Study: Auto Loan Markups Cost $25.8 Billion 

   Consumers financing a new or used vehicle through a dealership will drive off the lot and pay more than $25.8 billion in hidden interest-rate markups over the lives of their loans, according to a study by Washington based Center for Responsible Lending (CRL). 

   Your out-of-pocket cost is significant, averaging $714 per consumer, with an average rate markup of 2.47 percentage points. States with the highest markup costs are California ($2.6 billion), Texas ($2.2 billion), New York ($1.6 billion), Florida ($1.5 billion), and Pennsylvania ($1.2 billion), with Alaska having the lowest ($54 million). 

   Also known as “dealer reserve” or “dealer participation,” hidden interest-rate markups are described by dealers as their compensation for the time they spend putting a financing deal together. It’s considered “hidden” because consumers usually don’t know what interest rate they actually qualify for.

   The Consumer Federation of America, National Association of Consumer Advocates, and CRL offer these suggestions: 

* Run your credit report. Do this before you visit the

dealership. Visit annualcreditreport.com or call

877-322-8228. Get one free report a year from Experian,

Equifax, and TransUnion. 

* Buy your credit score. Order one individual score

(FICO Standard) directly from FICO for $15.95 at

myfico/com/Products/Products.aspx. Here’s a tip: If your

score is low, take steps to improve it before you apply for a loan. 

* Be skeptical of ads for “0%” loans. You’ll likely be switched to a higher rate, or find it difficult to

negotiate on the price of the vehicle. 

* Research prices. Check price information at Edmunds.com. For used cars, visit kbb.com.

And the best tip of all: Line up financing at Germania Credit Union. Get prequalified for a loan

before you shop for a vehicle. You don’t have to accept financing from a dealer; the sales and

finance people may tell you they can provide the best financing, but kickbacks and markups add to the cost you’ll pay. 

   A Germania Credit Union loan officer can help you size up any financing offer and likely make you a better one. Stop in or call 800-392-2202 today to land your best car deal.