In the current era of the automotive business, we have more transparency within transactions from most dealers than ever before in the history of selling cars. Additionally, there is more government oversight and regulations aimed at consumer protection, both from the federal level and the individual states and their varying laws. However, a crucial question remains unaddressed by the government: Where is the dealer protection from the lenders?

The Problem

All the laws designed for consumer protection have been enacted with one primary purpose in mind: to create a higher level of transparency on the part of the dealers, ensuring that consumers know exactly what they are paying for and what it costs. If a consumer chooses to purchase a product, such as a GPS vehicle locator to protect their vehicle, but the lender from whom the dealership has an approval does not allow that, the customer is left with two options: pay cash for the GPS or not buy it. Does this truly benefit the customer?

Lenders have the ability within their dealer agreements to decide, at their discretion, whether they want to allow the financing of certain products. This policy varies from lender to lender. What is the issue with a customer adding an item into their financing if they personally choose to do so? Why are lenders rejecting contracts simply because the dealer itemized an item on the contract or the buyer's order?

Lenders would prefer to turn a blind eye and ask dealers to lump the items into the sales price so that they don’t have to see it, which is asinine. If, as a lender, you are willing to loan someone 125% of the vehicle’s value on the front of the deal, what difference does it make that part of that 125% is made up of a product that a customer chooses to purchase? If we are moving as an industry towards greater levels of transparency and want to inspire greater trust in our customers, then it’s time for the lenders to do their part and stop banning items from being itemized on the contracts.

As time goes on, more states are enacting legislation that mandates the itemization of certain products and fees on a contract, not allowing them to be lumped into the sales price on the bank contract itself. This affects everyone: customers, dealerships, and product providers. While the focus may be on the state governments and the vague nature of the bills (and the lawsuits that follow), why do we not, as an industry, turn our attention to the banks?

The Solution

The fix is simple for any state law mandating the itemization of every fee: Have the lender accept the contract with the purchased products itemized out. By doing so, lenders can ensure they are aligned with the industry’s movement towards transparency and foster greater trust among consumers. This simple change would protect dealerships from unnecessary complications and support consumer rights to clear and honest transactions. It’s time for lenders to step up and contribute to the transparency and trust that the automotive industry is striving to achieve.

Want to learn more about how your dealership can deal with lenders? Reach out to Tim Allen today via email at tallen@ezvds.com or on LinkedIn.