Federal Rules Cost New-Car Dealerships More Than $3 Billion Each Year
Regulatory costs passed on to dealership customers, according to the Center for Automotive Research
WASHINGTON (May 30, 2014) – U.S. new light-duty vehicle dealers spent $3.2 billion in 2012 to comply with 61 major federal rules, resulting in higher prices for dealership customers and the loss of an estimated 10,500 dealership jobs, according to a new report released by the Center for Automotive Research (CAR), based in Ann Arbor, Mich.
According to the report, The Impact of Federal Regulations on Franchised Automobile Dealerships, the average dealership incurred $182,754 in costs to comply with federal mandates governing employment, business operations, vehicle financing, sales, marketing, and vehicle repair and maintenance. These regulatory costs equated to 21.7 percent of the average dealership’s pretax, net profits – or about $2,400 per dealership employee.
“The additional cost for new-car dealerships to comply with federal regulations are passed along to our customers in the form of higher prices, which results in lower vehicle sales and reduced employment at dealerships,” said Forrest McConnell, III, chairman of the National Automobile Dealers Association and a Honda/Acura dealer in Montgomery, Ala.
The overall impact of these costs on the 2012 U.S. economy was estimated at $10.5 billion in lost economic output and more than 75,000 fewer jobs, says CAR.
Every $1 increase in a dealership’s regulatory compliance costs results in $3.28 in lost output in the U.S economy and a net loss of 44 cents to the U.S. Department of the Treasury, according to the report.
The CAR report examined the costs incurred by new-car dealerships to comply with 61 federal regulations – a mere subset of all federal regulations with which new-car dealerships must comply. The study did not analyze the costs of upstream mandates imposed on vehicle manufacturers, such as fuel economy and safety rules. State and local regulatory mandates also were not analyzed. Thus, the study significantly underestimates the total regulatory burden imposed on dealerships.
NADA commissioned the CAR report. Cost estimates are for 2012 and are based on interviews in 2013 and 2014.