A new study has found that car dealerships’ markups on auto loans contributed to inflation in the US. The study, conducted by researchers at the Center for Economic and Policy Research, found that car dealerships charged an average markup of 1.8% on auto loans, resulting in an average overcharge of $1,818 per loan.
The markups on auto loans have been a long-standing practice in the industry, with dealerships typically receiving a commission from lenders for negotiating the loans. However, the study found that the markups were not always disclosed to customers, leading to an unfair and opaque pricing structure.
The findings of the study add to concerns about rising inflation in the US, which has been fueled by a combination of supply chain disruptions, labor shortages, and increasing demand from consumers. Inflation has been a major issue for the US economy in recent months, with the consumer price index rising at its fastest pace in nearly four decades.
According to data from the Bureau of Labor Statistics, the price of used cars and trucks increased by 10% in September 2021 alone, contributing to a 31% increase over the past year. This surge in prices has been attributed to a shortage of semiconductors, which has disrupted the production of new vehicles and led to increased demand for used vehicles.
The inflationary pressures in the auto industry are also affecting the price of auto insurance, which has been rising steadily in recent years. According to the Insurance Information Institute, the average annual cost of auto insurance in the US was $1,190 in 2020, up from $1,004 in 2015.
Overall, the findings of the study suggest that car dealer markups have contributed to inflation in the US, and that greater transparency and accountability are needed in the auto lending industry. As policymakers grapple with the challenges of rising inflation, the role of the auto industry in contributing to these pressures is likely to come under greater scrutiny.
