SALT LAKE CITY — Over 120 Utahns will have a bit more money in the bank after they were taken for a ride by a national auto finance company.
While the return of their funds is welcome news, what was it that made these loans devious, and how can you avoid that same fate?
Utah and 39 other states will deliver $694 million in canceled debt to consumers after an investigation into Credit Acceptance Corporation found their lending practices were setting consumers up to fail.
“What they did is they offered these people a chance to recover their credit scores by getting an auto loan, but then entered that auto loan first with lots of additional fees and service products that these people didn’t really need," says Katie Hass, director for Utah’s Division of Consumer Protection. "And then they charge really high interest rates, and they targeted people particularly that they knew were probably not going to be able to pay back those loans.”
Hass says weighing the cost of the principal and interest is key, and paying down the principal each month can make or break you.
Another red flag to look out for: are they hitting you with add-ons?
“Are they offering you gap insurance? Are they offering you a service product, like you can bring it in 15 times for oil changes or whatever it might be? Do you really need that?" says Hass. "And if they’re building in these add-ons or worse, making them mandatory to purchase that car, then maybe that is not a dealership you want to work with.”
In 2024, the Federal Trade Commission pushed for the Combating Auto Retail Scams rule.
It would prevent dealers from making misrepresentations, requiring consumer consent before adding additional fees.
But the rule was vacated and never went into effect.
“If you’ve ever stayed and waited for the financing guy to come in and you came into the dealership at 2:00 in the afternoon and then they said at 5:00 you’d be out of there soon and now it’s 9:00 or 10:00 and then you get the news that the price isn’t what you thought it was, that wouldn’t have been okay under that rule. Effectively, you couldn’t increase prices without direct consumer consent,” says Consumer Federation of America’s director of financial services Adam Rust.
Rust says you don’t need to take the financing that the dealer has.
Often the dealer receives a markup, so there’s a chance you will actually be paying more than your credit might require. Check out a bank or credit union ahead of time and figure out what terms you qualify for, then stick to your plan once you’re ready to buy.
“If you’ve agreed to a trade-in, stick with it; don’t let them tell you that they’re going to change it at the last minute,” says Rust.
Above all, plan ahead of time and don’t go over that budget.
“Make sure that you’re still doing your research. Go look and find out the true value of that car. Make sure that you’re not paying more in principal for that car than that car is actually worth, as in if I bought it today, could I sell it tomorrow for roughly the same price?” says Hass.