The legal interest rate in Kentucky is 8 percent annually. But car dealerships across the Commonwealth of Kentucky regularly charge much higher rates, often greater than 29 percent.

In many cases, car dealers can lawfully collect finance charges if a car is sold on credit. An installment sale contract, often used to finance car purchases, is where the cash price of the item sold, plus a component known as a “time-price differential,” or finance charge, is paid over time through installments. This is called the “time price doctrine.” Thus, a seller can charge any price, so long as the price is repaid in installments, even if the sales price includes a charge that, in other cases, would be illegal.

Fortunately, Kentucky has enacted legislation to cap finance charges for vehicle sales. In Kentucky, this statute is known as the “Motor Vehicle Installment Sales Contract Act,” and limits the finance charge to between $11 and $15 per $100 financed annually, depending on the age of the vehicle.

Yet, despite the law, car dealers continue to contract for and collect illegal finance charges, often disguising unlawful “interest” charges as “document” or “processing” fees. If you believe you were charged unlawful interest or other fees when purchasing your car, contact us for a consultation.