If the consumer does not return the car after purchasing the contract cancellation option, the money collected is 100 percent profit to the dealership. If the consumer returns the vehicle with more mileage, excess damage or after the two-day rescission period, the dealer can refuse to take it back.
Along with this big change, the Car Buyers Bill of Rights restricts the amount of finance interest the dealer can earn from the finance company for placing a contract. There is also a payment packing prohibition. Two new disclosures are also included in the Bill of rights. A credit score disclosure if the dealer runs any credit report and a separate form to disclosure any item added after determining the original sales price. All of these changes are designed to better disclose the sales process to the consumer.
Finally, the California law will help define what a certified vehicle is or is not. The law actually stipulates what excludes a vehicle from being labeled “certified” and forces a dealer to prominently display, in writing, the features of a certified vehicle. Any car or truck that has a branded history (lemon law, salvage, junk, etc.) cannot be certified, and any car or truck sold “as is” must also be excluded from the “certified” label.
So, what is really going to be interesting is how many dealers will actively attempt to sell this option and how many consumers will take advantage of this new law. In early discussions with various dealers, franchise dealers say they will explain the new law to the consumer, tell them they stand behind their used vehicles and advise consumers to shy away from the “option contracts.” However, used vehicle dealers have mixed reactions. Some like the opportunity to offer and sell this new product. Others believe they will sell the same car several times, and still others do not like the concept at all.
You can expect a follow-up report in six months with a summary of the impact the legislative changes have caused for local dealerships. For now, prepare yourself for what just might happen in your state next.