07-07-2021, 08:18 PM | #1 |
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Dealer Incentivized to Finance at Higher Rate?
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. |
07-08-2021, 10:45 AM | #2 |
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Uhhh.. yes they absolutely are. They get a kickback from the bank when they add points to your interest rate. There are laws governing how many points they can add ( I believe it used to be 3%, but I could be wrong). It pays to do your homework when it comes to getting the best interest rates!
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07-08-2021, 11:10 AM | #3 |
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Based on your refinance rate, 2.75 I'm guessing you have excellent credit.... so that dealership screwed you with 6%....
when you have excellent credit you are in control... get pre-approved from a credit union / bank before you go, so you know you rate before signing anything. really surprised you signed before knowing your options, but live and learn. |
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07-11-2021, 12:13 PM | #4 | |
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07-17-2021, 12:34 PM | #5 | |
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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. |
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07-19-2021, 04:52 AM | #6 | ||
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