Friday, September 12, 2008

Capital One survey: Americans don't know loan rates

"A majority (61 percent) of Americans who currently have auto loans do not know the interest rate they are paying on their loan, a new survey from Capital One Financial Corporation suggests. In a challenging economy, when saving money is particularly important, many consumers may be paying more than necessary and could benefit from a lower interest rate and a lower monthly loan payment by refinancing, the company notes..."
Read the rest of the article here.

Are you kidding me???

Where is Capital One getting the data for this survey?

I get beat up all the time over the interest rates. The majority of my customers want to know, and my procedure manual dictates, a full disclosure of exactly what the interest rate will be before any F&I products are mentioned.

Does this article imply that if the customer falls into the sub-prime catagory, the F&I manager might not be practicing proper disclosure? By reading this article, it appears so at least 61% of the time - right?

Would Capital One be admitting that they are buying paper from automotive dealerships who are not properly disclosing what their customers are signing?

Having a 61% portfolio ratio of customers who have no idea what their interest rate is would scare me to death.

This creates visions of an F&I Manager putting one hand over the truith-in-lending disclosures while at the same time pointing toward the bottom of the r.i.s.c. while leading the customer to just "sign right here".

Are we heading back to the "good 'ol days"?


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Profit Drivers said...

Sounds to me like Capital One Auto Financing is trying to build their weakening portfolio with some stronger paper...hence the reference to checking credit scores.

It's hard to believe that with the educated consumer these days, there is still that high a percentage of those who don't know their auto loan interest rate. My experience is the same as yours, there is severe competition with rates and the customer is all over a variance of 0.25%, 0.5%! The article seems to be a reflection of a certain segment of the market. After all, the sub-prime mortgage disaster isn't in the state it is because consumers were grinding away at interest rate negotiations! Rather, they are typically just thrilled to get approved for financing.

You mention a procedure manual...I live in Canada and we don't have a formal procedure manual. I realize business is done a little different between our countries. Where does a procedure manual come from? Is it a standard tool in every F&I office? Is it produced by the manufacturers or an independent company?

igetayes said...

Well the big problem is that the customer is so caught up in the moment they do not consider all of the facts. Most F&I departments actually film the closing process . As a x finance and insurance manager for close to 10 yrs the rate is usually the first thing talked about.I will admit that I wont harp on it once passed the discloser part. This area of buying a car is same as the rest ultimately its the buyers job to ask more about the rate. Most buyers pay a higher rate due to lack of money down,age of car,months they finance,and the amount financed in relation to book value. The credit factors in of course but several other factors play in to the A.P.R. People that own homes can hardly tell you what there rate is after being in the home past two years. The task ultimately is on the consumer to understand before they sign.

David Teves said...

Speaking of Capital One, is it just me or are their faxed "approvals" almost impossible to figure out?

"Well, your approved! All you have to do is switch cars, get more down, up the rate and get a different customer!"

Or something like that!

David Teves