Auto Financing Issue Could Get Hotter in '05
NEW ORLEANS Auto financing, a hot topic in 2004, could get hotter this year. It's on the minds of many dealers, especially the top echelon of the National Automobile Dealers Assn. such as 2004 Chairman Charley Smith, who spent much of his term responding to attacks on the practice of many dealers adding a percentage fee to loan rates they arranged for customers. The issue of rate caps on auto loans,
March 1, 2005
NEW ORLEANS — Auto financing, a hot topic in 2004, could get hotter this year.
It's on the minds of many dealers, especially the top echelon of the National Automobile Dealers Assn. such as 2004 Chairman Charley Smith, who spent much of his term responding to attacks on the practice of many dealers adding a percentage fee to loan rates they arranged for customers.
The issue of rate caps on auto loans, combined with calls for full disclosure of the fees generated much controversy last year.
There's more to come, says 2005 NADA Chairman Jack Kain.
“We expect more controversy, more media attention and more state legislative action in the months ahead,” he says. “Our response must be open and straightforward and based on greater transparency in the car-buying process.”
The Virginia Automobile Dealers Assn. became the first state group to advocate an F&I manager licensing law as an outgrowth of F&I scandals that rocked dealerships of three publicly owned groups in 2002 and 2003.
Backed by the state dealer association, Louisiana became the first state to adopt rate caps as law in 2004 — a move opposed by Smith, who voices displeasure with such governmental action.
Louisiana's caps coincide with those authorized by General Motors Acceptance Corp. and California's effort to join Louisiana in capping rates. California Gov. Arnold Schwarzenegger vetoed that, but said he might approve the idea in a second attempt at legislation this year.
While cool to legislative restrictions, Smith says the more car buyers know about financing, “the better off everyone will be.”
Consequently, NADA is helping to create a national education campaign on auto financing for consumers, legislators and regulators, he says.
NADA is emphasizing these points on auto financing:
Dealers offer the convenience of one-stop shopping.
Dealers have access to many credit sources.
Dealers offer competitive rates with exclusive access to manufacturer incentives and discounts.
It's a competitive marketplace, and “any time customers are not happy with a transaction, they can easily re-finance anywhere — with no penalty,” notes Smith.
“These are powerful arguments in support of dealer financing,” he says. “But they are relevant only as long as each and every customer is treated in an open and honest manner and is well informed about all aspects of the transaction.”
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