Assemblymember Susan John (131st District) said she received an advisory from the NYS Superintendent of Banks. It is designed to provide consumers with useful information about the pricing of auto loans and leases that are arranged through third parties. "As you may be aware," she said, "many lenders with active retail lending operations have developed relationships with third party loan originators, including automobile dealerships."

Consumers with complains concerning a bank or licensed lender in New York state should contact the Banking Department's Consumer Complaint Hotline at 1-800-522-3330 or website, at www.banking.state.ny.us and click on "Consumer Services."

Many lenders with active retail lending operations have developed ongoing relationships with third party loan originators, including automobile dealerships. These relationships provide the lender with new business opportunities to promote their loan products. According to Federal Reserve figures for 1998, there were more than $450 billion in car loans outstanding in America. In 1999, according to industry surveys, about half of the 17.7 million new vehicles expected to be sold were financed, with more than 75 percent arranged through car dealerships.

For many consumers, after their homes, a car purchase may be the largest purchase they will ever make. Yet, there is much about the process of financing the purchase of a car that the average consumer is unaware of. This advisory is designed to provide the consumer with useful information about the pricing of auto loans and leases that are arranged through third-party dealerships.

Car dealers arrange car loans and leases by collecting credit information from the customer and submitting it to one or more lenders - major banks, the finance arms of major automakers, even local credit unions. In the case of a car loan, the lenders typically analyze the customer's credit history and arrive at a minimum interest rate, called the "buy rate," at which they would be willing to finance the purchase. This figure is then communicated back to the dealer.

If the dealer quotes the minimum rate to the customer and the customer accepts it, the dealer immediately sells or "assigns" the loan to the lender, which will typically pay a small flat fee for arranging the paperwork. However, a dealer may elect to impose a markup to compensate it for the expense involved in offering consumers the convenience of dealer-arranged financing, in which case the dealer will quote a higher interest rate to the customer. If the customer accepts it, the dealer sells the loan to the lender and collects from the lender, all or a portion of the cash value of the difference between the buy rate and the higher rate set by the dealer, depending upon the arrangement between the lender and the dealer. Some lenders limit the number of percentage points a dealer can add to the loans they finance, and some do not.

State and federal law requires that consumers be informed about the interest rate and total finance charges that they are paying, but there is no requirement that dealers or lenders specifically disclose these markups. Additionally, a lender might quote a higher rate to a consumer who approaches it directly, than it would offer if the loan were arranged by a third party; however, the dealer add-on may end up eliminating the advantage to the consumer of obtaining the loan through the third party.

As in the case of institutions that make mortgage loans, under certain circumstances the Banking Department will hold companies responsible for violations of fair lending laws that arise from pricing decision may by third parties that arrange automobile loans and leases. New York state's fair lending law prohibits discrimination by a creditor against a loan applicant because of race, creed, color, national origin, age, sex, marital status, or disability.

Fortunately, consumers who know their creditworthiness and the rates available from other sources can negotiate the terms and conditions of an auto loan or lease. Following are some suggestions for getting the best deal:

•Before shopping, check with a bank, a credit union or an internet site to learn what rates they offer. You can compare auto loan rates by visiting the New York State Banking Department's website at: www.banking.state.ny.us. Rate information is updated monthly.

•Ask credit agencies for your complete consumer credit history.

•Take note of the annual percentage rate the dealer offers, not just the monthly payments.

•Bargain for a lower rate; the dealer sets it and can change it.

•Never sign blank loan documents even if that delays driving the new car home.

If you have a complaint concerning a bank or licensed lender in New York state, contact the Banking Department's Consumer Complaint Hotline, at 1-800-522-3330, or visit their website at the address indicated above, and click on "Consumer Services."