Protecting Our Community

What's concerning is that interest rates for people with lower credit scores are reaching record highs.

Illegal Interest Rates

These dealers are violating the 18% interest rate cap, they are just using a deceptive way to do it.

Automobile Loans

We Can:

  • Ensure Floridians Don't Fall into Debt

  • Stop Deceptive Practices

  • Enforce our State Laws

Interest rates for loans on cars have reached a record high with consumers facing monthly payments of $656 for a new car with an interest rate of 5.1% over 70.5 months.[1] What's concerning is that interest rates for people with lower credit scores (deep subprime scores which range from 300-500) are reaching 14.7% for new cars and 20.99% for used ones.[2] This means the average consumer could be paying up to $8720 of interest on a $14000 loan over a 5 year term.[3]

Dealers' Incentives to Scam Consumer

The Florida Statutes outlines an 18% interest rate cap on consumer loans ranging from $4000 - $25000.[5] The interest rate that an auto dealers financing department offers you is the initial “buy rate” they get from the lender plus an amount that compensates the dealer for handling the financing.[6] The interest rate cap on consumer loans only applies to the buy rate, so the hyper-inflated interest rates auto dealers are offering end up abusing the consumer who is unaware of this scheme and that negotiating is an option to them, or just getting an approval form a bank directly. 

 

Dealers have a huge incentive to essentially “scamconsumers into financing through the dealership because the extra interest is kicked back to the dealer.[7] There are no regulations on what a dealers interest rate handling fee can be, meaning consumers are at the mercy of these dealerships unless they’re aware of their options. 


Dealers who offer financing to consumers in-house that market to “no-credit” or “low credit” are able to jack up loan amounts because they don’t finance based on the value of the vehicle.[8] Banks and credit unions limit the amount they will lend for purchase based on the value of the car and overcharge consumers thousands of dollars over the car's value.[9]

[1] https://www.cnbc.com/2022/06/16/monthly-costs-to-finance-new-used-vehicles-hit-record-high.html

[2] https://www.carsdirect.com/auto-loans/what-is-the-average-interest-rate-for-a-car-loan-with-bad-credit

[3] https://www.carsdirect.com/auto-loans/what-is-the-average-interest-rate-for-a-car-loan-with-bad-credit

[4] https://www.carsdirect.com/auto-loans/what-is-the-average-interest-rate-for-a-car-loan-with-bad-credit

[5] https://www.consumerreports.org/car-financing/how-loophole-ridden-auto-lending-laws-harm-consumers-a3113489289/#:~:text=A%20Patchwork%20of%20Confusing%20Laws&text=Florida%2C%20for%20example%2C%20has%20an,%244%2C000%20and%20up%20to%20%2425%2C000.

[6] https://www.consumerfinance.gov/ask-cfpb/can-i-negotiate-the-interest-rate-on-an-auto-loan-with-the-dealer-en-795/?_gl=1*1hu2wt2*_ga*MjA5MDk1ODYxMS4xNjU3NTU1MzE1*_ga_DBYJL30CHS*MTY1NzU1NTMxNC4xLjEuMTY1NzU1NTM3Ny4w

[7] https://www.responsiblelending.org/issues/signs-predatory-auto-finance

[8] https://www.consumerfinance.gov/ask-cfpb/what-is-a-no-credit-check-or-buy-here-pay-here-auto-loan-en-887/

[9] https://www.consumerfinance.gov/ask-cfpb/what-is-a-no-credit-check-or-buy-here-pay-here-auto-loan-en-887/

Education

So, What Can We Do?!

The Commissioner of Agriculture can ensure fair business practices and honesty in the auto sales industry that will allow consumers to purchase a car with all financing options available to them before purchase. Chapter 570 of the Florida Statutes gives the Commissioner power to terminate any practice attempting to harm consumers. We need an increase in transparency. Having the dealership disclose the difference in accepting a dealer rate versus a bank buy rate would protect consumers in an already.[1] 

These dealers are violating the 18% interest rate cap, they are just using a deceptive way to do it. If they don't respond to an increase in transparency the Commissioner must legally pursue these dealers due to their danger to Floridians. 

[1] http://www.leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0500-0599/0570/0570.html