Internet marketplace hits a local roadblock

Used-car dealers find towns unwilling to license online sales

Email|Print|Single Page| Text size + By John Dyer
Globe Correspondent / April 27, 2008

Matt Grenier wants to expand his business worldwide. Like most car dealers, he wants to make a good living. Unlike most, he plans to do so without attracting road-clogging traffic to his hometown of Shrewsbury, polluting the environment, or erecting unsightly road signs. Grenier, 23, wants to be an online used-car salesman.

The problem is the Internet. The technology that would allow Grenier's business to operate almost unnoticed in Shrewsbury is the very reason why its Board of Selectmen recently denied his application for an auto dealer's license.

"I just don't see the benefit to the town, both to the public and the potential administrative costs," said Selectman John Lebeaux during the board's April 14 hearing on Grenier's license application.

Grenier said he intends to fight the board's decision. From his perspective, selectmen are preventing him from making a living. "It's commerce," he said. "When there were horses, you had to work close to your house. Now you can work all over the place. Now that there's the Internet, you can sell cars all over the world."

Others who want to market their wares on the Web are running into similar roadblocks. Throughout Boston's western suburbs, a number of selectmen and other local officials are deciding to withhold so-called "no display" used-auto dealer licenses, the kind that allow residents to sell vehicles without a sales lot. One argument against granting the licenses is that officials can't investigate complaints about such online salesmen, who often have no inventory and sometimes work from their homes.

"The laws have not caught up with the technology, and they need to," said Westborough Town Coordinator Henry Danis.

Westborough had two requests for the no-display licenses last year. Both were rejected. The most recent was from local resident Howard Garshman, whose application was denied after an October hearing at which he and the board heatedly debated his request. In January, selectmen instituted a moratorium on issuing such licenses.

"We can't monitor what he's doing," Danis said, referring to Garshman. "We have not only the right, but the obligation to do that."

Milford officials have also adopted a policy of rejecting applications from online car dealers, who they say regularly seek town licenses. "The Board of Selectmen does prefer you have a location," said Town Administrator Louis Celozzi. "If they are granting the license, they want to be able to regulate. If someone is involved on the Internet, obviously our regulations are pretty much useless."

Massachusetts gives municipalities sole authority over issuing used-car dealer licenses, according to Bill Boutwell, executive director of the Massachusetts Independent Auto Dealers Association; most of its 500 members sell used cars. Would-be Internet merchants need local approval to sell cars lawfully, he said, and the explosion in popularity of marketing websites like eBay and Craigslist is bringing the issue into higher profile.

Boutwell said he believe towns are acting in the interest of consumers when they reject applications for Internet sales licenses.

"Cars on display can be investigated and complaints can be fielded based on what you see," he said. "There are so many ways to be deceived on the Internet. You have no way to protect yourself. It's like chasing a ghost."

Grenier, who said he lists cars on eBay for another dealer he declined to name, does not see what the fuss is about. "It's just another source of capturing the audience," said Grenier. "I just have the know-how. It's a better product for a better price."

Grenier and Garshman said they could sell cars online to out-of-state or international customers without a dealer's license. But by law, residents without a dealer's license can sell only up to three cars a year within Massachusetts. A license would also allow them to obtain dealer's license plates, attend dealers' auctions, and avoid paying sales tax on cars they purchase for resale, they said.

Garshman said he regularly purchases cars outside Massachusetts and sells them abroad. He recently purchased a Honda in New Hampshire, drove it to Boston Harbor, and had it shipped to Russia, he said. He also buys and sells construction equipment online. None of those transactions require a license, he said.

Grenier said he would like to set up his own business selling vintage and late-model cars. Unlike Garshman, who doesn't maintain a local inventory, he would keep cars in a Route 20 garage he's arranged to rent if he receives a license, he said.

Since municipalities issue the sales licenses, the requirements can vary slightly from town to town. But at a minimum, Massachusetts requires licensed used-car dealers to hold a $25,000 surety bond, keep a log book to record sales, and have access to repair facilities where a vehicle sold with serious defects can be fixed under the state's Lemon Law.

Online dealers can satisfy those requirements as well as a traditional used-car operation can, and buyers from around the world can complain to town officials about dealers as easily as anyone else nowadays, said Garshman. If the town gave him a license, officials would have his address, he said. "It does give them the ability to monitor dealers who are not honoring warranties, service contracts, or taking deposits and not providing cars," he said.

Garshman added that online dealing satisfies the fears that led to local boards overseeing car dealerships in the first place.

"They didn't want people having auto sales in their front yards," he said. "I was never going to bring a motor vehicle into Westborough. My motor vehicles go from where I buy them to where they're sold."

Shrewsbury, for example, has an informal policy of limiting the number of used-car dealers in town to 20. Officials said they've determined that figure gives residents plenty of choices when buying a used car.

Selectmen at Grenier's hearing said they would give him a license only if he could prove residents needed more choices. Since he didn't intend to sell cars specifically to area residents, they said, he wasn't addressing the local need and didn't warrant a license.

Grenier said that since he wasn't going to display cars on the roadside, the board shouldn't really mind if he's operating a business in town. "I have an arrangement with a landlord for an approved location," he said after the hearing, and would be "helping the landlord pay taxes to the town."

The state's Office of Consumer Affairs, which handles disputes involving the Lemon Law, has not received any complaints about used cars sold online, spokeswoman Kimberly Haberlin wrote in an e-mail. Registry of Motor Vehicles spokeswoman Ann Dufresne said her agency's concern is whether a vehicle's title is transferred properly, rather than how it is sold.

Newton has approved three no-display licenses, said Linda Finucane, chief committee clerk for the Board of Aldermen, George Mansfield, who chairs the board's Land Use Committee, which grants the licenses, said he saw no problem with selling cars online. The city places restrictions on the licenses that keep holders from storing or selling cars on site, he said.

"If someone establishes one of these businesses on a residential street and then they have eight cars in their driveway, someone is going to hear about it," he said.

A license holder and online used car dealer in Newton, Radoslav Stamboliev, who buys cars in the United States and sells them in his native Bulgaria as a hobby, said he has been trying to expand his business. The problem, he said, is that he can't always trust the auctioneers that cater to dealers at large sales. The cars are just a few feet away, he said, but one never knows what one is getting.

"In bidding, you can't inspect the car," he said. "Sometimes they have things that need to be repaired."

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