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Tighter Restrictions on California BHPH Dealers

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Tighter Restrictions on California BHPH Dealers

By David Meyers, Executive Vice President

Many of our industry peers here in California — including us — were waiting on the edge of our seats to hear the final outcome of some critical pieces of legislation back in January. And sure enough, Governor Jerry Brown signed into effect two bills that stand to impact the Buy-Here-Pay-Here dealership industry across the Golden State.

For those out-of-staters unfamiliar with the two bills, here’s a breakdown of them. The first of the California BHPB bills, titled AB 1534, requires dealers to display a label on any used vehicle offered for retail sale that states the vehicle’s reasonable market value. In other words, what that car would cost if the consumer had good credit. This cost is, of course, lower than most BHPH ask for the used vehicles they typically sell to consumers with credit challenges. AB 1534 also requires BHPH dealer to show where this “good credit price” comes from.

The second of the two bills, AB 1447 is largely considered the least business-friendly of the pair. This bill requires dealers to provide a written warranty covering most of the major working parts of the used vehicle, good for 30 days or 1000 miles — whichever comes first. The bill also states that customers do not have to make the car payments in person. This makes it more challenging for BHPH dealers to repossess delinquent vehicle assets. Dealers must also now inform buyers when the vehicles have starter interruption devices installed in them, as well as give advance warning before using these devices to disable a vehicle. Lastly, buyers in California now have to give written consent before tracking technology can be placed in the vehicle they’re buying.

True, these bills seem to put more restrictions on BHPH dealers that could negatively impact their sales. But it actually could have been much worse. Governor Brown ended up vetoing a third bill, Senate Bill 956, which would have required BHPH dealers in California to secure California Finance Lender licenses as well as set a cap of 17% on the installment loans they offer, plus the variable Federal funds interest rate which currently stands at 0.25%. That’s lower than the credit card rate charged by many banks. Last but not least, under this bill dealers would have been forced to provide a grace period for buyers with repossessed used car, allowing them time to get their vehicles back and reinstate their loans before the car could go to auction. Needless to say, California BHPH dealers are pleased with the fact that this final bill was deemed overkill by Governor Brown.

So what do the new bills that got greenlighted mean for BHPH dealers in California? Here at Spireon, we firmly believe that these bills present BHPH dealers with an opportunity to strengthen their relationships and communications with buyers, at the same time reducing delinquencies and defaults — along with the costs of repossession. And here’s why.

First of all, having a GPS tracking device like GoldStar GPS or EnfoTrace GPS allows you to offer more competitive rates and terms on your subprime loans, because of the resulting reduced risk and repossession costs. Secondly, when approached in the right manner, GoldStar GPS and EnfoTrace GPS devices can be positioned as a real benefit to car buyers.

Don’t try to hide the fact that your used vehicles have GPS tracking devices installed in them. Rather, fully disclose the presence of the devices to your buyers. Make sure your buyers are clear on what the starter interruption device does, how it works, and how to avoid it being triggered. They will respond well to your candor, especially when you’re willing to work with buyers to make payments rather than incur the costs of repossession and skip tracking.

We also advise BHPH dealers to remind buyers that GoldStar GPS or EnfoTrace GPS come with automated payment reminders that help keep them on track with their payments. This also helps them rebuild their credit. And don’t forget to remind them that GoldStar GPS or EnfoTrace GPS tracking devices can also help recover stolen vehicles more quickly, and can often result in reduced insurance premiums.

It’s largely been our customers’ experiences that the vast majority of car buyers do not mind having a GPS tracking device in their vehicles. In fact, most of them appreciate having the added payment reminders and vehicle protection. So, for our BHPH audience here in California, there’s no need to fear the new bills aimed at our industry. Just make sure you’re prepared to support the success of your GPS tracking strategies and your care-buying customers with full disclosures and clear communications.

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