Rip Van Cardealer nodded off for a short nap in 2010. As evidently happens with people named Rip, though, he didn’t wake up until 2020. Rip was a hardworking sort, so rather than puzzle over why his beard was two feet long, he shaved, took a shower and went to work at his dealership.

Luckily for Rip, his kids were in business with him, so while he’d been snoozing, the kids had been running the dealership for him. At first glance, Rip didn’t see that much had changed. On second glance, though, he noticed that all the cars had price tags on them, sort of like the ones you’d see on refrigerators at Sears.

”What’s the deal with the price tags?” he asked his daughter.

“Oh,” she replied, the Consumer Financial Protection Bureau and the Federal Trade Commission have decided that car dealers have to put a price tag on their cars and we cannot deviate from that price.”
“I remember the FTC, but what is this Consumer Financial Protection Bureau?” asked Rip.

About four hours later, Rip had the inside skinny on the CFPB. Then he asked, “What’s with these odd prices? They aren’t set at $9,995, $14,995 or any other ‘close-to-the-next-thousand’ number we used to use to make buyers think they were getting a bargain.”

“Oh,” said his son, “we can’t do that anymore. The CFPB says that we can’t mark up a car that we finance more than 20% above the amount we paid for it. Markups higher than that, they say, are ‘abusive.’ So in order to get all the profit we can, we just use a straight 20% markup, and that results in numbers that are all over the map.”

“Well, that’s no big deal,” Rip replied. “We’ll just goose the profit on our F&I products and make up for what we can’t make on the cars.”

“Sorry, Dad,” his daughter said. “The government says that we can’t keep part of the finance charge like we used to. We also can’t mark up our F&I products more than 20%, either, because, they say, that would be abusive. And some products we can no longer sell at all. The Bureau says there’s so little value in them that no consumer should have to pay for them. But that doesn’t matter much anyway. We aren’t selling enough in the F&I office to make a difference in the bottom line.”

“Why not?” asked Rip. “We used to get a substantial part of our profits from F&I.”

His son groaned. “Not anymore. We aren’t allowed to even mention things like service contracts, GAP, tire-and-wheel protection, dent repair and other products until 10 days after the sale of the vehicle has occurred. By that time, we aren’t face-to-face with the buyer, and that really cuts down on our penetration rate. The Bureau says that making us wait until the vehicle sale is completed eliminates the danger of payment packing.”

“I’ve never heard such socialistic tripe in my life!” Rip thundered. “We need to go right to the top of the federal government and raise hell!”

“You can try that, Dad, but I don’t think you’ll get much of a reception from President Warren,” said the son.

“Well, then, what are we going to do?” Rip asked. “And why are you two packing all these boxes?”

“Oh, that’s right, Dad,” said his daughter. “We forgot to mention that. We’re moving to Australia.”

Thomas B. Hudson is a partner in the firm of Hudson Cook LLP and the author of several widely read compliance manuals. 2014, all rights reserved. Based on an article from Spot Delivery. Single print publication rights only, to Auto Dealer Monthly (4/14). HC# 4818-3850-5497. [email protected]