This presentation covers the key findings of the auto loans section of our report on the State of Lending in America and it's Impact on U.S. Households.

1. The State of Lending in America
and its Impact on U.S. Households
Auto Lending
Delvin Davis
December 12, 2012
©Center for Responsible Lending

2. Auto Lending Affects Millions
of Americans
Number of Cars Sold in the U.S. (millions)
70
60
41.6 42.6 43.0 43.6 42.7 44.1 42.6
50 41.6
36.5 38.8
40 35.5 36.9
30
20
10 17.4 17.2 16.9 16.7 16.8 17.0 16.5 16.2
13.3 11.6 12.8
10.4
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
New Sales Used Sales
America households owe over $700 billion
in auto loans.

3. Three Types of Auto Financing
1. Dealers arrange financing
through their Financing and
Insurance office – 80% of
car buyers go this route
2. Car buyers obtain financing
directly from a bank or
credit union
3. “Buy Here Pay Here” dealers
finance and service loans in-
house

4. Most Common Predatory Practices

5. Most Common Predatory Practices

6. Most Common Predatory Practices

7. Most Common Predatory Practices
Consumer Financial Protection Bureau and the Federal Trade Commission
are investigating these and other consumer concerns

8. Dealer Interest Rate Markups
• Dealers have incentive to inflate the
loan interest rate to increase their
commission.
• Markups cost US consumers $25.8
billion each year.
• Rate markups are correlated with
• Loans from subprime auto lenders
• Higher odds of default and repossession

9. Yo-Yo Scams
• How it works:
• Dealer allows buyer to leave with a car “on the
spot” even though financing is not finalized.
• Dealer later requires buyer to return and
negotiate a new (and more expensive) deal.
• Buyer cannot back out of deal, because their
trade-in has already been sold
• Consumers in a “yo-yo” pay rates 5
percentage points higher than
otherwise.
• Low-income and poor credit borrowers
are more subject to yo-yo’s.

10. Loan Packing
• Overpriced add-on products that
quickly inflate overall cost
• Vehicle service contracts
• Guaranteed Auto Protection (GAP)
insurance
• Credit life and disability insurance
• Theft deterrent systems
• Custom upgrades and accessories
• African-Americans and low-income
more likely to have add-on products
in their deal.

11. For More Information
See all CRL research on Auto Lending:
http://rspnsb.li/PPGdAg
Contact us:
Kathleen Day (DC): 202-349-1871
Graciela Aponte (CA): 510-379-5518
Ginna Green (SC): 510-866-5989