Does anyone know what the rebate, kick-back, or financing fee a financial institution refunds to a dealer when the dealer institutes a sale with customer financing? I plan on purchasing a vehicle soon and though I can afford to pay cash I was wondering if I could use that financing fee as a wedge to reduce the price of the vehicle, such as financing the vehicle & then paying it off immediately? This way the dealer gets the fee & he kicks a portion of that fee back to me, in the form of a price reduction.
Dealers work more closely with some financing providers than others. There was not kick back when I used my credit union to finance a car. Commissions are often 10% so perhaps a dealer would get a “commission” on a finance deal they write up for a “business partner” financing provider. I don’t think you are going to get another 10% off the deal. If you are a cash customer get the best deal they will give you and turn it down, and walk out the door. When the salesperson calls you on the phone a few days later you might get to sweeten the deal a bit.
There are so many factors that go into a dealer’s cost that you can’t focus on one factor without considering the larger picture. Put an offer out there that is low enough to get rejected, and then walk. If they want to make a deal you’ll get a phone call soon enough.
If you find a dealer who is willing to basically screw the financing company then you have found a dealer who will screw you “the customer” in some other way. What you are proposing might not be illegal but it is “on the fringe” and a dealer that plays that way can’t be trusted IMO.
I suggest removing that issue. Separate the two. First negotiate the cost of the car. Get that settled. I suggest you get two or more bids from dealers. Tell them the truth, you offering them the chance to make you an offer. If they don’t want to, ask them why they don’t want your business. Keep everything else out of the deal. Dealers love to make the whole thing as complex as possible. Never let them have your car keys, so you can drive away if they are not cooperating. Be honest and get one or two additional bids. Don’t go back and try to pit one against the other. They get one try. It has worked for me.
Once you have the price, ask them for their offer for financing. Check your credit union or bank for what they will change you for the loan.
It is sort of like buying the steak at one store and the potatoes at another. You don’t need to do both at the same store.
If you go in with your own financing (best way to finance usually), you can get the best price for the car. When the manufacturer has those low rate loans, you have to pay full price. You’d have to do the math, but my guess is that you get a better deal financing outside and getting the best price (including a rebate) than taking the low rate manufacturer loan.
When I got my Mazda I had shopped around several banks and found what i thought was a great interest rate(4.35%). Dealership and I worked things out through email and over the phone because they were an hour away from me.
When they sat me down before finalizing the deal, the salesman had called down to the finance department and found me a slightly better rate(4.14%) in a matter of minutes. Granted I had overlooked the bank they were using, so I dunno if I could have gotten the same deal at the same bank or not. But it could be another negotiating point. Tell them you found a 5% interest rate and see if they can meet or beat it; check local banks’ websites and see if they list their car loan rates on there.
However, be sure to read the fine print and make sure there isn’t any early pay off penalties for the loan. No use saving $200 if you gotta pay $150 extra to the bank for their payoff “penalty”.