The Fed Expected to Lower Interest Rates Again, but Consumers Won't Reap the Full Benefits on Their Auto Loans

NEW YORK, Sept. 16, 2019 /PRNewswire/ -- Interest rates are down by 1% or more on benchmark 10-year U.S. Treasury securities over the past year, with interest rates declining on all types of loans. Because of weakening economic data, trade disputes, and global uncertainties, the Fed is expected to lower rates further this week. Consumers, however, won't reap the full benefit of the decrease on their auto loans as car dealers will still mark up borrowers' rates on loans financed through the dealership.

According to Outside Financial Chairman Jon Friedland, "Because the average car dealership in the United States is selling fewer new cars this year than last, and selling them at lower margins, car dealers increasingly rely on the financing office to compensate. In fact, car dealers now earn more profit from financing cars than from selling cars."

The Outside Financial Markup Index has tracked the markups embedded in auto loans arranged by car dealers since 2010. Sonia Steinway, Outside Financial's CEO, explained, "The year 2010 is significant because that's when the Dodd-Frank Wall Street Reform and Consumer Protection Act established safeguards against predatory lending and increased loan disclosure requirements. Unfortunately for car buyers, auto dealers were specifically excluded from these regulations, even though 80% of new car financing is originated by dealers."

Outside Financial released the latest results for the Outside Financial Markup Index today, the leading measure of how much car dealerships mark up new car loans. 

Data released today for the year-to-date through July reveal that consumers paid an average of $1,904 in undisclosed fees and markups, a 6% increase from 2018 and an 82% increase since 2010, marking a record high.

"Consumers deserve the same transparency and choice in the financing transaction as they have when price shopping for a car," Friedland said.

About the Outside Financial Markup Index
The Outside Financial Markup Index analyzes public data from the Securities and Exchange Commission, the Federal Reserve Bank, the Consumer Financial Protection Bureau, the National Automobile Dealers Association, DealerStrong, and Auto Finance News, combined with interviews of automobile finance executives.  The Index details consumer costs on auto loans arranged by dealerships for new car purchases.  It is updated monthly and is subject to minor revisions for up to 4 months. The Index is available at https://www.outsidefinancial.com/auto-loan-markup-index.

About Outside Financial
Outside Financial brings education and choice to car buyers, arming them with resources and tools to make financing easier, and matching pre-qualified and motivated buyers with the right lenders. The company partners with leading financial institutions and VSC and GAP providers that share their consumer-first values. For more information, visit www.OutsideFinancial.com. 

SOURCE Outside Financial, LLC