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Mortgage News |
Mortgage News You Can Use Auto loan rates marked upBy Earle Eldridge, USA TODAY A consumer-lobbying group Monday accused automakers and banks of encouraging car dealers to mark up interest rates on loans to buyers and splitting the difference, which could range from $400 to $5,000. The National Automobile Dealers Association defended dealer markups as reflecting "fair compensation for providing a retail finance service." In a report, the Consumer Federation of America described a markup practice "encouraged by all of the auto industry's leading captive finance companies and top auto lending banks." It says "dealers subjectively hike the car loan rates of buyers" even though buyers think they are getting the best rate. "Most of these undisclosed markup charges are kicked back to the dealer by the lender, with the lender retaining the remainder," the federation's report says. The report cites loans financed by General Motors, Ford Motor and Nissan. Loans from those automakers were studied by academics as part of more than a dozen lawsuits in several states. The lawsuits accuse automakers, banks and car dealers of unfairly marking up finance rates, particularly to minority buyers. All three automakers say dealers take a loan application from a customer, attach a finance rate, then shop the application to lenders. The bank or automaker willing to pay the dealer the most to buy the loan gets it. "The dealer sets the customer (interest) rate, and they shop the financing," says Dan Jarvis, a spokesman for Ford Credit. "We are bidding on the loan, and we are in competition with other lenders." The Consumer Federation wants automakers and lenders to pay dealers a flat fee for sending them loan customers. Back to Original Article: Mortgage News You Can Use
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