Auto dealer exemptions don't agree with Barney Frank's tummy. (Photo: Kickin' and Screamin')

The National Automobile Dealers Association has political muscle, and it wasn’t afraid to use it to obtain the highly sought-after auto dealer exemption from Consumer Financial Protection Bureau oversight. NADA spokesman Bailey Woods told Automotive News that House and Senate committees made the right decision, as the CFPB would make dealer financing for auto loans more involved and ultimately more expensive. As it stands, it’s Christmas in June for auto dealers; they lobbied and Congress delivered.

Auto dealer exemption from CFPB oversight

The CFPB will have jurisdiction over mortgages, credit cards and other forms of consumer credit like payday loans, but the auto dealer exemption will leave dealer financing out of the new government agency’s hands. Arranging auto loans in-house will be unhindered for those dealerships with the capability, but the CFPB will still keep watch on banks and credit unions that work with auto dealers. The Federal Trade Commission still supervises auto dealers, but those in Congress who sought to bring dealer financing under CFPB scrutiny are dissatisfied with that system, as it takes the FTC as long as eight years to enact significant change. This is due to additional reviews the FTC must perform that are not required of federal agencies.

Rep. Barney Frank bemoaned the lack of votes

Barney Frank and other House Democrats wanted auto dealers to be put on a leash, as did President Obama, the Pentagon, military families, consumer rights and civil rights grounds, indicates Automotive News. Yet NADA’s lobbying turned things around for auto dealers, particularly considering where the finance bill began. All that the organization got for their trouble was a concession that the FTC could speed up their standard-writing process for auto dealers. This still will not protect consumers from some of the practices of dealer finance that some call shady. Auto dealers, on the other hand, call it making a living.

Need auto loans from someone other than an auto dealer?

Sources:

Automotive News (subscription may be required)

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Don't let a car salesman talk you into buying more than you can afford. Image from Flikr.com.

Some people might like the idea of waking up one morning, deciding they want a new car, heading to a dealership and getting the car and the financing taken care of all at once and in the same place.

However, convenience always comes with a price. In this case, that price could be a whole lot of money. Just like Car Deal Expert, dealerships contact several different banks or lending institutions and ask if they will lend you the vehicle price, minus down payment or trade-in or whatnot. However, Car Deal Expert  has nothing to gain by offering you a loan with a higher interest rate than you deserve, and the car dealership does.

Dealerships are all about the commission

Auto loan interest rates can vary widely and over time, a few percentage points of difference can really add up. Most car dealerships are always trying to get the highest possible commission they can, and the highest commission possible is usually attached to the loan with the highest interest rate.

So, potentially, a dealership could have offers for you from three different lenders, and in most cases the dealer will offer you the loan with the highest interest rate first.

If you must…

Working through Car Deal Expert and finding an online lender is the best way to get the best interest rate you can. However, if you absolutely are set on getting financing through your dealership, turn down their first financing offer. Go on, you can do it.

Just wait and see. The dealer will come back to you with another loan offer, with a lower interest rate. You know what you should do? Turn it down. In fact, if you actually want to get the lowest possible interest rate, you should turn down every offer the dealer gives you until the salesman finally comes back and says “That’s it. There’s no more. If you won’t accept those loan terms, you can’t get the car.”

Don’t worry; if you turn down a financing offer and then say, “Never mind, I guess that will work; I really want this car,” the dealer will still sell it to you. Probably the salesman, during this process, will feed you a bunch of lines about how “We gotta get this car off the lot” and “Someone is gonna come snap this car up.” Don’t buy it, the car or the lines. Can you tell I’ve been through this before?

A better alternative

Here is what happens at the car dealership if you have a pre-approved loan through Car Deal Expert: The dealer sees how much your lender is willing to give you, so the salesman won’t try to talk you into buying a more expensive car or accepting a loan with a higher interest rate.

That way, you get what you want without the pressure of a salesman who is trying to up his commission. The salesman already knows exactly what he’s getting. The dealer only has to find you a car that’s exactly the price you want and tell the lender “Yes, thank you, I will take the money.”
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