WASHINGTON—The CFPB Thursday unveiled its “auto loan shopping sheet,” a step-by-step guide that’s part of the Bureau’s Know Before You Owe initiative aimed at helping consumers shop for an auto loan.
The Bureau said the shopping sheet helps consumers see the total cost of a loan and make “apples-to-apples” comparisons among loan products. The Know Before You Owe auto loan initiative also walks consumers through each step of the auto finance process to help them decide how much they can afford to borrow and what options are right for them.
“Consumers should feel like they are in the driver’s seat when it comes to financing their car or truck,” said CFPB Director Richard Cordray. “The CFPB’s auto loan shopping sheet provides a roadmap for consumers to navigate the complexities of a loan. Consumers should know before they owe when it comes to the total cost, not just the monthly payments.”
Automobile loans are the third-largest category of household debt for American consumers, behind mortgages and student loans, with almost 100 million auto loans outstanding totaling more than $1 trillion.
“Typically, consumers have obtained auto loans with 60-month repayment plans, but the length of the loans, and indebtedness, are increasing. Meanwhile, the average length of ownership of a vehicle by U.S. consumers is approximately eight years. This means the auto budgeting and financing process is being regularly repeated by many consumers, with consumers still owing on loans after they are no longer driving the vehicle,” the CFPB said.
The CFPB’s auto loan shopping sheet can be printed out and used when talking to lenders. According to the CFPB, shopping sheet allows consumers to:
- Understand the total cost of the loan, not just the monthly payment: The auto loan shopping sheet helps consumers keep track of and compare the factors that make up a loan’s total cost. This includes the length of the loan, interest rate, optional add-ons, and certain fees.
- Comparison shop: According to the National Financial Capability Survey, only 50% of consumers report comparison shopping for an auto loan. The shopping sheet makes clear the factors that a consumer can negotiate and compare between loan offers.
- Watch out for financing features and add-ons that could lead to costly surprises down the road: Consumers should make their loan decision with as much information as possible, the CFPB said. The shopping sheet shows how additional features, services, or add-ons can increase upfront costs.
The Know Before You Owe auto loan shopping sheet can be found at: http://files.consumerfinance.gov/f/documents/201606_cfpb_auto-loan-worksheet.pdf
The Know Before You Owe auto loan initiative can be found at: http://www.consumerfinance.gov/consumer-tools/auto-loans/