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Old 08-15-2013, 06:48 AM
 
176 posts, read 403,681 times
Reputation: 96

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OK- so I have negotiated a price on a certified pre owned vehicle. Plan to borrow say 15k for it. Dealer says I am getting 1,000 off price by doing dealer financing but promises to match or beat the rate I have shopped for of 2.5% from my credit union (a bank on their list of lenders btw).

Get to the table and surprise surprise the rate is now 4.3%. Finance guys (playing good cop now) acts angry that the salesman and explains how he will make it right. The difference in total payments between a 15K loan at 2.5 (5 years) and a 15k loan at 4.3 is aprox $825 over the life of the the loan. He offers to subtract an additional 825 off the sales price but keep it a 4.3. I do all the math and agree.

I am also thinking, what keeps me from going back to my credit union in the first month of the loan and seeing if they will re-fi my car loan, thus getting the 850 dollars back twice- once from the dealer and then again by changing the loan to the lower rate?

Also- is it true that if you satisfy the loan within the first few months the finance dept. makes no commission? FYI there is no pre-payment penalty on this loan. The finance guy was saying this to me and I have also heard it before elsewhere.

I like to think I didn't get scammed here, but I'm smart enough to know that dealers don't do things that are not in their interest.

Good news is if I really did get scammed I can probably pay off the loan in a few months if need be.

Thoughts?
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Old 08-15-2013, 06:56 AM
 
Location: East of Seattle since 1992, 615' Elevation, Zone 8b - originally from SF Bay Area
44,104 posts, read 80,155,784 times
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Yes, you can re-finance with the credit union, I have done that before, buying on Saturday and refinanced Monday. I would not go back to that dealership for service though, they will be mad at you. The "scam" is that the dealer actually keeps the difference between their lender's interest rate and what they charge you. For example, if you qualify for their bank's best rate of 3%, and they charge you 4.25%, they keep the 1.25%. That probably works out to more than the $850 they knocked off the price.
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Old 08-15-2013, 07:33 AM
 
Location: Mount Laurel
4,187 posts, read 11,867,228 times
Reputation: 3512
Are you sure there is no pre-payment penalty? Don't go by what they tell you. Look at the documents you signed.
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Old 08-15-2013, 08:02 AM
 
2,341 posts, read 11,971,078 times
Reputation: 2040
If you have to ask us, walk away.
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Old 08-15-2013, 08:16 AM
 
Location: Grosse Ile Michigan
30,702 posts, read 79,364,238 times
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They may also tack on origination fees, and other fees, costs or charges that they keep. Car dealers often make more on the finance deal than they make on the sale of the car. That is why it is a bad idea to walk into a dealership and proudly announce that you will be paying cash for the car. They will not give you as good a price as they will if they think you ae going to finance it. I know someone who takes this to the extreme, filling out a credit application etc and then finding something in the loan agreement to get angry about and then announcing he will just pay cash. Meanwhile he has negotiated a lower price based on their belief they will make a bunch of money on the financing. While I woudl not advocate that kind of deception, he claims it works and he gets lower prices.
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Old 08-15-2013, 08:25 AM
 
Location: Cold Springs, NV
4,614 posts, read 12,214,826 times
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Quote:
Originally Posted by Coldjensens View Post
I know someone who takes this to the extreme, filling out a credit application etc and then finding something in the loan agreement to get angry about and then announcing he will just pay cash. Meanwhile he has negotiated a lower price based on their belief they will make a bunch of money on the financing. While I woudl not advocate that kind of deception, he claims it works and he gets lower prices.
I did something similar with my truck in 01. We had agreed on the price prior to ordering, and then they promised me another $1000 off at the signing. I'll never forget the look on his face when we told him we'd just write a check for the full amount.
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Old 08-15-2013, 08:30 AM
 
Location: Pittsburgh area
9,912 posts, read 24,534,437 times
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One thing I know is I'll be on the lookout for all these tricks when I finally buy another car. It's been 13 years....

OP, just make sure there's no early payment penalty in the documentation.
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Old 08-15-2013, 11:44 AM
 
4,500 posts, read 12,273,100 times
Reputation: 2901
Most dealers will add up to 3% on the APR, you might very well have gotten a 1.3-1.99% APR that they inflated to 4.3% APR, by giving you the instant gratification they're basically hedging their bets on you not wanting to go through the hassle of refinancing the loan.

If you have an approval through your CU for a lower APR, go ahead and re finance it if they'll do so, you save even more and the deal you ended up with is even better.

Oh, and they also get a flat commission from the finance company that could very likely have made up for the $825 alone, so essentially they're gaming you to make more money, while you don't gain from it.

It isn't your job to make sure they make money, do what you can to get a better deal.

And no you didn't get scammed, especially if it's a reputable dealer (not a buy here pay here kind of place), most auto financing is Simple interest with no early payoff penalty, so you should be fine, just refinance immediately.
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Old 08-15-2013, 12:22 PM
 
176 posts, read 403,681 times
Reputation: 96
I am in a no pre-payment penalty state, so in the clear there. And my loan docs confirm that.

I guess it is possible thatthey could have found something less than 2.5 for me and were just not revealing that. REgardless, since I know I can get 2.5 on my own I am happy with that.

In essence I think the dealership did me a favor. They paid me a grand to finance through them, paid me 850 bucks to compensate me for taking a higher rate, then I will save an additional 850 by doing the refi as soon as a i get the official documents in hand from the dealer's bank (TD bank). If they can still make money on that deal good for them.

Someone mentioned before not to go back there for service or they will try to screw me. It is a very old dealer in the area (like 90 years in business) do you think that is a possibility?
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Old 08-15-2013, 12:23 PM
 
Location: CFL
981 posts, read 2,697,697 times
Reputation: 1094
Check with the credit union. I had a similar setup. The special rate the Credit union was offering was for a new car only. Once I drive it off the lot and try to refi they considered it a used car and the special rates no longer applied. Their used car rate was still lower then the dealership arranged financing tho
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