CFPB’s flawed position is one of them.”

Last month, Reps. Ed Perlmutter (D-Colo.) and Marlin Stutzman (R-Ind.) introduced H.R. 5403, a bipartisan bill to nullify the CFPB’s auto lending guidance. So far, NADA indicated 69 Republicans and 40 Democrats in the U.S. House of Representatives support the dealer’s ability to discount the rate for our customers.