Evening star., 1922-06-10

removed.
reserve banks have been in operation
they have accomplished more than
the trainers could possibly have ex-
pected. Although there had been five
panics during the thirty years previ-
Gus to the federal reserve act, since
the system was put in operation the
United States went through the
greatest period of stress that it has
ever known without panic or the
| semblance Of a panic"
| c. H. Warrington, president of the
AutomotiVe Association of Washing
| ton. addressed the bankers on "Cios-
er Relationship Between the Auto
! motive Association and the District
! Bankers Association" He said, in
| part:
My organization. the Washington
! Automotive Trade Association, feels
! honored and indebted in being able
to place before you few of the
financial items, in the sale of tie
worlds largest transportation medi-
cussing with you the basis and
methods of financial procedure. as
Well as that of the retail sale on the
! deferred payment plan. 1t is but
natural that this great industry
should create problems heretofore
unknown. due to its rapid growth
! growth during which for time it
! was unable even to consider the
problems ahead of it.
Big Auto Industry.
Consider for a moment this over
| grown creature-the motor vehicle.
The year 1921 registered 10,444.632
| motor vehicles of all descriptions
running on the highways of our
country, with productive repre-
E.nf n ln1 1ar
06S.42O, employing 10000 men. re-
! ceiving wages and salaries of $299,-
I O9S.7S0, distributed by 13,452 dealers,
served by 10O.979 garages and re-
pair shops. Washington shared in
the distribution with As passenger. II
ments. with $4,000 employees, receiv-
ing $3,50O.000 to S4,000.000 a year
wages. Washington has $62. 500, 900 on
\ transportation equipment on its high
! ways.
with an average life Of three
| would be about $417 per annum. Add
to this the cost of maintenance, about
1850 per annum. The per capita cost
OF maintenance is low, slightly over
so per annum.
J "A much larger proportion of
| financing the sales of motor vehi-
cles is required than for the sale of
other commodities on time payments.
| Eightyhve per cent of the retail sale
of cars in 1921 was made in this
way. and 40 per cent of the money
| involved in the business is used in
| financing sales.
| "A large number of these sales in
| wolves the acceptance of used car
| to complete the transaction on the
new car. The transaction involves a
loan on the original car, a mortgage
i for the unpaid portion of the new
! ~ MI coi Ia nf nar
which, in the majority of instances.
carries a mortgage on the unpaid
| balance.
Element Of Risk.
/! ut is evident that the retailer can
| not be expected to do this financing
in the way that such matters are be-
ing handled in other fields.
/ Depreciation between the price of
a new car and the price of second
hand car introduces larger element
F, of risk in connection with this time
| method of payment and makes
financing more burdensome: This is
complicated by the condition in
| which the owner keeps his car and
che attention paid to- it's servicing.
ITO my mind this presents a funda-
mental relative to a loan on motor
vehicle. and the specific loan should
be based on two cardinal points to
my mind, STABILITY aind reliability:
/
ket? Reliability of the retailer-to
whom you make the loan"
! This problem cannot be met thor
oughly and the financing of automo-
| bile sales will be surrounded by some
difficulty until it has been worked
out by whatever means are necessary
to secure coordination. Fluctuating
! prices add to these difficulties. be-
cause a vehicle seized for nonpay-
ment is uncertain, and the amount
| spent for reconditioninG and received
for it's subsequent sale.
Need OF Concerted Action.
1T is at this point that feel that
! a concerted action on your part would
bring about great stabilization of
i these difficulties 1t is not banking
secret that timepayment sales Of
automobiles of this type have run
from fourteen to eighteen months.
Again this same extension Of time
! has been accompanied by the pay
ment of a small cash percentage, say
| % per cent of the total delivered SELL
ing price.
| siderat ton the policy Of allowable dis
count on ten-month paper, and In no
| case more than twelve months: this
with minimum payment Of 40 per
| cent cash. and not a side note nor a
post dated check. General practices
| In the past have been on a 25 per cent
i basis. Transactions on this basis, i
\ feel certain, are in your agreement,
are dangerous. The losses sustained
, were due largely to the disregard of
| the economic factor Of price change.
and the purchaser naturally found it
would save him considerable to re-
turn the car for non-payment Of his
note and Immediately purchase an
| other Of the latest model, or even a
closed car. for what he then owed
on the original car.
"The dealer was then forced into
an unwarranted loss on the sale of
his repossessed car. I am glad to ad-
nit that the 26 per cent practice was
+! soon abandoned. even on Fords, fol-
| lowed by minimum of 3S B per cent.
Few Cars Returned.
"In my opinion 40 per cent down
would not be a factor of sales re-
| sistance. All my sales since the first
year have been on a 40 per cent basis,
and have not lost a sale. Averages
! show that repossession takes place In
six-month cycles. A purchaser who
ments will work hard to avoid the
loss of his car. By a ten-month
period of payment. and not over
twelve under any circumstances, the
investment would be small and the
resale assured, at minimum Of loss,
If any.
"The stability Of the retail outlets
any dealer and the fexibility Of his
credits are directly involved in the
proper arrangement OF the financing
Of time sales, SO that financing will
be orderly. surrounded with proper
| safeguards and easily arranged.
! 1T is at this point that a closer CO.
| operation and coordination between
the District Of Columbia Bankers As
sociation and the Washington Auto
motive Trade Association would
greatly inure to our mutual benefit.
| Credit Quickly Absorbed.