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Automotive News: 2.5% becoming standard dealer finance markup

November 22, 2010

A 2.5 percentage markups on loan interest rates is becoming a standard in dealership finance, according to an article in the Automotive News. 

Dealers wondering where the spate of litigation over dealership F&I practices will settle could consider a markup of 2.5 percent on finance rates as a good benchmark. That markup is becoming a standard in dealership finance, according to an article in Automotive News.

 

The recently enacted Car Buyers’ Bill of Rights in California mandates a 2.5 percentage point ceiling on most dealership markups of wholesale interest rates. Markups of loans longer than 60 months are limited to 2 percentage points under the California law. 

And DaimlerChrysler Services agreed to a 2.5 percentage point limit on most markups to settle a class-action lawsuit that alleged bias against minority vehicle buyers.

 

Last year, GMAC agreed to a 2.5 percentage point limit on dealership markups as part of a legal settlement. Other lenders and automakers’ captive finance companies have accepted a 2.5 percentage point ceiling. 

Charles Ognibene, a Boston lawyer who represents auto finance companies, says the industry "has done well educating lawmakers and the car-buying public about how credit sales and auto finance really work."

 

Ognibene said: "Lawmakers have come to understand the legitimate function that a dealer’s F&I department performs. The value added by that department is not provided without cost."

 

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