With both presidential candidates describing themselves as agents of change, the vehicle finance industry likely will have to adjust to numerous new policies and requirements regardless of who’s elected, says the head of the industry’s national trade association.
“Each candidate has proposed tax plans that will have widespread ramifications for consumers and the industry alike,” notes Chris Stinebert, president and chief executive officer of the American Financial Services Association (AFSA). For example, the Republican candidate, Sen. John McCain (R-Ariz.), has indicated his plan would maintain the small business tax incentives enacted in 2001 while reducing corporate income tax rates, which are among the highest in the world. For the vehicle finance industry, a cut in corporate taxes to bring them on par with other tax rates in the global market could enhance profitability.
In contrast, Sen. Barack Obama (D-Ill.), the Democratic candidate, has detailed a plan to provide tax relief for 90 percent of working Americans, leaving the top five percent of Americans with a tax increase. Presumably, working Americans would use the tax relief money for vehicle down payments, among other purposes. However, a large number of financial services business owners, executives and dealers who are in the top five percent would feel the pinch.
In addition to deciding the next president, November’s elections will affect the composition of key Congressional committees, such as those that oversee financial services, commerce and judiciary issues. “There’s also the question of how close the Democrats will get to a filibuster-proof majority in the Senate,” says Stinebert. “If this happens, it could mean more latitude for the committee chairmen to move bills that may be intended to provide expansive consumer protections, yet result in reduced credit availability.”
AFSA also expects to continue monitoring several proposals, including one that would ban pre-dispute arbitration and one that would require non-mortgage financial institutions, including dealers and vehicle finance companies, to report race and rate information on borrowers. “Not only would the cost of collecting and reporting this data be exorbitant, but it could lead those evaluating the information without pertinent credit data to make inaccurate conclusions regarding the industry’s practices,” says Stinebert.
Going forward, AFSA believes the industry will be better positioned if it not only expects change, but embraces it. “No matter which candidate the American public elects, we will be ready to work with the next administration,” Stinebert says. “Among other things, we will be emphasizing the need for market liquidity, so that those who need credit to buy a car are able to do so. This will be a critical part of our efforts to strengthen and stabilize the economy.”
Note: The new administration’s impact on the vehicle finance industry will be discussed in more detail during AFSA’s 13th Annual Vehicle Finance Conference and Exposition, scheduled for Jan. 21–23, 2009, in New Orleans. For more information about the conference, please visit www.afsaonline.org.