Most consumers purchasing vehicles from dealers require a loan, which the dealer typically arranges on their behalf. In this process, the dealer manages the financing application from start to finish, controlling both the procedure and the disclosure of information at each stage.
Ideally, consumers benefit from the dealer’s expertise and access to multiple lenders, increasing their chances of securing a suitable loan. However, many consumers misunderstand the dealer’s role, assuming the dealer is acting in their best interest when, in reality, dealers are compensated by lenders for bringing them business.
Dealers often submit a consumer’s credit application to multiple lenders and receive various offers with different interest rates and terms. Instead of presenting all options, a dealer may recommend a financing option that benefits the dealer the most, such as one from a lender offering a higher commission to the dealer (also known as kickbacks). While this is not illegal as long as the dealer provides truthful information, it can lead consumers to miss out on better rates.
The real issue arises when dealers deliberately withhold better financing options available to a consumer. A dealer may know a consumer qualifies for a lower interest rate elsewhere but steer them toward a lender that offers higher commission for the dealer.
The Motor Vehicle Dealers Act (MVDA) and the Consumer Protection Act (CPA) require dealers and salespersons to conduct business with honesty and integrity, and to be clear and truthful in describing products, services and prices related to a vehicle trade, including financing.
Before signing your contract, check the bill of sale for disclosure of the dealer or salesperson receiving commission from the bank for facilitating the loan and ensure the dealer has presented all available rates.
Click below to access the complaints form to report non-compliant dealers.
