Caps on dealer markups: In most low-income car purchase transactions, the dealer arranges the financing in addition to selling the car. Dealers typically contact prospective lenders and present the consumer’s financial information. Lenders then will inform the dealer on what terms they will be willing to lend to that consumer. Often dealers will have consumers enter into financing arrangements at a higher interest rate than the con- sumer actually qualifies for. The dealer keeps most of the extra money that will be paid by the consumer due to the higher interest charges. Consequently the dealer has no inclination to find a low interest.
