How Much Does a Car Dealership Spend on Consumer Credit Checks?
The cost for a car dealership to run a consumer credit check can vary widely, depending on the dealership and the credit reporting agency they consult. Typically, this cost ranges from a few dollars to approximately $30 per credit check. This fee is often passed on to the consumer as part of the financing or loan application fees. However, some dealerships may negotiate lower rates with credit bureaus based on the volume of credit checks they perform.
Cost Variability and Negotiation
It's important to note that the exact cost can significantly vary based on the specific dealership and the credit reporting agency they use. For instance, a car dealership might negotiate lower rates with a credit bureau if they regularly perform a high volume of credit checks. This can help reduce the overall cost and make the service more affordable for consumers.
Historical Perspective
Accurate cost information can be difficult to obtain due to the dynamic nature of these expenses. A decade ago, when I was employed in a loan department of a local bank, the cost of a credit check was relatively minimal due to the volume of inquiries from lenders. We had a predefined monthly fee for our credit reporting agency, and it’s likely that car dealerships operate under similar arrangements today.
Dealer Investment and Credit Load Coverage
A small car dealership may invest around one million dollars in bonds to cover their credit load. This investment ensures that the dealership can afford to cover potential losses related to credit checks and the associated financing. While a million dollar investment might seem substantial, it's a necessary expense to ensure smooth and secure financing processes for customers.
Typical Cost Structures
Many car dealerships work with credit rating agencies to manage and process consumer credit checks. These agencies often offer a flat monthly fee for access to their services. This arrangement allows dealerships to run an unlimited number of credit checks within the agreed-upon timeframe, saving them from having to manage varying costs for each individual check.
Conclusion
The cost of running a consumer credit check for a car dealership can range from a few dollars to around $30 per check, with some dealerships negotiating lower rates based on volume. For smaller dealerships, a substantial investment may be required to cover potential credit load risks. Understanding these costs and the typical arrangements between dealerships and credit rating agencies is crucial for consumers and car dealerships alike.
Key takeaways:
The cost of a credit check is typically passed on to the consumer as part of financing or loan application fees. Dealerships may negotiate lower rates with credit bureaus for high-volume credit checks. Small dealerships might invest around one million dollars in bonds to cover credit load risks.