Auto Dealer Loan Intermediation: Consumer Behavior and Competitive Effects

Andreas Grunewald, Jonathan A. Lanning, David C. Low and Tobias Salz

No 28136, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper studies the intermediation of auto loans through auto dealers using new and comprehensive administrative data. The arrangements between auto dealers and lenders incentivize dealers to increase loan prices. We leverage details of the corresponding contracts to demonstrate that many consumers are less responsive to finance charges than to vehicle charges. Taking this behavior into account, we estimate an equilibrium model of dealer price setting and lender competition. We explore counterfactuals where dealers have no discretion to price loans and final rates are set by lenders instead. We find large gains in consumer surplus from such a policy.

JEL-codes: G41 G51 L0 L13 L5 L62 (search for similar items in EconPapers)
Date: 2020-11
New Economics Papers: this item is included in nep-com
Note: IO
References: Add references at CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://www.nber.org/papers/w28136.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:28136

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w28136

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().