An article in today's New York Times discusses the increase in subprime mortgage lending. As the article points out, although most of the really bad mortgages that caused the financial crisis were subprime loans, not all subprime loans are bad. People with less than "A" grade credit should be able to get a home loan, too. The real problems arise when lendors deceive consumers regarding loan terms, gouge them on pricing, or set them up for loans that they can never repay. That is the difference between subprime lending and predatory lending.
Car dealers like to brag about their relationships with multiple banks and finance companies, and they often imply that these connections help consumers get low interest rates. But, many consumers would be surprised to learn that car dealers frequently mark-up the interest rates. In many deals, the dealership makes more money by marking up the interest rate than they profit from the sale itself.
Managing Attorney Dan Blinn will be the in-studio guest on WTIC 1080 Law Talk on Saturday, June 28 at 3:00 pm. He'll be talking about how to avoid getting ripped off at the car dealership. Feel free to call in and ask any consumer law related questions.
Car rental companies owned nearly 2 million in 2013, and most of those rentals will be resold on the consumer market. Some rental companies have retail divisions that sell former rentals directly to consumers. Many of those cars can be a good deal, and many rental companies offer a decent warranty.
One of the biggest tricks in the car business is the "dealer conveyance fee," which is supposed to compensate the dealership for its costs in processing the paperwork, taking care of the registration, and closing the deal. About 20 years ago, dealer conveyance fees were modest, with most dealerships charging less than $100. But, starting around the late 1990's, a few dealerships started to charge more. Others followed, and before long, many were charging $299 or more. The dealerships that kept their rates reasonable suffered from unfair competition, because other dealerships advertised cars at lower prices, only to make up the difference by charging a higher conveyance fee. So, more dealerships increased their fees to match their competitors. Soon, other dealerships raised their prices even higher. Today, we have some dealerships charging as much as $799, or about 10X the amount charged by many dealerships as recently as 15 years ago!
Important news for Connecticut residents who have taken out a payday loan: the Connecticut Department of Banking recently reached a settlement with CashCall, Inc. and Western Sky Financial, LLC concerning unlawful lending practices. Customers that took out a payday loan from either of these companies on or after October 1, 2009 may be entitled to a full or partial refund. For more information, visit the settlement website, or contact the Connecticut Department of Banking at
One trick played by auto dealers to boost their profits is to charge customers to etch the vehicle identification number (VIN) onto the windows of a car. The VIN is a 17 digit number that is unique to a specific motor vehicle. There is some evidence that car thieves are less likely to take a car with the VIN etched on the windows, and some insurance companies offer discounts for comprehensive insurance premiums if a car has VIN etching. So, this service may have some value.
Many consumers decide to trade-in their cars before they have paid off the old loan. When things go right, the dealership will obtain a pay-off amount from the bank or finance company and will make the payment on time and for the proper amount. The dealer gets the title, and the old car loan is paid off.
Most car manufacturers have certified pre-owned ("CPO") programs. Typically, CPO programs involve an inspection by an authorized dealership, who "certifies" that the car meets the manufacturer's high standards. For example, Toyota advertises that it has a "160-Point Quality Assurance Inspection." CPO cars often sell for a premium price. One reason for the higher cost is that most programs include a manufacturer's warranty. But, the main reason that many consumers pay extra for certified pre-owned is because they believe that these cars have been thoroughly checked out and are in great condition.