NADA, CFPB Fight For Future Of Automotive Financing
According to National Automobile Dealers Association chair Forrest McConnell, the United States government’s plan to tighten automotive finance regulations amounts to an attempt by said government “to take away the consumer’s right to get a discount.”
Autoblog reports the Consumer Financial Protection Bureau wants to further extend its reach in the industry, arguing that a flat-fee system would provide more transparency and prove beneficial to consumers over the current discretionary interest rate system, which the agency claims can be used to discriminate against certain groups of customers.
McConnell returned fire, proclaiming the CFPB’s reasoning as “flawed,” and that dealers are against discrimination:
Dealers have to discount those rates to be competitive. The current system saves customers money. Period.
At stake are 87.4 million outstanding loans worth over $900 billion as of Q1 2014, 90 percent of which originate from 38 auto finance companies that would fall under the proposed CFPB regulations.
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Every deal is different, but good finance managers will maximize the back end profit of each deal, sometimes that's rate markup, sometimes it's warranties. They usually had the discretion to cut the front end profit in favor of back end profit if the total gross was better
If anything this is a good example of what regulation can do to benefit citizens. In essence each actor was getting 'free' interest that was unearned by simply being in a business agreement to funnel action to them. It's not inherently illegal but under new regulations it would be squashed and changing to a fee-based system would actually make the system more competitive, you know that thing that Conservatives and Capitalists crow about but never actually want.
RE: "And that's the real solution. Let car manufacturers sell directly to their consumers." Why would auto manufacturers want to do that? They'd have to buy back all of their dealerships. They don't have the money to do that or begin to finance their own inventory. The legacy OEMs already have learned they want no part of retailing cars. Their dealers are their partners. What is keeping auto OEMs from competing with their own dealers? Common sense.
RE: "Those who fail to recognize or react to the situation they find themselves in will continue to perpetuate whichever stereotype applies. Where I come from, we call them sh!tbags." Subprime/BHPH is how many improve their credit score to graduate back into the 4 "normal" credit tiers. Guido and Tony, at Kneecap Motors and Car Loans, don't report to the credit bureau.