Does the Dealership Add interest to your Approved Apr

[siccrydas]

I got Approved through Cap1 for a 4.53% on a 2015 Chevy Silverado for 28,000. My question is when I go to the dealership to buy the truck and what not CAN they add on to that Apr ?

[cartwrna]

If they do the financing they very well could, I'd call Cap 1 with the vehicle information price year miles VIN etc and get a blank check sent to you, at that point you have your own financing and can go to the dealership with pride and hassle their lists price down some as well!

[cartwrna]

Dealerships can add in the neighborhood of upto 3% I believe. Then once you pay the loan off they get that extra interest on the back half of it.

[patrick00032001]

Not true, Im a finance manager at a car dealership currently, if we elect to "Bump" any rate, the lender pays us the full amount up front, now, if the customer pays the loan off or refinances the vehicle in a 180 day period, the lender will charge the dealership back for any amount that was paid to us, but there is no participation paid at the end of the loan, thats all paid up front once the deal funds.

[CH-7-Mission-Accomplished]

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@patrick00032001 wrote:

Not true, Im a finance manager at a car dealership currently, if we elect to "Bump" any rate, the lender pays us the full amount up front, now, if the customer pays the loan off or refinances the vehicle in a 180 day period, the lender will charge the dealership back for any amount that was paid to us, but there is no participation paid at the end of the loan, thats all paid up front once the deal funds.

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So how does the rebate work?  If you get 3% over the required rate for the term of the loan, do they just give you 3% of the loan amount and keep the 3% overage for all years after year 1?

If you get them 3% overage they are collecting that for up to 72 months or more.

[patrick00032001]

If your talking about the lender, yes, they keep the extra income off the note, now if the customer pays the note off early, and doesnt carry out the full 72 month note, then the lender will only net the interest income up to the point of payoff. I apologize if I read the comment above incorrectly, I was thinking about dealer reserve, which is paid once then note is sold off to the lender.

[SamsungHDTV]

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@siccrydas wrote:
I got Approved through Cap1 for a 4.53% on a 2015 Chevy Silverado for 28,000. My question is when I go to the dealership to buy the truck and what not CAN they add on to that Apr ?

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Quick answer: yes they can, and they will if you haven't shopped your rate.

Solution: go get a pre-approval at a credit union or other bank directly.

[1fstgixer]

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@CH-7-Mission-Accomplished wrote:

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@patrick00032001 wrote:

Not true, Im a finance manager at a car dealership currently, if we elect to "Bump" any rate, the lender pays us the full amount up front, now, if the customer pays the loan off or refinances the vehicle in a 180 day period, the lender will charge the dealership back for any amount that was paid to us, but there is no participation paid at the end of the loan, thats all paid up front once the deal funds.

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So how does the rebate work?  If you get 3% over the required rate for the term of the loan, do they just give you 3% of the loan amount and keep the 3% overage for all years after year 1?

If you get them 3% overage they are collecting that for up to 72 months or more.

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I have been in the car biz for a long time, there are very few lenders that will allow a dealer to "mark up" the rate 3 points, however the dealership would not get 100% of the 3%, they would get 75 maybe 80%  of the as profit. Now the fun part, if customer pays car off in 2 years instead of 5 or 6 the lender then will just charge the dealer back the prorated, per contracts and dealer agreements, basically they just go and the dealer profit back. Easy math for an example 

total mark up above approval rate is $1000. Dealer is on 75% reserve method so will get $750 of the  $1000, now we will say it is a 5 year note and it gets traded in at another dealer in 2 years, the bank will just go into the dealers account and take back the 3 years of reserve that they cannot collect, so now that dealer is out $450 of what was profit 2 years earlier....

Today most respectable dealers will sign a customer up at the buy rate and the lenders pay the dealers a "flat fee" that is not charge back able after 90-180 days...but those flats are not big money...just secure income for the dealer.

[StartingOver10]

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@1fstgixer wrote:

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@CH-7-Mission-Accomplished wrote:

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@patrick00032001 wrote:

Not true, Im a finance manager at a car dealership currently, if we elect to "Bump" any rate, the lender pays us the full amount up front, now, if the customer pays the loan off or refinances the vehicle in a 180 day period, the lender will charge the dealership back for any amount that was paid to us, but there is no participation paid at the end of the loan, thats all paid up front once the deal funds.

---

So how does the rebate work?  If you get 3% over the required rate for the term of the loan, do they just give you 3% of the loan amount and keep the 3% overage for all years after year 1?

If you get them 3% overage they are collecting that for up to 72 months or more.

---

I have been in the car biz for a long time, there are very few lenders that will allow a dealer to "mark up" the rate 3 points, however the dealership would not get 100% of the 3%, they would get 75 maybe 80%  of the as profit. Now the fun part, if customer pays car off in 2 years instead of 5 or 6 the lender then will just charge the dealer back the prorated, per contracts and dealer agreements, basically they just go and the dealer profit back. Easy math for an example 

total mark up above approval rate is $1000. Dealer is on 75% reserve method so will get $750 of the  $1000, now we will say it is a 5 year note and it gets traded in at another dealer in 2 years, the bank will just go into the dealers account and take back the 3 years of reserve that they cannot collect, so now that dealer is out $450 of what was profit 2 years earlier....

Today most respectable dealers will sign a customer up at the buy rate and the lenders pay the dealers a "flat fee" that is not charge back able after 90-180 days...but those flats are not big money...just secure income for the dealer.

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This is interesting info. Are you an owner or in the finance dept of a large dealership? I ask because usually the lenders will pay a large fee for premium par rates and the adjustment period for early payoff of the financing is limited to X months. In your post you are talking about years for the lender to adjust the payments made to you...that seems like a very long time. If that is the case, then does the adjustment amount decrease as the period is longer? e.g. within 6 months X, within 12 months Y, within 2 years Z etc?  Seems like it would be a decreasing amount and not the entire profit allocated to the dealer finance department originally.  JMO

BTW, there is something similar in mortgages, but it is limited to one year and applies to defaults.

[SamsungHDTV]

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@1fstgixer wrote:

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@CH-7-Mission-Accomplished wrote:

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@patrick00032001 wrote:

Not true, Im a finance manager at a car dealership currently, if we elect to "Bump" any rate, the lender pays us the full amount up front, now, if the customer pays the loan off or refinances the vehicle in a 180 day period, the lender will charge the dealership back for any amount that was paid to us, but there is no participation paid at the end of the loan, thats all paid up front once the deal funds.

---

So how does the rebate work?  If you get 3% over the required rate for the term of the loan, do they just give you 3% of the loan amount and keep the 3% overage for all years after year 1?

If you get them 3% overage they are collecting that for up to 72 months or more.

---

I have been in the car biz for a long time, there are very few lenders that will allow a dealer to "mark up" the rate 3 points, however the dealership would not get 100% of the 3%, they would get 75 maybe 80%  of the as profit. Now the fun part, if customer pays car off in 2 years instead of 5 or 6 the lender then will just charge the dealer back the prorated, per contracts and dealer agreements, basically they just go and the dealer profit back. Easy math for an example 

total mark up above approval rate is $1000. Dealer is on 75% reserve method so will get $750 of the  $1000, now we will say it is a 5 year note and it gets traded in at another dealer in 2 years, the bank will just go into the dealers account and take back the 3 years of reserve that they cannot collect, so now that dealer is out $450 of what was profit 2 years earlier....

Today most respectable dealers will sign a customer up at the buy rate and the lenders pay the dealers a "flat fee" that is not charge back able after 90-180 days...but those flats are not big money...just secure income for the dealer.

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Maybe most respectable dealers will sign a customer up at the buy rate, but there aren't many respectable dealers out there. And probably most the time its when a customer as a great credit profile. 

Still the full proof way, is to get a pre-approval outside the dealership and use it to get the rate you actually deserve.