Complying with federal regulations cost U.S. franchised car dealers $3.2 billion in 2012, according to a study commissioned by the National Automobile Dealers Assn.
As it often goes, consumers ended up covering much of that, says NADA Chairman Forrest McConnell III.
“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,” he says.
Complying with 61 major federal rules results in dealerships hiring an estimated 10,500 fewer employees, according to the report by the Center for Automotive Research based in Ann Arbor, MI.
Called “The Impact of Federal Regulations on Franchised Automobile Dealerships,” the report says:
- It cost the average dealership $182,754 to comply with federal mandates governing employment, business operations, vehicle financing, sales, marketing and vehicle repair and maintenance.
- Those regulatory costs equated to 21.7% of the average dealership’s pretax, net profits, or about $2,400 per dealership employee.
- The overall impact of these costs on the 2012 U.S. economy is an estimated $10.5 billion in lost economic output.
- 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.
The CAR report examined costs of complying with 61 federal regulations. Those represent a subset of all federal regulations with which new-car dealerships must comply.
Dealers not only are subject to federal regulations that pertain only to them, “but they also must comply with regulations that apply more broadly,” says the report.
It says regulation compliance ranges from small efforts, such as refraining from prohibited practices, to “very costly process burdens” that require capital expenditures, documentations and filing of evidence to show compliance.
The study did not analyze costs of upstream mandates, such as fuel economy and safety rules, imposed on automakers.
State and local regulatory mandates also were not analyzed, so the study significantly underestimates the total regulatory burden imposed on dealerships, NADA says.
