Debate Over Auto Loan 'Dealer Fees' Speeds Up

Debate Over Auto Loan 'Dealer Fees' Speeds UpAuto loan “dealer fees” are still somewhat of a mystery to most buyers of cars and trucks.
Dealers often arrange loans through third-party lenders, creating a “one-stop shop” for most consumers who need financing.
Dealers then decide what they charge for that service — and add their fee onto the lender’s interest rate.
That much is not in question. But how much of a fee and whether minorities are getting hit with bigger fees than other buyers is very much in debate — and  an issue being closely examined by the U.S. Consumer Financial Protection Bureau.
Dealer and consumer advocates disagree over the dealer compensation process, including what these fees should even be called, according to an article by the New York Times.
Critics call them markups, while lenders and others refer to them as dealer participations.
The National Automobile Dealers Association says franchise dealers typically do not charge more than 1 percent interest on average, a figure that the group says is fair compensation.
The association also contends that switching to a flat fee, one alternative suggested by consumer advocates, would only result in higher costs for car buyers.
But some consumer groups argue that average fees range a bit higher, from 2 to 2.5 percent, depending on the terms. Those terms can add hundreds of dollars over several years.
Meanwhile, those consumer advocates and the CFPB say that African-American, Asian and Hispanic borrowers often end up paying more than white borrowers with comparable credit backgrounds.
Read the full article.

One thought on “Debate Over Auto Loan 'Dealer Fees' Speeds Up

  • December 11, 2013 at 5:07 pm

    Consumers need to be smarter and pay attention to those fees and just say no! unfortunately its always the ones that are desperate and think they have no other options.

Leave a Reply

Your email address will not be published. Required fields are marked *