Understanding the economic impact of Alaska’s dealer-friendly legislation

In Alaska, much like the rest of the country, people rely on their cars for everything: commuting to work, grocery shopping, accessing healthcare services, and more. In a state with virtually no public transportation, which has only declined even more since Capital Transit announced it would have to suspend bus routes due to staff shortages, owning a car is not a luxury. 

Yet, the cost of car ownership has reached unprecedented levels, with recent data revealing that car insurance premiums rose 26% over the last year. The escalating expenses associated with car ownership, including repairs, gas, highway tolls, and other unavoidable costs, make this number climb even higher. For many Alaskans, these rising costs are making car ownership increasingly more expensive and sometimes completely out of reach. 

Against this backdrop, pending legislation in Alaska threatens to exacerbate the growing affordability crisis for the state’s residents, pushing car prices even higher and favoring the profit margins of already rich auto dealers at the expense of everyday consumers.

Purchasing a new car comes with the assurance of an auto manufacturer’s warranty, which covers certain repairs for a specified period. Currently, in instances where warranty repairs are required, auto manufacturers reimburse dealers so that car owners incur no expenses. However, a disproportionate share of this reimbursement goes to the dealer, leaving only a small share for the technicians responsible for conducting the repairs.

The proposed legislation aims to significantly increase the reimbursement rate for warranty repairs, funneling millions annually to Alaskan auto dealers. This not only inflates expenses for automakers, but it makes cars less affordable for consumers. The legislation also does nothing to require dealers to pay their technicians a penny more. Additionally, it endorses a practice of charging consumers for labor repair time based on estimates from a book instead of the time actually spent working on the vehicle. Such a practice likely violates Alaska’s Automobile Repair Act, which is intended to protect consumers from misleading and misrepresented repair costs.

This is a clear example of how the sponsors of these laws contend they help out the “little guy” under the guise of fairness, and instead leave consumers paying the ultimate price. 

The American Consumer Institute examined similar laws enacted in other states, specifically those resembling House Bill 233 and Senate Bill 144, and found a concerning trend: these laws ultimately drive up vehicle prices, costing consumers $48 billion more annually which translates to a nearly $3,000 increase in the price of a new car.

Legislators must prioritize consumer interests and market competitiveness to ensure a fair, balanced automotive industry that serves the needs of all stakeholders. It’s time to put an end to dealer-centric legislation that puts consumers at risk.

Steve Pociask is the president and CEO of the American Consumer Institute. He has been involved in consumer public policy research for 40 years. He has published numerous economic studies, including three books for the Economic Policy Institute, and policy studies for numerous independent nonprofit organizations. Many of his research studies have focused on the consequences of public policies on consumer welfare.