The CFPB has unveiled its latest “Know Before You Owe” initiative aimed at consumers shopping for an auto loan. The new initiative was accompanied by the CFPB’s release of a report entitled “Consumer Voices on Automobile Financing” that is intended to share the CFPB’s research about how consumers approach decisions about auto financing.
The CFPB’s overall objective is to help consumers make informed choices about financing when buying a car by encouraging them to do the following:
- Shop for and compare financing options
- Look beyond the monthly payment and consider the total cost of financing
- Be aware of situations and financing features that could result in “costly surprises down the road”
Know Before You Owe. The key component of the initiative is a shopping sheet that is intended to assist consumers by indicating which financing factors are negotiable (vehicle price, add-ons, fees, down payment, trade-in value, interest rate, loan term) and allowing them to compare the total cost of multiple loan offers.
The shopping sheet is also included in a guide entitled “Take control of your auto loan” that is intended to walk consumers through the auto financing process. (The guide does not address leasing.) The guide contains sections on (1) budgeting, (2) different types of auto financing (such as bank loans, dealer-arranged financing and “buy here pay here” dealer financing), (3) shopping for an auto loan (which includes advice encouraging consumers to checking current interest rates, consider the impact of an existing loan on a trade-in, and “think about optional add-ons ahead of time”), (4) negotiating an auto loan (which includes advice encouraging consumers to know what is negotiable and negotiate to lower the total cost and not just the monthly payment), and (5) closing the deal (which includes advice encouraging consumers to confirm that the documentation reflects what was negotiated).
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