Navigating car finance and avoiding dealer tactics?

[the_artful]

Having been taken for a ride when financing my current car a couple of years ago (dealer arranged the finance for me), I'm determined not to get taken for a ride this time around as I'm contemplating my next car (different dealership). Problem is, there's so little information out there on the actual nitty-gritties of this topic.

I've heard people say that dealers get kickbacks from lenders for arranging finance and that they will load this as a percentage on top (eg bank offers dealer 11%, dealer offers me 13% and takes a cut). Is this true? (Sounds like it goes against banking regulations a bit.)

If I get pre-approval from a number of banks, does that constitute shopping around? Standard Bank (my day-to-day bank) pre-approved me for an amount but no mention of term or rate. Seems pointless beyond knowing what they feel I can afford. How is this supposed to help me negotiate with F&I? Or is there something I'm missing.

I have already negotiated a firm on-the-road price for the car before discussing any details on the finance side etc. Once that was agreed, I then started talking a possible trade-in for my new car, and have told them that I am pre-approved by Standard Bank, but not mentioned any rates to them (even though I technically haven't been given those details by the bank, just the loan amount).

I would really appreciate any tips, insight, guidance etc.

 

[Hemi300c]

Any fee, commission or "cut" has to be declared by the FSP being the financial institution if not they are acting illegally.

 

[the_artful]

Any fee, commission or "cut" has to be declared by the FSP being the financial institution if not they are acting illegally.

Cool - noted, thanks! Do you know where I would be able to see/ask for this declaration when the time comes?

 

[ToxicBunny]

Cool - noted, thanks! Do you know where I would be able to see/ask for this declaration when the time comes?

It will be in the contract....

 

[tRoN]

On my last purchase the in house finance rate was better than my banks.
I took this to my banker and they beat their quote

 

[SauRoNZA]

Firstly how do you think you are taken for a ride with your current vehicle loan?

Secondly no, there are no percentage based kickbacks and there is nothing in it for them to load the interest rate. They get a “finder’s fee” and a rather small one at that.

The benefit to the dealership is really getting the car sold and making a profit there.

There is however laziness afoot to try and get the interest rate down (because of said low fee) and you need to push back a couple of times to negotiate the interest rate.

Better still negotiating about what is in their power instead of the bank’s like discounted the on the road fees or throwing In a cheaper service plan etc.

There is no incentive for them to do better which is ultimately why doing it yourself can often have results.

 

[the_artful]

Firstly how do you think you are taken for a ride with your current vehicle loan?

Secondly no, there are no percentage based kickbacks and there is nothing in it for them to load the interest rate. They get a “finder’s fee” and a rather small one at that.

The benefit to the dealership is really getting the car sold and making a profit there.

There is however laziness afoot to try and get the interest rate down (because of said low fee) and you need to push back a couple of times to negotiate the interest rate.

Better still negotiating about what is in their power instead of the bank’s like discounted the on the road fees or throwing In a cheaper service plan etc.

There is no incentive for them to do better which is ultimately why doing it yourself can often have results.

Thanks SauRonNZA. Got you; makes sense. Having asked around online, and among friends and colleagues, the interest rate I was given at the time was prime plus 3.75%, yet I had a credit score in the high 800s. It just didn't add up to me, hence I felt a little taken advantage of. (Not to mention the dealership itself turned out to be notoriously bad.) I will certainly look to see how I can negotiate on those other areas instead, thank you.

 

[the_artful]

On my last purchase the in house finance rate was better than my banks.
I took this to my banker and they beat their quote

Interesting... I must look into that. Will the multiple credit checks not hurt my credit rating though?

 

[nazmo]

You have all the power. When i purchase a vehicle, I know my interest rate value (more or less).
I insist on getting 3 quotes for financing, I also ask my private banker to give an option. Now knowing what Im worth, I can quickly assess and push for a bit of an improvement, demanding (the best option) to be improved. They have to fight, enquire and get back to me. it usually works.

The most important part is to know what your rating is and what you worth. Then dont accept anything worse.

 

[nazmo]

At the end of the day, all the dealership wants to do is close the deal and make a sale. They make their profit and com on the sale. After that, they have nothing to do with the financing, thats between you and the bank, who now owns "your" car. I made a dealership wait 3 weeks for my trade car to be completed at the panel shop. They need the sale more than you need the car. make them work for it

 

[the_artful]

At the end of the day, all the dealership wants to do is close the deal and make a sale. They make their profit and com on the sale. After that, they have nothing to do with the financing, thats between you and the bank, who now owns "your" car. I made a dealership wait 3 weeks for my trade car to be completed at the panel shop. They need the sale more than you need the car. make them work for it

Thanks Nazmo - that's reassuring. Out of interest, was the dealer aware that you were getting the bodywork fixed up? Do you think they would use that to their advantage to offer a lower trade-in offer? Or is it in fact in their favour because it means they don't have to do it themselves?

 

[nazmo]

Thanks Nazmo - that's reassuring. Out of interest, was the dealer aware that you were getting the bodywork fixed up? Do you think they would use that to their advantage to offer a lower trade-in offer? Or is it in fact in their favour because it means they don't have to do it themselves?

Totally aware. It was cosmetic damage, but there was a massive delay when VW didnt have a specific part (for a polo can you believe it). Full disclosure. Also Cannings, they work perfectly so they werent even worried. I got book value minus R2000 or something negligible. THing is, my car was already in for repairs when i saw my new car, put in an offer and immediately said my current car is being worked on. They arranged everything, even prelimenary quote based on my word in terms of trade in mileage and condition. All things considered, i got a fantastic trade in.

 

[SauRoNZA]

You have all the power. When i purchase a vehicle, I know my interest rate value (more or less).
I insist on getting 3 quotes for financing, I also ask my private banker to give an option. Now knowing what Im worth, I can quickly assess and push for a bit of an improvement, demanding (the best option) to be improved. They have to fight, enquire and get back to me. it usually works.

The most important part is to know what your rating is and what you worth. Then dont accept anything worse.

Further to this the more important factor is being willing to walk away.

Don't appear desperate as if you need a car.

Nothing will make a dealer jump faster than you saying "no deal" and meaning it really to bugger off and leave it all hanging.

Obviously within reasonable expectation without taking the piss. These people do have a business to run and profit to make stiff.

 

[nazmo]

Further to this the more important factor is being willing to walk away.

Don't appear desperate as if you need a car.

Nothing will make a dealer jump faster than you saying "no deal" and meaning it really to bugger off and leave it all hanging.

Obviously within reasonable expectation without taking the piss. These people do have a business to run and profit to make stiff.

Absolutely. As much as i loved that car, I never showed my hand. And always say "im doing this deal sooner than I wanted, so im happy to wait until next year and see what pops up"... It was the truth.
And not all salespeople are bad lol. This was a solid oke who fought to keep the deal going, as the car got many offers while I was waiting on my trade in to be repaired.

 

[ToxicBunny]

Further to this the more important factor is being willing to walk away.

Don't appear desperate as if you need a car.

Nothing will make a dealer jump faster than you saying "no deal" and meaning it really to bugger off and leave it all hanging.

Obviously within reasonable expectation without taking the piss. These people do have a business to run and profit to make stiff.

100% this...

I managed to get a dealer to knock nearly 10% off the list price of a vehicle, and include ALL the fees in that new price just because I was prepared to walk away from it....

Ended up walking away anyway because I started hearing stories about the dealerships aftersales service and it wasn't pretty so I told the salesman straight that his service departments record lost him the deal...

 

[the_artful]

Totally aware. It was cosmetic damage, but there was a massive delay when VW didnt have a specific part (for a polo can you believe it). Full disclosure. Also Cannings, they work perfectly so they werent even worried. I got book value minus R2000 or something negligible. THing is, my car was already in for repairs when i saw my new car, put in an offer and immediately said my current car is being worked on. They arranged everything, even prelimenary quote based on my word in terms of trade in mileage and condition. All things considered, i got a fantastic trade in.

Ha! They just quoted the trade-in offer on my car: R27,000 less than the official TransUnion book value. For an immaculate car that would easily retail well. Gob-smacked. About that walking away you spoke of...

 

[cmawa]

cutting the middleman is always good. OK get a quote from the dealership, got to the bank and negotiate a vehicle loan with a better interest. Just me you won't regret. It is obvious that banks have a competition too so if the dealer chooses one of them, the consultant will get something. and you pay for it directly or indirectly.

 

[cmawa]

Any fee, commission or "cut" has to be declared by the FSP being the financial institution if not they are acting illegally.

They don't disclose it but you sign papers and its written there and you not aware of it.