Legislature(2005 - 2006)BUTROVICH 205
02/23/2006 01:30 PM Senate TRANSPORTATION
| Audio | Topic |
|---|---|
| Start | |
| SB300 | |
| SB273 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 300 | TELECONFERENCED | |
| *+ | SB 273 | TELECONFERENCED | |
SB 273-MOTOR VEHICLE SALES
CHAIR HUGGINS announced SB 273 to be up for consideration.
SENATOR COWDERY, sponsor, advised members of a proposed
amendment to the bill, to amend Section 1, page 1, line 11, to
delete "for sales in this state" and add, after "vehicle", the
phrase "pursuant to which the dealer's area of responsibility is
located within the State of Alaska". He deferred to his staff
for an explanation.
SENATOR FRENCH objected for discussion purposes.
RYAN MAKINSTER, Staff to Senator John Cowdery, Alaska State
Legislature, explained that in 2004, HB 272 was passed with
regard to unscrupulous advertising or sales practices. Some
people were selling slightly used cars as new, or were
ambiguously claiming that they were new cars. In that bill and
some other legislation, AS 08.66.015 was changed, becoming more
far-reaching than intended. The legislation had "current model"
to deal with this problem, Mr. Makinster noted. However, many
people trade in vehicles soon after buying them. The language
prohibited sale of a current-model vehicle for any reason unless
it had a manufacturer's certificate of origin. Under current
law, a vehicle would have to be held by a dealer until the next
year's model was introduced.
He said this law isn't being enforced. It would be a bad
business practice for dealerships and, according to the
Department of Law (DOL), would hurt the consumer overall. For
example, Mr. Makinster said, a serviceman going overseas
wouldn't be able to turn in a car because no dealership would
want to pay for that car and have it sit on the lot until the
next year's model came out.
He explained that SB 273 therefore removes "current model" from
statute. Thus a new vehicle can be sold only if in possession
of the certificate of origin and if the dealer has the
manufacturer's sales and service agreement. "So basically a
manufacturer-dealer can only sell new cars," he added. "A used-
car dealer, under no circumstance, can sell a new car." He said
this protects the consumer because it doesn't allow a used-car
dealer to purport that a used car is new.
2:08:12 PM
CHAIR HUGGINS asked whether registration provides the primary
evidence that a car isn't new.
MR. MAKINSTER said the manufacturer's certificate of origin
remains with the car until registered; it is then relinquished
to the state's department of motor vehicles and the car
automatically becomes a used car. That is how it occurs in most
states. Some states, however, have more ambiguous statutes.
CHAIR HUGGINS requested clarification about what would change.
MR. MAKINSTER answered that it wouldn't change anything being
done right now. The statute as written isn't being enforced,
which is why DOL has requested this change. If it were
enforced, a vehicle might have to sit on a dealer's lot until
the next model year came out.
2:10:21 PM
SENATOR COWDERY related his understanding that the attorney
general's office said, if this were enforced, there would be
about a $5,000 fine for every transaction.
MR. MAKINSTER concurred, but clarified that the fine would apply
to every attempt to sell, which could attach even to
advertisements.
SENATOR FRENCH requested clarification on whether there is a
prohibition on selling it at all, or if the person just cannot
sell it as a current-model vehicle.
2:12:30 PM
MR. MAKINSTER responded that, according to DOL, the prohibition
is on selling it - because "current model" isn't defined in
statute, it can be interpreted as an inability to sell a
current-model vehicle.
SENATOR FRENCH remarked that it seems to go along with the
letter from Mr. Sniffen [of DOL, in packets].
MR. MAKINSTER, in response to Chair Huggins, said the change
[proposed in the amendment offered by Senator Cowdery] was at
the request of the auto dealers association; it was received
only two days ago. He reported that DOL believes it is a good
change.
He informed members that Mr. Sniffen of DOL, who would testify
at the next committee hearing, said this new language is
probably better because "sales in this state" is somewhat
ambiguous with regard to dealers in other states, who might have
agreements with the manufacturer to have Alaska under their
umbrella of responsibility. Mr. Makinster also noted that
Mr. Sniffen said this is mostly a matter of style, but also
clarifies what "sales in the state" means.
CHAIR HUGGINS brought up the issue of Canadian dealers in
particular.
MR. MAKINSTER said that was what the original bills dealing with
this matter were trying to address. He relayed that Mr. Sniffen
said it has been resolved through other legislation. "This is
basically cleanup language," Mr. Makinster added.
2:15:55 PM
CHAIR HUGGINS asked if [SB 273] would have any negative impacts
for the buyer.
MR. MAKINSTER said he didn't believe so; according to DOL, this
would actually help consumers, who would be allowed to buy a car
and turn a car in. As for used-car dealers, he noted that
Section 2 repeals [AS 08.66.015(b)], which reads:
(b) A person who does business as a dealer in the
state may not offer to sell or sell a motor vehicle as
a new or current model motor vehicle having a
manufacturer's warranty unless
(1) the dealer has a current sales and service
agreement with the manufacturer and the agreement
requires the dealer, upon demand of the motor vehicle
buyer, to perform or arrange for, within a reasonable
distance of the dealer's place of business in the
state, the repair and replacement work required of the
manufacturer under the warranty; or
(2) the dealer offers to give the buyer a rebate
to cover the repair and replacement work that the
dealer cannot perform or arrange for within a
reasonable distance of the dealer's place of business.
He pointed out that someone could have a used current-model
vehicle, and that a used car could have a manufacturer's
warranty. The existing language limits purchasing options for a
buyer. Thus the bill allows consumers to buy new but slightly
used cars from a wider range of dealers, not just new-car
dealers.
2:17:15 PM
CHAIR HUGGINS observed that the bill allows a person to transfer
a warranty when selling a car.
MR. MAKINSTER concurred.
CHAIR HUGGINS opened public testimony.
CAROL LYBERGER, Lyberger's Car and Truck Sales, Anchorage, said
this bill is a good change and just cleans up an old law. She
offered an example, saying this will make every dealership in
compliance with state law. She expressed 100 percent support.
In response to Chair Huggins, she indicated she believes it is
friendly to both customers and dealers.
2:21:02 PM
JON COOK, Legislative Director, Alaska Auto Dealers Association;
General Manager, Aurora Motors, Fairbanks, informed the
committee that he strongly supports SB 273 and the proposed
amendment. He said it can't be overstated how beneficial this
is. Agreeing this is a housekeeping issue - since dealers in
Alaska are technically out of compliance with state law and yet
it isn't enforced - he noted that it would be detrimental to
consumers if the current law were enforced, which could happen
someday if the statute remained on the books. He specified that
repeal of subsection (b) also would be most welcome.
SENATOR FRENCH asked how many cars come back after the first
year of their sale.
MR. COOK replied that his dealership gets perhaps a dozen a
year, and he believes several hundred are returned each year in
Alaska. In response to Chair Huggins, Mr. Cook noted that his
organization's membership includes the vast majority of new- and
used-car dealers in Alaska. He has worked on this issue for
more than a year, but hasn't heard objections. He suggested it
would help used-car dealers especially, since they cannot sell a
current-model vehicle at all under the existing statute. He
indicated he couldn't see any negative impacts on customers, but
there would be many problems under the current statute, if
enforced, including a worsening of the negative-equity situation
discussed earlier in the meeting.
STEVE SAUTNER, Owner, Dealers Auto Auction of Alaska, Anchorage,
expressed support for SB 237. He explained that wholesalers
would like to be in compliance with state law because they sell
new, previously owned vehicles, particularly repossessed
vehicles, dealer-consigned vehicles and rental vehicles, which
they'd like to sell as soon as possible. There are several
thousand such 2006 vehicles in Alaska, and dealers cannot absorb
all of them. This change is needed so dealers can be in
compliance.
2:28:03 PM
MR. SAUTNER, in response to Senator Cowdery, said about a third
of the vehicles he gets are repossessions; a third are dealer-
consigned vehicles, including aged inventory and new-car trade-
ins; and a third are rental vehicles and off-lease vehicles. A
lot of current-model-year vehicles are returned from rental lots
every year; many go to the Seattle markets now, but increasingly
they are liquidated.
CHAIR HUGGINS asked about any drawbacks to dealers or customers
from these proposed changes.
MR. SAUTNER replied that he isn't in the retail side of the
business, but doesn't see any negatives from either side.
2:29:53 PM
[Cynthia Drinkwater of DOL informed members that she was on
teleconference to answer questions and that Mr. Sniffen would be
available for future hearings.]
CHAIR HUGGINS asked whether anyone else wished to testify. He
announced that SB 273 would be held over. [The proposed
amendment was not adopted.]
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