Unregulated Buyers Have No Effect On Sale Price In Salvage Pools
There were fewer than 100 industry advocates in the room the day we realized that the “public” in the salvage pool was not really John Q Public at all. Th e public would mean a person who was buying a vehicle for personal use, a soccer mom or perhaps a laborer who needed a truck to haul his tools. But in reality, the folks buying salvage vehicles at the auction were there to acquire parts cars and rebuilders to sell to a consumer for personal use. That sounds like the definition of a small business owner buying goods for resale.
The problem is that the purchaser is operating as a consumer would operate, without regulations. So at the ARA committee meeting just as the annual convention was about to kick off a few years ago, the epiphany happened. That it wasn’t the public in the salvage pool, it was an unregulated buyer. A person acting under the protection aff orded to a consumer but conducting business regulated by the Department of Transportation (DOT), the Department of Justice (DOJ), the Environmental Protection Agency (EPA), the Internal Revenue Service (IRS) and the state counterparts in each respective state in the nation plus the District of Columbia and the U.S. territories such as Puerto Rico.
What argument exists to continue to allow the unregulated buyer to remain in the auction house buying salvage vehicles without regard to regulation?
The argument presented by the owner of the vehicle (the insurance company that deemed that vehicle a total loss wreck) is that these unregulated buyers are performing a function of the free market by keeping prices competitive. Simple on the surface, more bidders in the pool will bring in a higher sale price. But what about “IF” bids and “ON APPROVAL” sales?
The obvious repercussion here is that the insurance companies themselves have provided irrefutable proof that the unregulated buyer has no effect on the sale price of the salvage vehicle. If they did, then all cars would be sold to the highest bidder as the free market set the best price for the good through “demand” in the economic principle of supply and demand.
The simple fact that the unregulated buyer exists in the market, and yet the insurance companies control the sale price, means that the public in the salvage pool has no effect on sale price and therefore no beneficial effect in the industry.
What is the detrimental effect of the unregulated buyer to the environment?
In the automotive salvage and used parts industry we have long known the negative affect the unregulated buyer has on the environment. Without the regulation of reporting, permitting and tracking as the business owners adhere to for the processing of each vehicle and maintaining a place of business, the unregulated buyer has no documentation as to the disposal of the waste streams coming from his or her salvage vehicle operation. A regulatory enforcement officer would assume a business without documentation for the disposal of their waste has illegally released it to the environment.
Perhaps they do not have waste simply because the fluids are not evacuated. When the unregulated buyer continues to act as a consumer upon delivery of the vehicle to the scrap processor the burden of processing the metal to a commodity-like state for recycling under the exemption from hazardous and solid waste regulation for metal recovery falls on the scrap metal processor. This is the same burden assumed when an actual consumer brings in an end-of-life-vehicle. If the hazardous constituents of the metal are not removed then the scrap metal will not fi t the criteria for exemption from hazardous waste regulation for processed metal reclamation. DOT title processing is also expected as well as DOJ reporting under the National Motor Vehicle Title Information System (NMVTIS).
What is the detrimental effect of the unregulated buyer to state revenue?
Unregulated buyers reap the benefits of being a consumer by not acquiring environmental permits, avoiding the cost of legal waste disposal, or at least moving the burden of waste management to the scrap processor, and depending on the tax payer to bear the burden of environmental cleanup if wastes are illegally dumped.
Yet they also reap the benefit of a small business automotive salvage owner in that they are buying goods at wholesale without paying sales tax. If the unregulated buyer is in fact a consumer, not required to have permits or manage waste, then the retail sales purchase of a vehicle would be taxed like most other consumer-purchasing behavior. The amount of revenue the states are losing could be easily tracked with purchase records.
California has already addressed the problem with the proposal of Assembly Bill 2618 as amended. To summarize, it will mean that the auction pool will collect sales tax on all vehicles sold, but licensed salvage operators will have filed an exemption for resell. Thus leaving consumers (unregulated buyers) to pay sales tax on their retail purchase as expected! (Reference: www.aroundthecapitol.com/Bills/AB_2618/20112012/).
What is the detrimental effect of the unregulated buyer to crime prevention?
Another hole in the dam is the NMVTIS requirement. “The National Motor Vehicle Title Information System is designed to protect consumers from fraud and unsafe vehicles and to keep stolen vehicles from being resold. NMVTIS is also a tool that assists states and law enforcement in deterring and preventing title fraud and other crimes.” (Reference: www.vehiclehistory.gov).
The program is woefully under-funded for enforcement action and again, consumer purchases made by unregulated buyers in a business-only regulatory arena circumvent the intention of the new data reporting system and the law. Or does it? Upon closer inspection, regardless of the state regulation, it would seem that the unregulated buyer is required to report end-of-life vehicle purchases upon acquisition. There is no loophole in this federal regulation that requires state permit, licensing or another designation. The Anti-Car Theft Act, defines junk and salvage yards “as individuals or entities engaged in the business of acquiring or owning junk or salvage automobiles for resale in their entirety or as spare parts or for rebuilding, restoration or crushing.” Included in this definition are scrap-vehicle shredders and scrap-metal processors, as well as “pull- or pick-apart yards,” salvage pools, salvage auctions, and other types of auctions, businesses and individuals that handle salvage vehicles (including vehicles declared a “total loss”). It would seem that the presence of the unregulated buyer in the salvage pool market has no beneficial effect on the pricing and has a detrimental effect on consumer safety, crime prevention, state revenue and environmental stewardship. All important aspects to consider as well as the blemish they place on the industry of professional automotive recycling facilities and used auto parts stores by perpetuating the junk yard image.
Sue Schauls is an independent environmental consultant with automotive expertise. She is the Environmental & Safety Consultant for CCAR-GreenLink the EPA automotive compliance assistance center. She is the executive director and regulatory consultant for the Iowa Automotive Recyclers (IAR); she developed and implements the Iowa - Certified Auto Recyclers Environmental (I-CARE) Program. She contributes articles to several trade publications and is a member of ARA Technical Advisory, Safety and Certified Auto Recyclers Committees. Sue has a bachelor of arts degree in science: environmental planning from the University of Northern Iowa, 1996.