Magazine article Mother Jones

No Credit? Big Problem

Magazine article Mother Jones

No Credit? Big Problem

Article excerpt

INTEREST RATE MARKUPS: Used-car dealers often act as middlemen between the buyer and a financier like Credit Acceptance Corp.The financier sets a minimum interest rate based on the customer's financial circumstances and lets the dealer mark it up and pocket the difference as compensation. (Most dealers shop around in search of the biggest markup.) In effect, this means you are likely paying the dealer a kickback on the lender's behalf. What's more, studies have found that dealers impose higher markups on black and Hispanic customers relative to white customers with comparable credit.

CREDIT KINKING: By exaggerating your income and assets, a car salesperson can "kink"your credit to secure a more aggressive deal.The dealer gets paid when the lender buys your finance contract. You, on the other hand, are stuck with a bigger loan than you can afford-one that may soon show up in some Wall Street bond offering. …

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