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CENTRAL MOTOR COMPANY WACO, TE-XA5 j . N. MITCHELL January 25> 19U9 Mr. Marriner S. Eccles Board of Governors Federal Keserve System Washington, D. C. Dear Mr. Eccles: I heard over the radio last night that the Executive Committee of the National Automobile Dealers Association had officially recommended to the Federal Reserve Board to liberalize Regulation W to allow 2ii months1 installment credit terms against the sale of new cars, to permit people of low income to purchase new cars for use in going to and from work. The miilrun of automobile dealers are not so altruistic that they think more of the interests of buyers than of themselves. I was a Director, Vice President, and a member of the Executive Committee of N&DA, for a number of years prior to 19U8. I have been a retail dealer, representing Dodge and Chrysler in Waco, Texas, for thirty-four years. I believe I am qualified by experience to know something about the soundness of automobile credits. Under the existing circumstances, I cannot conceive of any movement that would be, in the long-run, more detrimental to the automobile industry, to the retail dealers, and to the buying public, than to extend credit terms to 2\x months against the purchase of new automobiles • The average person who cannot pay more than one-third down on the purchase of a new automobile and liquidate the balance in 18 equal monthly installments has no moral or economic right to purchase a new car above that price. Whenever you establish the basis of 21* months1 credit terms to purchasers of new automobiles, you are automatically encouraging people to purchase out of their price class — with resultant credit losses. Mr. C. M. Wilson, President of General Motors, is quoted in Automotive News, of January 2l±, 19U9 issue, as stating (with reference to extending terms to purchase new automobiles), "I am not in too much of a hurry to get too many folks in debt." In that same issue, Mr. Albert Bradley, Vice President of General Motors, is quoted as stating, "It would be unfortunate if every time business got a little tough the credits were stretched out farther so that a longer term became the standard." I think, Mr. Eccies, you will agree that those gentlemen are qualified by position and experience to speak wisely on this subject. Used Car inventories are high, and the market is becoming more stagnant daily, and the prices of used cars are slipping fast. •- # Another factor influencing the market and sale of used cars is that all too many people, who pre-war were normal used car buyers, made easy money during the war and for a period after the war, and dissipated their earnings and are not now able to pay cash for new automobiles, as they could have done had new cars been available in 19U6 and 1°U7> but whose appetites to purchase and own things beyond their means are not yet willing to live within .their price class and are refusing to purchase good used cars, but wish to purchase new cars if they can buy them on long enough terms* The automobile industry, an important factor in the economy of this nation, grew to its size and volume through the marketing of used cars* Anything that tends to hamper the sale of used cars will, in the end, circumscribe the sale of new cars# Therefore, a balanced relationship between the sale of new cars and used cars should always be maintained to insure a healthy operation of this very important industry* The easier you make it possible, through long credit terms or otherwise, for people to buy new cars, the quicker you bring a stalemate on against the sale of used cars, which in turn slows dov/n the manufacture of new cars. In my opinion, a great harm will be done to the automobile industry, both at manufacturing and retail, to the public and to our national economy, if .Regulation W is liberalized to provide 2k months1 credit terms to purchasers of new automobiles • Respec li f&mmry 1 # Hr# 3* K. l&tehell, Central Motor Company9 D®ar !fc% Mitchell* thoughtful letter of January 25 iapressed ma so aach that I took the liberty of passing i t along to Gowraor Uwaas as tl»» aaraber of the Board to vhoaa Segalatlcai IT matters ar© aaaigoed and also to tl» other Board ia«aber»# I know that they are a# aacli interested as 1 tnw iE Issfing your coraaents \M ch are baaed on yowr mm w&mm&m business experience. They are also based on \&mt 9&m to m to be very sroimd long-rouge oonsiderations in ti^ pablle interest as \fell as in the long-run interest of the indwfcry itself« In faet t of course, the two are identical in the end* It i s nost refreshing and enoouragiag to ham your caaaasruBication and I nanted you to bsov that i t vns Sincerely -/oxers, E# S* Kccles