- Nov 2, 2022
Talon R LV
Actually your article refers to points. Points being where a lending institution say in the automobile or housing market has a buy rate from their lender and they have the ability to raise the rate, and bank the difference. You're also dealing in larger sums financed where a small bump in the rate can be very profitable. Of course it also refers to implied racism where some may single out minorities and charge them more than say someone who may be more experienced or educated. Automobile dealers are also known to sell extended warranties, gap insurance, paint sealant and the like for inflated costs in these sorts of situations as well. Honda Finance (Not affiliated with their Automotive financing product) is an arm used by Honda and its dealers to facilitate the sale of their products. They have a published rate on their site. Often a dealer is required to participate in these sorts of programs. Ever wonder why the cash price for something is less than the financed price? Lower interest rates sell more product. Read your article again and digest the meaning of the article. Dealer participation is a monetary sum put forth by the dealer or the consumer to secure a lower rate, say for a lawn mower, side by side or a tractor or implement, not a home or automobile. Some dealers don't use these types of programs as they prefer not to participate in relinquishing their profits doing so. Take a moment to Google "current fed lending rate" and see how this compares to Honda's 4.99 % rate. Someone once told me, It doesn't matter what the perceived cost of something may be, it only matters what someone is willing to pay for what they desire. I'm retired from the construction and development industry while my family operates an automobile dealership. While in the building industry, we owned and operated a mortgage business as well. Although I don't claim to know everything, my grasp of finance and lending is fairly extensive.No, I actually got the definition from an article on ConsumerFinanceMonitor.com. Your description wasn't in line with what I remember being told, so I looked it up. But, hey, I'll take your word for it - you learn something new every day.
At the CFPB’s auto finance forum on November 14, Director Cordray and other CFPB officials reiterated their distaste for dealer finance chargewww.consumerfinancemonitor.com
Also, NADA.org describes it the same way I did in a publication titled Fair Credit Compliance POLICY & PROGRAM:
On March 21, 2013, the Consumer Financial Protection Bureau (“CFPB”) issued a fair lending guidance bulletin to indirect auto finance sources (which the CFPB refers to as indirect auto lenders) stating “that certain lenders that offer auto loans through dealerships are responsible for unlawful, discriminatory pricing” and that lender policies “that allow auto dealers to mark up lender established buy rates and that compensate dealers [for originating credit contracts] in the form of dealer [participation]” create a “significant risk” of fair lending violations.5