Dealers don't like it, but they must face the facts: Just about all the secrecy is gone from the retail auto business. The lawsuits in five states that attack loan markups - and the resulting national publicity - threaten the finance reserve, which has been a source of income for as long as any of today's dealers have been in business.
It's time to get over it and move on.
Earlier, dealers lost the confidentiality of their invoice prices. Suddenly, those prices were on the Internet. Then it was the holdback, that sacred built-in profit that in tough times was the difference between red ink and black ink on some dealers' financial statements. Most buyers don't understand the holdback, but they know it amounts to several hundred dollars on a new vehicle.
The loan markup - the extra one, two or three percentage points that the dealer adds to the rate quoted by the finance source - is not a victim of the Internet. In fact, it's not even a victim of the courts. Yet.
But even if the courts uphold the loan markup, the cat is out of the bag. Buyers know about it, and it will become part of the bargaining process. It no longer belongs solely to the dealer. Informed consumers will learn to shop for car loans.
Losing most of the finance income will hurt some dealerships severely. Fortunately for those dealers, the lawsuits likely will not be resolved any time soon, and it will take a while for most consumers to catch up with the disclosure about finance reserves.
So there is time for dealers to develop new business models that don't depend on fat finance reserves. It may be painful that customers know so much about the dealer's business, but an informed consumer who knows the dealer has nothing to hide will be a trusting, loyal customer.