ARIZONA STATE SENATE

RESEARCH STAFF

GAIL HICKS

ASSISTANT ANALYST

COMMERCE COMMITTEE

Telephone: (602) 542-3171

Facsimile: (602) 542-7833

TO: MEMBERS OF THE SENATE

DATE: February 26, 2001

SUBJECT: Strike Everything Amendment to S.B. 1163

(motor vehicle transactions; financing arrangements)

Purpose

Requires a motor vehicle dealer to retain title and possession of a traded vehicle until financing is finalized or the traded vehicle is returned to the customer.

Background

According to the Attorney General’s (AG) office, “spot delivery” is the practice by motor vehicle dealers of requiring or allowing customers to take a vehicle home before the dealer has made final arrangements to place the customer’s loan or lease contract with a lender. Dealers are often unable to place contracts for the interest rate and down payment to which a customer has agreed and often take several weeks to notify a customer that financing arrangements have fallen through.

Customers often trade in their vehicles to a dealer as a down payment on a new vehicle, and by the time a dealer notifies a customer that financing has fallen through, the dealer may have sold the customer’s trade-in. Dealers have, at times, been willing to offer the customer the wholesale value of the trade-in vehicle, which may be lower than the agreed upon value of the trade. The dealer can repossess the new vehicle if the customer does not return it, and a dealer may charge the customer 10-40 cents a mile for each mile the customer has driven in the new car. Customers who, through this process, are left without a vehicle may be asked to sign a new contract for purchase of the new vehicle at a higher finance rate.

The strike everything amendment to S.B. 1163 addresses these potential situations by requiring dealers to retain traded vehicles until the financing arrangements have been completed.

There is no anticipated fiscal impact to the state general fund associated with this measure.

Provisions

1. Requires a motor vehicle dealer to retain title and possession of any vehicle traded by a customer as part of a transaction until financing is finalized or the traded vehicle is returned to the customer.

2. Prohibits any contractual or agreed-upon waiver, modification or limit on remedies in the event that the dealer does not retain title and possession of the traded vehicle until the transaction if finalized.

3. Refers to the definition of motor vehicle dealer already provided for in statute.

4. Provides for a general effective date.

GH/jas