Consumer advocates take aim at dealer finance profits

Donna Harris covers retail issues for Automotive News
It's been a few years, but consumer advocates are back again with guns aimed squarely at dealers' finance profits. Did I say guns? Well, certainly the language is loaded.

As they lobby Congress to regulate car dealership finance with a proposed new consumer financial protection agency, consumer groups are accusing car dealers of charging "hidden fees" and taking "kickbacks" from financial institutions.

Kickbacks? Hidden fees? Could they be referring to the interest rate markup? Dealers commonly make money by marking up the wholesale interest rate they pay the financial institution that finances the auto transaction.

The vast majority of lenders -- and even some dealers -- cap those markups to curtail abuse.

Also, the fact that dealers make this profit is widely disclosed. Several years ago, the National Automobile Dealers Association and the American Financial Services Association jointly crafted written disclosures that typically appear in finance documents.

So, are consumer advocates objecting to dealers making a profit?