“Add-on” auto finance plan gets a “D” for deception
Buying a car can be expensive. So when you hear there’s a service that can save you on financing, you might be all ears. Well, you’ll also need to be all eyes, because some companies say one thing while the paperwork says something different. Case in point: a biweekly payment plan offered by National Payment Network (NPN) at dealerships such as the Matt Blatt Dealerships in New Jersey.
These companies claimed NPN’s auto add-on plan could help customers pay off their loans faster and save money on interest payments, all with no upfront fees. Okay, so where’s the catch, you say? Right here, says the FTC: Matt Blatt Dealerships and NPN failed to tell customers the total cost of the add-on service or that the cost often outweighed the savings the service provided.
Here’s how the plan worked: People made biweekly payments to NPN, and NPN made monthly payments to the financing company on the person’s behalf. Through this plan, people paid more money toward their car loans more quickly, which eventually saved them money on interest. But according to the FTC, many people paid in more than they saved: NPN took an enrollment fee of $399.00, as well as a processing fee of $2.99 for each payment and a $25 cancellation fee, which many people paid even if they ‘cancelled’ because they had completed NPN’s plan. These fees added up to more than $775 on a standard, five-year car loan. The FTC says these fees more than offset any savings for many people, and many others didn’t end up saving what they were told they would.
As part of the settlement with the FTC, NPN is providing customers with $2,475,000 in refunds, and will be barred from giving people only half the story about savings in the future. Matt Blatt Dealerships will be under a similar order, and will give up the commissions it received for selling NPN’s payment plan.
If you’re interested in financing a car and want to pay off your loan early to save on interest payments, you may be able to do so for free. Check out Financing a car? Ask about pre-payment penalties for more information.