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Hidden finance charges cost car buyers billions, group says
January 27, 2004
BY DEE-ANN DURBIN
WASHINGTON -- Secretive auto financing charges cost consumers $1 billion each year, a consumer advocacy group said Monday.
When a car buyer arranges financing through an auto dealer, lenders quote a finance rate based on the buyer's credit history. In some cases, dealers are increasing that rate by several percentage points and sharing the profit with lenders, the Consumer Federation of America said.
The National Automobile Dealers Association responded that the charges are fair compensation for dealers who set up financing.
Dealers typically increase the rate by around 3 percentage points, which can add $1,000 to the cost of the loan, the Consumer Federation said. The group estimates the practice affects one out of every four buyers who finance their vehicles through dealerships and disproportionately hurts low- to middle-income blacks and Hispanics.
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