2015 MD Legislature provides clarity on spot deliveries and Tesla sales as new governor reigns in Rain Tax and other taxes
The Maryland General Assembly helpfully addressed the automobile business practice of spot deliveries as the 2015 session was winding down earlier this month by passing important legislation that once and for all recognizes the time honored practice of dealer credit arrangers selling vehicles to consumers before the financing is finalized. Spot deliveries that have long been standard operating procedure in dealerships have correspondingly been mischaracterized by consumer groups and plaintiff lawyers who sue dealers as yo-yo sales. These industry critics have long contended that dealer credit arrangers regularly, and by design, bait vehicle buyers into loans with unrealistically low rate offers, that these same dealers change up into higher rates when the financing is ultimately concluded after the vehicle is delivered.
The idea that dealers everywhere are laying in wait for unwary car buyers for the chance to bump up the finance rates theyêre working to finalize for those buyers is patently absurd, said Peter Kitzmiller, president of the MADA, who, along with WANADA leaders, fashioned and directed the spot delivery legislation. The extent to which there are vehicle sellers who engage in so-called yo-yo sales there are ample consumer protection laws, enforced by readily available consumer protection agencies across the state to deal with it, he said. So with such abuses in todayês car business few and far between, dealer advocates argued, there is no reason not to recognize spot delivery in the law as the reality that has been and will continue to be which is what this legislation accomplishes.
What the legislation provides — that will likely be signed into law by the governor — is a dealer disclosure methodology for the buyerês order that makes it clear to the consumer vehicle purchaser utilizing dealer- arranged financing that the transaction is final, unless the finance rate presented the day the vehicle is delivered comes back from the bank higher, in which case either party can unwind the deal, to include the return of any trade-in to the consumer.
The buyerês order disclosure method — which is similar to the law in Virginia — institutionalizes the practice of spot deliveries in Maryland for financed vehicle transactions. The real value of the legislation is that it addresses the Maryland Motor Vehicle Administrationês longstanding position that dealer spot deliveries are only acceptable when the vehicle is delivered on dealer tags, as opposed to temporary tags, when financing isnêt finalized, said John OêDonnell president of WANADA. Since most Maryland vehicle buyers over the years experienced no issues with the credit arranged by dealers, consumers took delivery, going off with their new ride on temporary tags, no problem.
To ensure that all dealers understand how the new Maryland spot delivery methodology will work when the law takes effect next October, MADA will be presenting webinars, the first being May 12 at 11 am. To register, click here.
In other automotive related legislation, Maryland will join a growing number of other states, including Virginia, that have come to terms with the well-publicized, high end, electric sports car manufacturer, Tesla, on its national quest to retail vehicles without dealers as an exception to the stateês vehicle sales law. Provisions of the legislation, with Tesla in mind, carve out an exception to the Maryland law that vehicles be retailed by dealers. The circumstances under which this can happen are these: 1) licensing as a dealer only exclusive EV manufacturers where 2) no other dealer holds a franchise from that manufacturer; and 3) there is no cross ownership between licensees; and 4) only four licenses this sort may be issued.
In tax related legislation, first term, first year Republican Governor Hogan delivered on his promise to have the General Assembly repeal the controversial stormwater remediation fee, a.k.a. the Rain Tax. While the General Assembly did, indeed, repeal the Rain Tax, the governor and lawmakers recognized the basis of the stormwater management requirements originating at the U.S. EPA that looks to states like Maryland to keep large water estuaries, like the Chesapeake Bay, under control for ground water runoff pollution. As a result, the Rain Tax is no longer required by the state of localities, like the counties in the Maryland suburbs. These same localities, however, are instead directly involved with the federal requirements and are mandated under the new Maryland approach to develop their own programs to accomplish the EPA objectives. Dealers in Montgomery County, for example, arenêt apt to see much lessening in local property assessments and stormwater runoff programs than what is correctly required.Download Bulletin PDF