Auto dealer discrimination allegations highlight need to know rights, loan options

A row of cars for sale in front of the glass wall of an auto dealership.Image: A row of cars for sale in front of the glass wall of an auto dealership.
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Allegations that a Maryland-based auto dealer charged illegal fees and discriminated against Black and Latino customers make it easy to see how car shoppers can get cheated on auto financing.

In addition to hitting customers with hundreds or even thousands of dollars in “junk” fees, the dealer allegedly saddled Black and Latino people with higher financing costs, according to an Oct. 18, 2022, Federal Trade Commission complaint.

Key takeaway: The allegations against the dealer are a serious reminder to guard your rights and know your options when it comes to dealer auto financing.

Guard against unfair auto loans

The FTC accused Passport Automotive of charging unnecessary fees for things like certification, reconditioning and inspections that it claimed were required. If you’re feeling pressured or even just excited about getting a car, you might be more vulnerable to aggressive or shady sales tactics.

What you can do

  • Know your rights. Dealers can’t sneak extra fees into your deal or lie about them.  
  • Take control. Explore all financing options before you head to a car lot. Learn what the best places for a car loan might be for your situation — especially if you have credit challenges — and shop for the best deal possible. Dealership financing might not be your best bet.  

Recognize and report discrimination

The federal Equal Credit Opportunity Act makes it illegal for dealers and lenders to use race, sex, disability, gender, sexual orientation or any other protected trait to provide an auto loan on different terms than they’d offer a similarly qualified borrower.

What you can do

Getting out of a bad car loan

If you have a loan that you’re unhappy with, refinancing your car loan could make sense. Technically, you can consider refinancing at any time — even within the first three months of your loan — though you may need to wait at least until all paperwork on the sale goes through.

What you can do

  • Crunch the numbers. But before going this route, consider the costs carefully. Check to make sure your contract doesn’t have a prepayment penalty, which could be costly. Refinancing your car loan could help you save money if you can secure a lower interest rate. If you can’t find a lower rate, a loan with a longer repayment period could trim your monthly payment to something more affordable. Using an auto refinance calculator can help you figure it out. Just be aware that stretching out your payments means you’ll likely pay more interest overall.
  • Shop carefully. Before you look for a new loan, check first with your current lender to see if it may be willing to refinance your loan. If that’s not an option, look for opportunities to apply for prequalification for a car loan with various lenders so you can compare offers and get the best loan possible for your needs and budget.
  • Watch for auto loan refinancing rip-offs: Don’t be fooled by companies that promise to lower your car payments after you pay them upfront. Scammers can simply take the money and do nothing to help you.  

About the author: Brad Hanson is a senior editor at Credit Karma. His 30 years of experience in print and digital media includes work for the Los Angeles Times-Washington Post News Service, and Polyvore. Most recently before… Read more.