Amid the industry’s current flap with the Consumer Financial Protection Bureau over dealer reserve, there remains a bright spot: The auto finance business is profitable and volumes are growing.
But that begs a question: Could today’s prosperity end up sabotaging the industry in its struggles with the CFPB?
In good times, lenders and dealers might be more inclined to give up on dealer reserve -- after putting up a decent fight -- because they’re confident they can make up for it on volume, on F&I products and on other profit centers.
But that would leave them vulnerable over the long haul. During the next downturn when volumes are shrinking, flat fees or other limits won’t seem as palatable.