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Auto Loan Markups Can Cost You

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In December of 2004, while NBC's Dateline put the car-buying business on the hot seat, they put credit unions in the spotlight as an example of " how to do it right."

Using a hidden camera, the show documented outright fraud in dealerships consisting of fast talk, forgery, and shady financing arrangements. A young woman trying to purchase a Ford Mustang was coerced by the car dealer's finance manager into signing papers for a 10.9% loan. The woman later was accompanied by a consumer expert who helped her secure financing from her credit union at 4.9%. The cooperative and nonprofit status of credit unions enables them to pass savings on to members, resulting in lower rates and higher yields.

Remar Sutton, president of the Consumer Task Force for Automotive Issues, offered consumer survival tips in the car-buying process. He suggested skipping the dealership financing arrangements in favor of joining a credit union as the best option for a fair loan and honest answers. Other tips: Don�t feel pressured, don�t exceed your budget, don�t sign a mandatory arbitration agreement, and don�t buy on your first visit to the dealership.

Consumers who finance their vehicles through auto dealerships are charged hundreds of millions and perhaps as much as a billion dollars annually in undisclosed finance markup charges, reports the Consumer Federation of America, Washington, D.C. These hidden markups typically add at least $1,000 to the cost of an auto loan. This takes place when automobile dealers subjectively hike the car loan rates of buyers who arrange financing through those dealers.

This markup practice is encouraged by all of the auto industry's leading captive finance companies and top auto-lending banks and impacts about one in four buyers of new and used cars who finance through the dealership. Marked-up finance rates are determined arbitrarily by the dealer and encouraged by the lender, regardless of the consumer�s creditworthiness, with kickbacks to both.

Do not be part of the statistics.

Visit New Century Federal Credit Union for all your auto financing needs.

Available to Qualified Applicants Only