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A Consumer-Friendly Future for Auto Lending - ConsumerReports.org

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But “the loan selected by the dealer is not necessarily the loan that is best for the consumer,” says Ryan Kelly, acting auto finance program manager at the Consumer Financial Protection Bureau. “Consumers often do not realize that auto dealers are not required to select the cheapest loan,” and instead may present one that provides the most profit for them.

A requirement that dealers put loans up for bid and then tell borrowers about all of the offers could correct this, says Ian Ayres, a lawyer and an economist at Yale University’s School of Management and its law school who has studied disparate pricing in auto lending

Chuck Bell, programs director at CR, agrees. “Consumers would be much better served by a financing model where they can choose the best of competing loan offers,” he says. “In the meantime, however, we also believe dealers should be required to disclose all the loan offers they currently receive in a clear, understandable way, because it’s blatantly unfair to conceal that information.”

“Many dealers might still only offer the higher-cost loan options they receive compensation for,” Bell adds, “but ending the secrecy is a first step toward a fairer sales process.”

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