Used Car News

Arkansas car dealers are supporting a 2010 ballot initiative that would raise permanently the state’s interest cap to 17 percent.

Car dealers support the measure along with other retailers who sell goods on installments.
The proposal also includes changes affecting local government bonds.
Fran Cavenaugh, chief financial officer of Cavenaugh Auto Group based in Walnut Ridge, Ark., said this is the latest of several efforts to change the state’s usury limits.
Cavenaugh, a member of the Arkansas Independent Automobile Dealers Association, said the measure has always failed because of consumers’ negative perception.
“The Arkansas IADA and the Arkansas Automobile Dealers Association are working hard to communicate the benefits of this to consumers,” she said.
The current limits on interest rates in Arkansas at 5 percentage points over the discount rate. The means the current rate is 5.5 percent.
The strict limit forces many lenders to reject loan applications from credit-damaged consumers because of the risk of default, Cavenaugh said.
Creditors in states with higher limits charge additional interest to cover their risk.
Cavenaugh said these restrictions limit competition in the buy-here, pay-here industry, since it discourages any new dealers from getting into the business. The Cavenaugh Auto Group has three buy-here, pay-here stores to go along with several franchise dealerships.
Cavenaugh said passage of this ballot issue would open up the state to new buy-here, pay-here dealers and a larger customer base.
The issue will be on November’s ballot.