Dealer Reserve

[MarvBear]

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