AFSA president and CEO Randy Lively was a speaker for a December 2nd Consumer Federation of America (CFA) panel on vehicle financing held during CFA's annual Financial Services Conference. Other panelists were Stuart Rossman, director of litigation for the National Consumer Law Center and George Rose, vice president, customer relations for Fitzgerald Auto Malls. The panel's moderator was Eric Rodriquez, director of National Council of La Raza's Economic Mobility Project.

All three panelists directed their remarks toward addressing consumer group concerns about the rate differential between the price paid by assignees to purchase financing contracts from dealerships and the Annual Percentage Rate (APR) paid by the consumer. Vehicle financing, said Lively, has "an astounding amount of variability," given the consumer's many options related to vehicle choice and financing. For example, someone buying a vehicle has access to both direct lending via a bank, credit union or finance company, as well as to indirect financing from a captive automotive finance company or other financial institution.

Thanks to growth in technology and capacity within the vehicle financing industry, a greater variety of financing arrangements now exist and more consumers have access to credit than in the past, said Lively.

Dealership financing offers several advantages for the customer, he said, including the convenience of one-stop shopping. He also noted that 1) fierce competition and other external factors have considerable influence on pricing and 2) the Annual Percentage Rate (APR) and terms for payment are negotiable, just like the price of the vehicle.

Lively also mentioned "Understanding Vehicle Financing," the consumer brochure produced jointly by the AFSA Education Foundation and the National Automobile Dealers Association in cooperation with the Federal Trade Commission.

Rose said concerns about rate differentials could be addressed with a three-part solution: 1) fair competition, 2) disclosure and 3) transparency. Dealers do need to be fairly compensated for their services, he said, adding that the flat fee system advocated by some consumer groups could cause problems. The "bad guys" will create new charges, he said, and find other ways to get around this system to obtain compensation equal to previous interest rates.

Rossman provided a historical overview of rate differentials, describing it as a practice with different names depending upon the party's relationship to the vehicle financing transaction. He also gave some background on related legal cases in which he has been involved. "What's not being disclosed is the rate differential," he said. "Whether or not this is a deceptive trade practice has not been specifically answered."

"Litigation is not the best way to get systemic change," said Rossman, "but we are making progress and we are not done yet."