Quote:
Originally Posted by AlmondJayRoM3
Quote:
Originally Posted by M4-CPA
Just purchased a vehicle, and signed my contract at 6%. I just refinanced 3 days later at 2.75% through my credit union.
This leads to me to wonder. Are dealerships incentivized to put buyers in a higher rate, even if the buyer would typically qualify for a better rate?
If dealership are compensated for putting buyers in higher rates, are dealerships then dis-incentivized when buyers turn around and refinance their loan a week later?
I’m simply curious, I have no idea the true financial relationship that dealerships have with the banks.
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The practice is called the finance reserve or dealer reserve. Its why some dealers are willing to offer lower prices on the car if you go through them from financing. Best way to do it is to have financing already figured out through your bank or credit union and to treat car price negotiation and payment terms as two separate transactions. That is unless they are offering some special finance rate.
As to whether refinancing can hurt the dealer, the answer is yes. Typically the finance reserve is paid to the dealer in installments over the life of the loan and stops when you refinance.
Additionally, when financing through the dealer, there are sometimes prepayment penalties involved. Best to review terms of the loan. |
No prepayment penalty on my loan here in NH