Expensive car loans cheating consumers

Hidden costs boosting new car prices

Car loans that initially seem like a good deal may wind up proving costly in the long run. Motorist organisation FDM and independent banking portal Mybanker say that loans for less than 100,000 kroner to purchase the popular mini-cars are especially problematic.

Although dealers offer competitive interest rates of 3 percent or lower, the cost of taking out the loan can often be as high as 15,000 kroner on an 80,000 kroner loan, effectively raising the annual percentage rate (APR) of the loan to nearly 10 percent.

“Car dealers are behaving like loan sharks,” John Norden from Mybanker told Politiken newspaper.

Have I got a deal for you
Allan Gunner Christensen from FDM said that dealers are making such a small amount of profit on the cars themselves that they are making up the difference by establishing their own loans and charging exorbitant interest rates. Christensen recommends that customers do their loan business with banks rather than car dealers.

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Jens Brendstrup, the head of the Danish car dealers' association, rejected the criticism.

“The price of a loan is a commodity," Brendstrup told Politiken. “There is plenty of negotiating room.”