Home > Auto Loans > The Hidden Truth About Auto Loans
The Hidden Truth About Auto Loans |
|
Auto loans are in high demand today. In
America, millions of people are heading for auto loans to buy their dream cars. As a result, lending agencies providing auto loans are also mushrooming all over the country. When you approach the lenders for auto loans, most of them often claim to provide you the required loan at very moderate interest rate. But the truth is different. Most of the lenders charge hidden fees from the borrowers. According to one recent survey released on January 26 by the Consumer Federation of America (CFA), purchasers of both new and used cars are being charged as much as $1 billion annually. And these are hidden fees that the borrowers did not know until the report was released. Almost all the borrowers did not know what went wrong with their auto loans. According to the research, these unexpected things happened only because of the secretive practices run by the lenders and dealers. Most of the interest schemes were based on adjustable mode, so the borrowers were clueless as to how to fight with the situation. Eventually, what happened? The borrowers end up paying very high interest rates on the loans that they borrowed. To be more precise, African-American and Hispanic borrowers were the worst sufferers. The report also says that the markup occurred when auto dealers subjectively hiked the car loan rates of buyers who arranged financing through those dealers. Consumers often paid marked-up finance rates determined arbitrarily by the dealer and encouraged by the lender, but they were led to believe that their rate was based on their creditworthiness. Most of these undisclosed finance charges were kicked back to the dealer by the lender, according to the report. Generally, a borrower's approval of auto loans is determined on the basis of his credit rating. If a person's credit rating is good he can get an auto loan from any lender. Even the lenders compete among themselves to get his business. But what happened to the millions of people who had been charged $1 billion hidden fees? There were several borrowers who really had good credit report. But indiscriminate charge over their loans made their credit report valueless. According to another survey that was conducted in 2001 by the Federal Reserve Board's Survey, 34% of all households had at least one auto loan registered against their name. The average value of these outstanding loans was $15,000 and as a result the Americans owed more than $500 billion on auto loans. The report also revealed that the Americans paid close to $45 billion in interest on these auto loans annually. Truly speaking, finance markup charges exert a havocking impact on the borrowers of auto loans for both new and used cars. Several auto industries' leading captive lenders suggest the extent of the practice of finance markup charges and their impact on consumers: --A study of Nissan Motors Acceptance Corporation (NMAC), found that as many as 50% of customers were assessed the markup, costing consumers between $70 and $210 million, according to a study of over 310,000 NMAC borrowers covering the period March 1993 to September 2000. --A study of Ford Motor Credit Company (FMCC), the nation's largest auto loans lender, found that over 1.5 million customer records indicate a markup was incurred in the period November 1997 to December 2001, which amounts to a rate of markup of one in four (25.9%) of the 5.9 million records examined. A conservative estimate of added debt burden to consumers who financed through FMCC is hundreds of millions of dollars. --A study of General Motors Acceptance Corporation (GMAC), the nation's second largest auto loans lender, indicates that the annual frequency that GMAC transactions received was the markup at least one in four (25.9%), and as high as 41.7%. It affected at least $421.6 million in markup, according to a study of 1.5 million of the company's 6.2 million customers from the period January 1999 to April 2003. To wind up, the auto loans industry is not entirely flawless. So before signing up any deal, it's very much necessary to know about the exact company profile, and the other details. |
|
| ------------------------ |
|---|
|
|
| ------------------------ |
|---|
|
|
|
|
| ------------------------ |
|---|
|
| ------------------------ |
|---|
Custom Search
|
| ------------------------ |
|---|
|
|
| ------------------------ |
|---|
Consumer Alerts | About | Bookmark Us | Contact | Espanol | Privacy Statement | Copyright | Terms & Conditions | Financial Widgets | SiteMap
Copyright © 2006 Credit Loan, LLC. 235 APOLLO BEACH BLVD, STE 218 Apollo Beach, Florida 33572 All rights reserved.
Disclaimer: The content provided on CreditLoan.com is for informational purposes only; do not make any financial decisions based on its content. Financial decisions are personal, based on an individual's situation. Consult with a financial professional before making any financial decisions. CreditLoan.com is not liable for your financial actions.
