The Best Possible Deal?
(cont'd)

The only two services that the car dealer performs are, No. 1, to find a source of financing, and second of all, to take care of the paperwork. And for that, we think they're entitled to a fee, a reasonable fee. But not to a kickback that might exceed $1,000,says Steve Brobeck, president of the Consumer Federation of America, which is the largest consumer advocacy group in the United States.

In a recent report, the Consumer Federation of America cited a number of well-documented studies indicating that the people who paid the most in undisclosed interest charges to car dealers were those who could afford it the least. It also said that the practice took advantage of the least sophisticated buyers, especially Hispanics and African Americans.

Car dealers size up the customer. And if the person is obviously well educated and is carrying a copy of Consumer Reports, they're not going to try to mark up that car loan rate, says Brobeck. If, on the other hand, they're less affluent, they don't appear to be well educated and they're a minority, they may very well try to overcharge them.

Those statements are absurd. They are absolutely ridiculous, says Ritchey. But that’s not the way Barbee and Ewing remember it. They even had a name for that kind of customer: the less fortunates.

To categorize the ideal customer that you want to get your hands on, says Ewing. Those are the people that you made your living off of.

What was his idea of a perfect customer? About a 40- to 50-year-old black person, says Ewing.

Had the income. Had the money to afford it. But was kind of shaky on his credit and you've got that person. He's gonna make a big lick, adds Barbee. We call it the big lick.

The lick was so big on Mildred Conley and her husband - nearly $7,000 - that Covington Pike Toyota made more money packing additional interest into their loan, than it did selling them the used Sequoia.

But even if the Conleys had known about the $7,000 in additional finance charges, they had a poor credit history, and they were at the mercy of the dealership.

That $7,000 in dealer reserve was due to a 4 percent markup. But lawsuits against the big finance companies have led them to try and rein in the dealers -- capping markups at 2 or 3 percent.

Even one percentage point is really too much from our perspective, says Brobeck. We have every reason to believe that there are some car dealers working with lenders who are charging in excess of 3 percentage points.

Car buyers, he says, should be told exactly how much the dealer is making on their loan.

They do think that when they go to a car dealership and they ask the car dealership to find financing, that they're not going to be ripped off, says Brobeck. There’s no question that that’s a rip-off.

Covington Pike Toyota and the United Auto Group say they've reached a tentative settlement of the lawsuit against them. The details are not yet public.

After the suit was filed, the dealership changed the paperwork that it gives to customers. There's now a clause that says they "may or may not receive income" arranging loans. The amount they make? That's still a secret.

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