How much cheaper your auto loan would be if dealers played fair

Source: Ian Ayres, Washington Post (Paid Registration)

As websites such as Cars.com and TrueCar have made car pricing more transparent, auto dealers have turned to boosting their profits with hidden fees on loans.

When a consumer chooses in-house financing with an auto dealer, the dealer sends the customer’s financial information to a lender and is told the rate that the customer qualifies for. But it’s legal for the dealer to turn around and charge the customer a higher interest rate. You might qualify for a 5.9 percent interest rate, but if the dealer can get you to agree to a loan at 11 percent, the lender will kick back more than $1,000 to the dealership as pure profit.

Anyone who considers purchasing a vehicle with dealer financing should worry about the fact that the government allows these concealed price hikes. But people of color are particularly vulnerable, given that they are historically discriminated against by the auto industry.

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