Reform of Auto Loans Supported by NADA

The U.S. financial system has been revised and financing options at car dealerships are now promising to be more competitive. The revising efforts are appreciated by the National Automobile Dealers Association which is pleased that the regulatory structure is preserved but consumers are protected under the new laws for dealer-assisted financing. Auto credit is still affordable in an extremely competitive auto finance marketplace. There has been a debate around the idea that dealers did not wish to be regulated by an additional organization. They considered that they are just intermediaries between their clients and the institutes that offer money for buying cars. As such, extra regulations would only imply additional costs for the consumers.

Dealers can arrange financing that meets bank or credit union terms, while clients can still rely on their own banking relationships. There are no unnecessary regulations for small business dealers, and their role is still to facilitate financing under the new laws.

However, there is a new Bureau of Consumer Financial Protection, which has direct federal oversight on all auto loans. This new institution will probably become operational in 2011. Its existence will ensure that no deceptive practices will be involved in any types of loans. Auto dealers asked the Congress to be exempted from the new Bureau as they help buyers get loans but they are not the banks making the loans. Dealers have been victims of the credit crisis just as much as consumers so there was concern that an additional structure could adversely affect their business.

Dealers argued that they are only intermediaries for financial institutions, which are the ultimate processor and service provider for the loans. The debate over the exemption of auto dealers from the new consumer financial rules has been going on for a few months but has now come to a resolution.

Dealers consider that they were already well-regulated at each state level and there was no need for supplementary regulations. Such extra regulations would translate into additional costs that would ultimately be passed on to consumers. Auto dealers that work in rural towns were afraid that such supplementary regulations could be a direct hit to their business.

On the other hand, car dealers should be subject to the same regulations as other workers who help with writing loans. They should play by the same rules as their competitors, in communities all across the country. Banks and credit unions that make car loans will be regulated by the new bureau, so unfair or deceptive practices will be less likely.

Auto loan industry is a bigger industry than credit card industry. Almost 80% of car loans are made through dealerships. Thus, dealers can charge for expensive add-ons, such as extended warranties which consumers might not be well aware of. Customers could also be offered a more expensive car that may seem manageable if they opt for longer loan periods. Clients might become more focused on an affordable monthly cost instead of the total cost of the car acquisition.

Dennis runs Car Dealer Check a site that provides user generated Car Dealer Reviews and information on Mississippi Car Dealers.