Auto dealer's "Buy Rate"...

[Kratos-TM]

What does this technically mean.....and how can one make sure he isn't getting snowed by the finance manager on the interest rates?

[pizzadude]

Moved to auto loans

[Kratos-TM]

I'm reading on here of people negotiating the interest rate down with the finance manager? How are you guys doing that....do you know what your rate should be? Now if you have a rate quote from another outside source to compare, I understand......but I see guys are negotiating rates without an outside comparison rate....???  I just read in one thread where someone demanding a 1.99APR be taken down to 0.9APR.....without any outside quotes to compete......wow.....what negotiating power did they have to imply they deserved better?......LOL

[Walt_K]

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@jarroldharrell1 wrote:

I'm reading on here of people negotiating the interest rate down with the finance manager? How are you guys doing that....do you know what your rate should be? Now if you have a rate quote from another outside source to compare, I understand......but I see guys are negotiating rates without an outside comparison rate....???  I just read in one thread where someone demanding a 1.99APR be taken down to 0.9APR.....without any outside quotes to compete......wow.....what negotiating power did they have to imply they deserved better?......LOL

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Probably willingness to walk away and/or knowledge of what their credit score was and what they could get.

The easiest thing to do is to have other financing lined up.  Then it is pretty simple.  After you agree on a price, you can just tell them that you already have financing, but you're willing to let them compete for the financing if they can beat the rate.

[SamsungHDTV]

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@jarroldharrell1 wrote:

What does this technically mean.....and how can one make sure he isn't getting snowed by the finance manager on the interest rates?

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1. What does auto dealer's buy rate mean?

Auto dealer's "Buy Rate" is the rate lenders have approved you for when the dealer submits auto loan applications on your behalf. 

So if you walk into a dealer find your car some people have the finance manager apply at different lenders on their behalf. So lets say XYZ bank has approved you for 3%, this is your 'buy rate'. The dealer will come back to tell you, "Good news! We got you approved for 5%!" They have marked up your interest rate a full 2%. XYZ bank and the dealership will split the extra money you paid in interest. Pretty crappy deal for you the consumer. 

2. How do you make sure you aren't going to get snowed by the finance manager?

Before you talk to the finance manager, apply for your own financing. If you happen to apply at the same XYZ bank mentioned above, they will give you 3%. You then avoid being snowed by the finance manager because you know what rate you actually deserve. Further more, when finance managers know you have independent financing they will rely only on their captive lender to try to beat your 3% rate at XYZ bank. 

*captive lender means a lender who's primary function is to lend money to finance their parent company's product. For example Honda Financial Service is a captive lender in that they primarily lend money for Honda dealerships to finance the purchase of Honda vehicles. Captive lenders generally tend to be slightly more lenient on an imperfect credit history and they always try to beat the rate you get. 

So obtain your own financing, and tell the finance manager you would only like to apply with their in house financing. Tell them your rate, so they can try to beat it.

Hope this helps.

[Kratos-TM]

Very informative guys..... Thanks so much...

I plan on getting the new 2014 Mercedes S class coming out this fall. $100K vehicle. Gonna put $20K down on it. So I need a $80K loan. I wonder what outside bank is good for loans of these magnitudes....?

[pizzadude]

If you're planning on borrowing $80K then it is even more important that you get a good interest rate.

[Kratos-TM]

Indeed pizzadude.....I really hope I can pull off a good rate on this thing. I'm scrambling around the internet on various sites reading hours and hours worth of threads trying to gather as much information as possible so that I can increase my chances. I even read that entire 190 page Auto Loan Approval thread on this site!  Although I have a high credit score and putting money down, I'm still not sure if I can pull off those prime rates because of the amount of the loan.