The used car industry is booming right now and dealerships are expecting a strong winter quarter as well. That's because a lot of late-model used cars are expected to hit the market. But if you're looking for a new car, a consumer advocacy group says you should look out for bad deals.
"Complaints about auto lenders are on the rise," said Emily Rusch, Executive Director of the California Public Interest Research Group. "Between March and July of this year there were more complaints from consumers about auto loans and leases than at any point in the Consumer Financial Protection Bureau's 8-year history."
Rusch just authored a report that analyzed complaints about auto lending and leases made to the CFPB. The agency recorded 2,800 complaints in the first five months of the pandemic, more than any other 5-month-period ever, according to the report.
The report also looked at the top 15 auto lenders across the U.S.
"Eight of them have also had enforcement actions taken against them recently," Ruiz told our sister station NBC Los Angeles. "So they show that there has actually been violations of the law or rules that need to be addressed as well."
The CPIRG's report comes as auto sales are starting to bounce back after COVID-19 shutdown dealerships and manufacturers through spring. Rusch said people are looking to buy cars to avoid public transportation or ride sharing.
"There are 810,000 more than expected that will be coming off lease, or from rental car de-fleeting in the last four months of the year," said Pat Ryan, CEO of CoPilot.
That means dealerships will be pushing to sell, so Rusch is advising consumers need to take a close look at all the financing options offered to them.
"Looking at things like add ons, extended warranties, that customers realize actually weren't a good deal," said Rusch. "Yoyo financing is something we see where they think they've signed on for one interest rate and it turns out it was another."
Shoppers should look for things that would lengthen the term of the loan or jack up monthly fees, Rusch said.
"For so many people transportation is critical to economic security," said Rusch. "So we want to make sure people can keep their cars and there are fair rules for repaying those loans that they already have."
Rusch said shopppers should know what they can can spend, and look for loans that offer flexibility in case of job loss. They should also look for fancing deals from their bank or credit union.