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Dealer Reserve


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#1 MarvBear

MarvBear

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Posted 23 December 2005 - 05:43 PM

Future Dims for Traditional Dealer Reserve
Source: Automotive News
Date: December 12, 2005

Situation

Hit w/ bias lawsuits, dealers typically settling for 2.5% markups of wholesale interest rates
Dealers say industry competition keeping markups below 2.5 points on most transactions
But minority plaintiffs, consumer advocates calling for legal limits
Rate markups in jeopardy in 1st bias suit to go to trial; could yield to flat $500 fee
Outcome could influence similar cases against Toyota Financial Services, Ford Motor Credit
Federal judge on record as leaning toward ban on markups


Significant Points

Plaintiffs say dealer markups cause illegally high finance charges for many minority consumers
Dealers say markups justified for services provided in arranging vehicle financing
In case involving Ford unit Primus Financial Services, judge ordered parties to negotiate voluntary settlement
Hinted would outlaw markups if mediation failed
Plaintiffs called for 2.5% cap on markups; required written justification of profit more than $500
Say almost 75% of Primus deals would not require justification






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