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I've dealt with car dealers 6 times in my life. Today was the 6th time. 4 out of 6 of the times were awful, but this one was the worst.
I went with my 60 year old aunt to help her buy a car after her previous vehicle (a 2014 Honda Accord) got damaged by flooding. She has no kids and her husband passed a few years ago, so I am the closest thing to a son to her. Her credit is okay, but not great. When her husband died five years ago, it left her with a lot of debt which finally got resolved. Her credit score is around 750 and there are no collections or delinquent accounts.
She picked out a 2013 Honda CRV with 40,000mi and wanted to finance it. We checked with her credit union and they said she could buy a used vehicle with 4% interest. This is their standard rate. Not bad, but not great. I helped her negotiate the vehicle down to $17,500. She was going to put $2000 cash down which was left over after insurance totaled the flood damaged vehicle.
The salesman was great and everything was going well until we get to the finance department. They run her credit (I wanted to compare rates) and tell her that the interest rate is going to be 11%. I laughed and said that her bank offers 4% and that I hoped they could do better.
He said he was going to check with his manager and the bank and see if there is anything they could do. 5 minutes later he comes out and offers 3.75% and starts this story about how he "just worked a miracle" and how "banks usually don't budge on interest" for them.
Next, he starts trying to sell her a paint protection plan, a wheel warranty, GAP coverage (useless because she is putting $2000 down), and an extended aftermarket warranty. He says the interest will be lowered to 3% if we buy all policies. I say NO to everything. Then, he gets visibly irritated and says "hey, we helped you out with interest, why can't you help us with some insurance policies?". I just tell him that my aunt wants the car, nothing else, and that the insurance policies turn a $17.5K vehicle into $20K. He was cold and rude acting the rest of the time.
I have some questions:
How can the dealer lower the interest rate after the first interest offer?
How can the interest rate be lowered by buying aftermarket warranties/insurance? Does the dealer work out something to pay the interest with the bank?
Are the bank, dealer, and aftermarket warranty/insurance companies working in cahoots?
How can the dealer lower the interest rate after the first interest offer?
How can the interest rate be lowered by buying aftermarket warranties/insurance? Does the dealer work out something to pay the interest with the bank?
Are the bank, dealer, and aftermarket warranty/insurance companies working in cahoots?
1) The dealer is not lowering anything, he's selling a loan product from the lender. The higher the interest rate loan product he can get you on, the more bonus $ he'll make from the lender.
2) He makes more profit on the insurance than on selling the lender's bonuses.
3) Not really ... the dealer is merely selling products with the highest margins.
Have you shopped around for other lenders to see if they can beat the CU's 4%?
Do not believe anything they say. And if they concede on something, they are going to try to s c r e w you back out of it later in the transaction. The biggest power you have is the power to walk.
Last time I walked I had a text from the salesman an hour later offering another $500 off. Followed by another text the next morning offering an additional $500 on top of that. I had told him before walking that the next day I was going to another dealer that had an identical car.
You see a dealer "Stealer" everyone from the top to the bottom is on the take. When a customer hits the lot they all are working to make money off you. Everyone that works there is on some sort of commission with the exception of a lot attendant. This is why Tesla didn't want anything to do with dealers they want to sell directly to the public. When they came to my state Arizona the dealers got so upset they were able to get the legislature to pass a law which bans cars being sold in my state without the use of a dealer. I don't even know if it's constitutional to even do that but the law hasn't really affected sales of Tesla's here they just have a show room here and you pay Tesla out of state they car is delivered to you like ordering online.
Dealer service departments are worse then the sales department last time I was there getting some warranty work done they tried to tell my Diesel emissions system would need to be serviced cost me $850 wasn't under warranty my truck is a year old and has 15k on it. I took it to a different dealer they had no idea what they were talking about no work needed. It was an outright scam.
When I bought my truck we got a good deal on our trade in but the finance guy like your experience was the same my credit is 850 and I had gotten a quick approval though the internet for 2% from chase bank. Went in guy says best they can do is 4% I let him go with that for awhile we worked out an extended warranty which I wanted he started at $4000 for 7/70k I told him online people said they get the same for $1700 he quickly dropped his price to $1700 I got the feeling he could have gone lower. Then when we got to sign the papers I dropped the chase bank 2% offer I had already called them they said that dealer has access to the bank they can use that offer. He wasn't too happy about that but after we got up and walked out they chased us into the parking lot and I got 1.7%.
It's almost criminal what they do in those dealers one dealer took my keys and drove my car somewhere while the sales guy drove me around the lot trying to get me to buy a truck on the spot. When I told him I wasn't interested in any of those trucks he just kept driving me around. After 30 minutes I asked how long it would take well he takes me back to the waiting room area another 30 minutes later this time I'm upset I went and demanded my keys back and my car. They had driven it into the service department where some guy was looking under the hood. I no longer turn over my keys for a trade in price quote. There was a dealer in town where they would throw your keys on the roof of the building while they tried to get you to buy a new car.
I've dealt with car dealers 6 times in my life. Today was the 6th time. 4 out of 6 of the times were awful, but this one was the worst.
I went with my 60 year old aunt to help her buy a car after her previous vehicle (a 2014 Honda Accord) got damaged by flooding. She has no kids and her husband passed a few years ago, so I am the closest thing to a son to her. Her credit is okay, but not great. When her husband died five years ago, it left her with a lot of debt which finally got resolved. Her credit score is around 750 and there are no collections or delinquent accounts.
She picked out a 2013 Honda CRV with 40,000mi and wanted to finance it. We checked with her credit union and they said she could buy a used vehicle with 4% interest. This is their standard rate. Not bad, but not great. I helped her negotiate the vehicle down to $17,500. She was going to put $2000 cash down which was left over after insurance totaled the flood damaged vehicle.
The salesman was great and everything was going well until we get to the finance department. They run her credit (I wanted to compare rates) and tell her that the interest rate is going to be 11%. I laughed and said that her bank offers 4% and that I hoped they could do better.
He said he was going to check with his manager and the bank and see if there is anything they could do. 5 minutes later he comes out and offers 3.75% and starts this story about how he "just worked a miracle" and how "banks usually don't budge on interest" for them.
Next, he starts trying to sell her a paint protection plan, a wheel warranty, GAP coverage (useless because she is putting $2000 down), and an extended aftermarket warranty. He says the interest will be lowered to 3% if we buy all policies. I say NO to everything. Then, he gets visibly irritated and says "hey, we helped you out with interest, why can't you help us with some insurance policies?". I just tell him that my aunt wants the car, nothing else, and that the insurance policies turn a $17.5K vehicle into $20K. He was cold and rude acting the rest of the time.
I have some questions:
How can the dealer lower the interest rate after the first interest offer?
How can the interest rate be lowered by buying aftermarket warranties/insurance? Does the dealer work out something to pay the interest with the bank?
Are the bank, dealer, and aftermarket warranty/insurance companies working in cahoots?
1. Its called a interest rate mark up. You got the car you want and now the finance guy is searching for the best deal on a loan. But the dealership is NOT required to tell you the cheapest loan you've qualified for and can legally pad the interest rate with a couple percentage points for themselves.
Let's say the bank or finance company says you're eligible for a 5% loan, but the finance manager tells you 7%. On a $22,000 five-year loan, that extra 2% will add an extra $1,277 to your payments. The lender is in cahoots with the dealer. It collects the extra money, keeps half for itself and sends the other half back to the dealer.
THE REASON your loan magically went from 11 t 3.75 is because you said you got another finance co wth 4%. He didn't want to lose the deal. So after "working hard for you" he came with a deal beater you couldn't walk away. And he was hoping to make it up on the upsell guarantee/warrantee/services. Which most people stupidly buy. So that's how your loan magically changed rates. If you didn't say anything that guy would of sold you the loan at 11% even though you qualified for 3.75/4%.
2. It's not. They simply get a commission on the sale of the policy. The added on policy cost is rolled into the car loan.
3. Yes. Of course they are. Dealers have preferred lenders. They als sell all these aftermarket warranties, guarantees and services to pad the profit and they get a kickback. It's probably badly not called a kick back but some bs legaleblather wording such as refund of sales equity loan commission
It's his job to turn that 17.5k vehicle into a 20k vehicle. You do understand that right? Because the total borrowed amount of the loan is subject to that loan rate. So more money for them.
Personally I don't much care how he acted as long as the total price on the vehicle I was buying corresponded to the agreed price. Btw your aunt should of walked in with her financing and made a deal on a OTD price write a check and walk out.
At that point they couldn't even run her credit.
When I buy I already have 4-5 dealers on the line. I make my offers based on OTD price and I carry my own financing. I stopped buying traditionally a while back. (Granted now that I no longer have my company I don't buy as many vehicles and I tend to buy secondhand. But they gotta be perfect shape and inspected.
Last edited by Electrician4you; 10-15-2016 at 03:51 PM..
Did you get 3% for a rate? If he can offer 3% with the junk, he can offer 3% without it.
We didn't even bother. The .75% difference would be like $200 over the period of the loan.
Quote:
Originally Posted by Electrician4you
1. Its called a interest rate mark up.
2. It's not. They simply get a commission on the sale of the policy. The added on policy cost is rolled into the car loan. Look up #1
3. Yes. Of course they are. Dealers have preferred lenders. They als sell all these aftermarket warranties, guarantees and services to pad the profit.
It's his job to turn that 17.5k vehicle into a 20k vehicle. You do understand that right?
Personally I don't much care how he acted as long as the total price on the vehicle I was buying corresponded to the agreed price. Btw your aunt should of walked in with her financing and made a deal on a OTD price write a check and walk out.
At that point they couldn't even run her credit.
I understand that they are out to make money, but I made it clear before even getting the financial paperwork started that we did not want any add-ons, just the car. He still asked, pleaded, and begged, then treated us like crap for the rest of the paperwork.
Stores like Amazon are out to make money, yet they don't treat their customers like idiots.
Hopefully Teslas will become more popular and run dealers out of business.
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