Bank of America Told Me This About Dealer Financing Rates... True or False?

[doodman]

I went to Bank of America today since they offer 3.45% (up to 60months) for auto loans in my state, and the manager there said that dealers send out the purchasers financial app and give the purchaser the best rate that comes back from the inquiry.

Is it true that dealers will give the purchaser the best rate that comes back? Call me cynical, but I find this hard to believe...

PS. This is concerning a purchase and NOT a lease.

 

[manhunter]

If you apply for credit at the dealership, they enter your information into a system that shoots it out to numerous banks and lending institutions that they are connected with shopping for the "best" rate they can get for you. Now, ...., is what they quote you really the best rate offered from any and all banks that respond back? If you have doubts, then tell them you want to see who offered what. If the dealer signs you up for financing with one of their established banks, they get a cut of it, ....., I know you find that hard to believe. That is why they will push real hard to get you to use them for financing. But, if the rate they offer is in fact the best rate out there, then who cares what they get out of it, ...., as long as you get what you want. One warning, and it may not matter to you, but when they send out your credit inquiry to numerous banks, it will show up on your credit report as multiple credit inquiries, which can and will lower your credit score for a short time. Hope this long drawn out explanation helps.

 

[Jed]

Why don't you just shop around for the best possible rate yourself? Then you'll know if the dealer is giving you a good deal or not. I know that some dealers are still offering 0% interest on certain vehicles, so that would be the best deal ever....but I don't even think that is possible on a 2010 4Runner.

 

[Ron Helmuth]

Bring your own to the table

Line up your own financing-become a credit union member if necessary. (They have excellent rates usually a few points below a bank) This will make your negotiation process much easier and save you some dough.

If you have good to outstanding credit already (I always have) then this is not an issue. If you have marginal credit scores- again you will save money having it arranged before you fall in love with the vehicle you want to get.

Know what your credit scores are before you start drooling over something you can not truly afford. Budget some funds for insurance, title, taxes....

I have never put money down on a vehicle for example-that is just throwing it away in my mind. Use your good credit and pre-arranged financing to help negotiate the absolute lowest price on the actual vehicle for sale. They agree and you hand them the check from the credit union and everyone is happy.... :banana:

Voila- the difference you save is going to be right about what the stealership wanted you to put down, hence my comment 'throwing it away'.

 

[doodman]

If you have good to outstanding credit already (I always have) then this is not an issue. If you have marginal credit scores- again you will save money having it arranged before you fall in love with the vehicle you want to get.

Are you saying that IF I have outstanding credit (I do have an excellent credit history and score), that I shouldn't have an issue with the dealer arranging financing?

My only concern is that the dealer will run my application and NOT give me the best possible interest rate so that they can get a higher monthly payment out of me.

 

[Ron Helmuth]

I'm saying by shopping around for your own financing you will know ahead of time what rate is applicable to you and this vehicle you will buy.

Then when the dealership tries to jack a point or two more out of you it will be blatantly obvious. Easy to call their bluff but come on-this is how they make their money and I think everyone is well aware of that fact.

Unless the dealership is throwing in some kind of "extra' for using their financing, there really is no point to financing with them at all. Even then the goodie they toss in will not be worth the hundreds, more likely thousands extra their financing would ultimately cost you.

 

[poolzer]

When I 1st talked to Toyota of San Diego, they swore thy couldnt beat 3.9%. I got BofA to write a letter for 3.5% and Toyota's financial manager matched it. Was the lowest I could get in my area and my credit score is fantastic.

This was 2 weeks ago.

 

[SurfToy]

I bought mine in January, and I had a 4.49 rate from my credit union. Toyota Motor Credit was offering a 3.90 rate on certified used vehicles, as they were trying to move them. I didn't even have to negotiate, they just offered me the best available rate, so I went with it.

 

[bradj]

When I 1st talked to Toyota of San Diego, they swore thy couldnt beat 3.9%. I got BofA to write a letter for 3.5% and Toyota's financial manager matched it. Was the lowest I could get in my area and my credit score is fantastic.

This was 2 weeks ago.

Same with me, told dealer I've got 2.99 arranged and he said he'd do 2.5 without a second thought.

 

[rook]

One warning, and it may not matter to you, but when they send out your credit inquiry to numerous banks, it will show up on your credit report as multiple credit inquiries, which can and will lower your credit score for a short time. Hope this long drawn out explanation helps.

This is only partially true. The FICO model is built to tolerate multiple inquiries in a short time frame to compensate for customers shopping around for installment loan and mortgage products. They will be scored as one inquiry but show up on the file as an inquiry from each participating financial institution.


Too many people worry about inquiries when they should be concerned with keeping low debt levels, maintaining long standing accounts and on-time payment history.

 

[gRunner3]

The dealers have room to operate. I bought a Highlander for my wife about a year ago and the finance guy initially told me I was approved from Credit Union X for 4.6%. I had previously applied for a Capital One Auto blank check for 4.25% that was on its way in the mail but I had not received yet. After I told him that and said I'd wait and come back the next day once I had received my check from Capital One he lowered the rate to match it. Same credit union, but he obviously has some room to play with the rate. So it kind of sounds like you get approved for as low as XX%, but they may get additional compensation if they are successful at getting you to agree to a higher rate.
My suggestion - always have financing before you go to the dealer. That way you don't have to play games... tell them what your rate is and that if they can beat it, you'll use them. If they can't, then use your own financing.

 

[dabigac]

I work for a credit union that has contracts with several area dealers. Typically, when a dealer submits an application to us that qualifies for financing, we will approve at x.xx%, but the dealer can add up to 2 percentage points on top of that. The dealer keeps whatever amount they can add on to our offered rate. So yes, typically the dealer will have quite a bit of room to negotiate on an interest rate.

The above advice of getting pre-approved before you go to the dealer is great advice. This way, you know where you stand. If the dealer can beat the rate...great. If not, at least you know you're not over-paying.