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Changes to salvage car sales could cut insurance rates

But opponents say it could cost thousands of jobs.Springfield lawmaker sponsoring bill.

Proponents of changing who can buy and sell scrapped cars say removing restrictions could lead to lower auto insurance rates for Ohioans, but salvage yard operators say that could cost thousands of jobs in the industry.

House Bill 468, sponsored by state Rep. Ross McGregor of Springfield and co-sponsored by state Rep. Bob Hackett of London, would change laws regarding the resale of wrecked vehicles by expanding the types of licenses under which an individual can sell salvage motor vehicles.

Currently, Ohio requires an identification card to purchase one of the more than 100,000 cars a year that are deemed a total loss by insurance companies after crashes or other damage. Licensed dealers in Ohio and 21 other states can apply for the ID cards. More than 1,900 valid buyer identification cards have been issued.

The state has more than 600 valid salvage dealers, according to the Bureau of Motor Vehicles. There are currently 19 salvage yards in Springfield.

In other states, insurance companies can sell the vehicles to anyone via online auctions with fewer regulations.

The legislation would allow anyone with a salvage motor vehicle auction license or salvage motor vehicle pool license to sell salvage vehicles to authorized purchasers.

Also, a person wouldn’t need to obtain a buyer’s identification card from the Registrar of Motor Vehicles before buying a salvage vehicle at an auction or pool.

“Nobody really likes the bill,” McGregor said. “There are some competing interests here.”

The insurance industry doesn’t believe it goes far enough, McGregor said, while salvage dealers don’t want anything to change.

“This is a modest step in opening up the salvage vehicle industry to a broader market, but it doesn’t do away with complete restrictions,” said McGregor, R-Springfield.

The law maintains certain prohibitions on salvage dealers, including banning sales when there’s reasonable cause that a vehicle may have been stolen, or a title wasn’t presented to the purchaser before a sale is completed.

The bill passed the House on May 13, but likely won’t be voted on by the Ohio Senate until after the November election, McGregor said.

The bill was assigned to the State Government Oversight & Reform committee on May 15. State Sen. Chris Widener, R-Springfield, won’t decide whether to support or oppose the bill until after the committee process has concluded, according to one of his staff members.

A previous bill, Senate Bill 273, died on the House floor in December 2012. McGregor was opposed to that legislation because of the effect it could have on small salvage dealers like Walt’s Auto in Springfield, he said.

SB 273 would have essentially opened up the salvage vehicle market, McGregor said. They used that bill as a starting point for the new legislation.

“Some of it is minor and some of it is major,” he said. “At the end of the day, there were some tough decisions (state Rep. Barbara Sears) had to make as the sponsors of the bill.”

The Ohio Auto and Truck Recyclers Association is opposed to the bill in its current form, said association President Jim McKinney, because there are no restrictions on who can purchase salvage vehicles.

Damaged cars could be sold to unsuspecting consumers, whereas salvage yards typically buy the cars and sell the parts.

“These vehicles are big targets for theft and deception to the consumer, like title cloning and VIN washing,” McKinney said. “Those things are susceptible to happen.”

The association has 600 members in Ohio with about 5,000 employees. If passed, the legislation could lead to job losses in the industry, McKinney said.

“There’s only so many wrecked cars to buy,” McKinney said. “If (dealers) buy fewer of them and more of them are going out of the country, which is what they want, then jobs will be lost in Ohio.”

Currently 40 states have no restrictions on who can purchase salvage vehicles, said Dean Fadel, vice president for government affairs at the Ohio Insurance Institute. The market should be opened up for full-fledged competition, Fadel said, which could lead to lower insurance rates in Ohio.

“(The bill) is a sliver of progress,” Fadel said. “I wouldn’t give it any more than that.”

Scrapped vehicles are a byproduct of the auto insurance business, Fadel said. There are currently a few thousand qualified buyers in Ohio, while in other states, like Indiana, there are 300,000 qualified buyers. Big salvage yard businesses, such as LKQ, don’t want to see the market open to consumers from all over the world, Fadel said.

“They’re getting their product for a lot less here because there’s a smaller pool of buyers,” Fadel said. “They’re turning around and selling them for market prices.”

People buying cars at auction without identification cards could lead to people buying cars and selling parts out of their homes without a license, said Gene Wyen, vice president of Walt’s Auto, 3551 Springfield-Xenia Road.

“Some of them do things they shouldn’t do with these old cars and sell to the public,” Wyen said. “The (buyers) get burnt and they don’t have any recourse.”

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