“We don’t understand how removing 17,546 price discounters from the marketplace is a good thing for consumers.”
A proposed financial protection regulation stipulating flat fees in auto lending will actually end up hurting buyers because franchised car dealers will not be able to cut rates, according to the National Automobile Dealers Association. It is common practice for banks and other lenders to set a base interest rate or the so-called “buy rate” and then for an auto dealership to “mark up” the interest rate to the final rate the customer pays on the loan for the car.
As always, it pays to shop since rates can vary drastically, and there have been cases of blatant discrimination where dealers charged varying amounts even though the victims have the same credit scores. (Read Asian Auto Lending Discrimination in Los Angeles?)
“The Consumer Financial Protection Board is pursuing a policy that could weaken competition in auto lending and result in higher credit costs for millions of consumers,” said Westcott, in speech to the Automotive Press Association in Detroit. He claimed pressure from the CFPB to force finance sources into adopting flat fees would eliminate a dealer’s ability to “meet or beat” a given rate, and could increase the cost of credit for millions of consumers.
“When it comes to indirect lending, dealers are ‘price discounters.’ We don’t understand how removing 17,546 price discounters from the marketplace is a good thing for consumers,” he added. “And we don’t see how tampering with a $783 billion auto lending market—that’s working effectively and efficiently—is a good thing for consumers either.”
Westcott, a Buick-GMC dealer in Burlington, NC said, “We don’t understand how removing 17,546 price discounters from the marketplace is a good thing for consumers,” he added. “And we don’t see how tampering with a $783 billion auto lending market—that’s working effectively and efficiently—is a good thing for consumers either.”
“The dealer franchise network creates competition, offers convenience and saves consumers money, while making a complex system seamless for car buyers,” Westcott said at the Detroit Athletic Club.
