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Us - Scrutiny Over Disparity In Loan Fees At Auto Dealerships

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http://dealbook.nytimes.com/2013/11/22/scrutiny-over-disparity-in-loan-fees-at-auto-dealerships/?ref=business&_r=0

When Pedro Lantigua, a 32-year-old truck driver from Oklahoma City, decided to trade in his car last summer, he walked into his local dealership and drove off with a brand-new Chevrolet Silverado. Like millions of Americans, he agreed to a loan arranged by the dealer.

Unlike most buyers, however, Mr. Lantigua actually knows how much he spent on that service, but only because the details came out when he sued the dealer for breach of contract related to his trade-in.

Mr. Lantigua agreed to pay $609 a month, meaning he would own the car in about six years. But Mr. Lantigua said he did not know that his 12.6 percent interest rate included about $1,000 for the dealership, David Stanley Chevrolet, which arranged Mr. Lantigua’s loan through Ally Bank, according to Mr. Lantigua’s lawyer, Kathi Rawls.

Dealers often arrange loans for car buyers through third-party lenders, providing something of a one-stop shop for about 80 percent of all consumers who need financing. Dealers can decide how much they want to charge for that service and tack their fee onto the lender’s interest rate.

What a nice incentive to have...

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If he signed a loan agreement with the dealer, what business of his is it, how the dealer and the bank split the profits?

If I pay £1.20 for a pie at the bakers, can I sue them because 20p of that goes to the shopkeeper instead of all the profit going to the chef?

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If he signed a loan agreement with the dealer, what business of his is it, how the dealer and the bank split the profits?

If I pay £1.20 for a pie at the bakers, can I sue them because 20p of that goes to the shopkeeper instead of all the profit going to the chef?

Good question. It says he sued for 'breach of contract' so maybe we're short on a few details.

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It was/is the same in the UK, the dealer can make quite a bit on the finance.

A good ruse was to buy a car on credit arranged by the dealer, push them on the headline price and often they would drop the price and increase the trade-in value, hiding their profit in the extortionate finance charges. Take the deal and then pay off the finance completely during the mandatory cooling off period. You win, the dealer loses.

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Good question. It says he sued for 'breach of contract' so maybe we're short on a few details.

Durrr..'Twas ever thus. Anyone for a mortgage ?

The buyer agreed to pay a certain amount per month to own a car for a total 'sum', eventually

So, as you say, the story has to be short on other details.

Edited by LiveinHope

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Durrr..'Twas ever thus. Anyone for a mortgage ?

The buyer agreed to pay a certain amount per month to own a car for a total 'sum', eventually

So, as you say, the story has to be short on other details.

That said, the sums that people are prepared to pay for a car , $600/month for 6 years! And 80% of purchasers on finance, many subprime at that.

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And yet you can go into a US medical facility and they are legally alllowed to charge $60 for a 10 pack of paracetomol, and nobody lifts a finger.

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In my local motorbike dealership they show the monthly payment on the ticket. You have to turn it over for the actual price and a lot of them don't have it at all.

Its like the motorbikes are just a distraction for the customers and their real business is debt. It seems the spirit of our times is "affordability" :)

Edited by Hold Fast

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That said, the sums that people are prepared to pay for a car , $600/month for 6 years! And 80% of purchasers on finance, many subprime at that.

It would be very different psychologically if they had to go to the dealer each month and hand over $600.00 in CASH

Electronic transfer - unseen and painless - until reckoning day

In any case, at $600.00 a month (excluding running costs) it would probably be cheaper to hire a car at weekends and use taxis/public transport during the week.

Edited by LiveinHope

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IIRC lots of US car firms were sued some years ago when it transpired that they were allegedly charging higher IRs on car loans to non-whites. IIRC it was a bit stink in the US around the time of the dot.con bubble bursting.

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