Feb. 3 -- Not everyone knows that dealerships earn a profit when they arrange loans for customers to buy vehicles.
When a dealership submits a credit application on behalf of a car buyer, a bank or finance company quotes an interest rate based on the customer's creditworthiness.
The dealer then can mark up the interest rate, usually three percentage points, which raises the payment. A dealership can make $1,000 or more, depending on the size of the loan.
Now, some consumer groups want to stop the practice, saying a flat fee would be fairer. In California, a ballot initiative would limit the fee to $150 per loan.
But that would hurt many dealerships because in a competitive market, when dealerships don't make much on the sale of the vehicle, the profit from arranging loans and insurance is all they have.