The Dealer called the next day and dropped my % Rate 5 Points

[Poquelin]

Okay, I'm confused!

On Saturday night 3/30. I bought a Ford Fiesta SE. I took out a loan for $16000 at 16.78% for 72 months with monthly payments of $360. I know those are bad terms but I never thought I would get approved by anybody so I accepted those terms. I signed all the paperwork and left with my new car.

The dealership was closed Easter Sunday. So Monday morning, they call me and tell me they found me a better deal. They said they were overnighting a new contract which will give me $16000 loan at 11.7% for 60 months with monthly payments of $357.

Why would they do this? I had already signed the paperwork and accepted the more expensive loan. Don't they make more money by giving the worst possible terms?

Don't get me wrong, I'm not complaining! The 5 point difference and the fewer 12 months in the life of the loan drop the total interest charges from $9550 to $5200. A savings of over $4,000.00.

I intend to refinance this loan in December of this year with a Credit Union so I will finally get decent terms. But I am confused as to why they would give a less costly product after I had agreed to a more expensive one? Does this happen often?

Any ideas out there?

Thank you,

[Barris]

There could be two reasons and either one worked in your favor:

1. The cheaper loan from another lender might have a relatively larger commission margin for the dealer

2. He gave out the first loan rate based on your FICO BEACON score whereas the second deal could be based on your AA FICO score. Do you have a good payment history as far as your installment loan are concerned? Eg: Mortgage, previous car loans, etc.

[Poquelin]

Barris,

lMust be option 1 then because my credit is not good. I have a MyFICO 638. A BK 7 dismissed 13 months ago, only 2 accounts showing In my history: a HSBC secured card which HSBC gave me back the $2500 security deposit after 1 year of on time payments. The other acct showing is a Verizon cell phone collection for $108 which says it was IIB. My BK7 shows as well as an IRS lean. Like I said, not good so it must have your 2nd scenario.

Thank you,

[HoldingOntoHope]

Or maybe we've been all wrong and car dealers are really on the side of the consumer and are more concerned with treating us fairly than making the best money they can. In any event congratulations. It may be that the dealer is looking for good recommendations or repeat business. It's nice to know that at least one auto dealer in the USA has a heart.

[Epcot]

Wow, that's great, Congrats!

[Dustink]

Write them good reviews, yelp ect.

That is awesome!

[sccredit]

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@Dustink wrote:

Write them good reviews, yelp ect.

That is awesome!

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^^This^^

[pizzadude]

Your monthly payment @ 16% should have been closer to $400, so you'll be saving around $45 a month with the lower interest rate.

Double check the loan paperwork to make sure there aren't any additional fees / bad terms associated with it.    Assuming that there aren't, I'd jump on the lower rate.