For Immediate Release
Contact:
Monday, January 26, 2004
Jack Gillis, 202-737-0766
Brian Alexander, 202-331-1550
REPORT CONCLUDES HIDDEN AUTO FINANCE CHARGES COST AMERICAN
CAR BUYERS AS MUCH AS ONE BILLION DOLLARS ANNUALLY
INDUSTRY-WIDE PRACTICE HAS LED TO DISCRIMINATION AGAINST
AFRICAN-AMERICANS AND HISPANICS
Washington, DC – American car buyers are being charged at least hundreds of millions and as
much as a billion dollars annually in undisclosed “finance markup charges” when they finance
their cars at automobile dealerships, concludes a report released today by the Consumer
Federation of America (CFA).
The report titled, “The Hidden Markup of Auto Loans: Consumer Costs of Dealer Kickbacks and
Inflated Finance Charges”, describes a markup practice encouraged by all of the auto industry’s
leading captive finance companies and top auto lending banks. The markup takes place when
automobile dealers subjectively hike the car loan rates of buyers who arrange financing through
those dealers. Consumers are led to believe they are receiving a rate based on their
creditworthiness, but often pay marked-up finance rates determined arbitrarily by the dealer and
encouraged by the lender. Most of these undisclosed markup charges are kicked back to the
dealer by the lender, with the lender retaining the remainder. According to several studies,
these markups historically have affected about one in four consumers who get car loans through
the dealers.
Moreover, the subjective nature of this dealer markup has led to discrimination against African-
Americans and Hispanics. These minority car buyers are marked up more often, and, when
they are, are charged on average hundreds of dollars more than are other Americans, even
when they possess similar credit histories, according to the report.
“These hidden finance kickbacks typically add at least $1,000 to the cost of an auto loan, and
are costing consumers as much as one billion