Quote:
Originally Posted by Mullins
Mine said BMW let's them cap it at an extra 1% (unconfirmed).
All that aside, now I'm trying to figure out if it's worth me paying off the loan within the first 6 months to prevent the dealer from getting the loan kickback…
I did finagle a few items from them for "compensation".
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The 1% finance cap is allowed. Whether you choose to accept the dealer doing so is another matter. From their perspective, there is little incentive to run financing through a manufacturer's captive finance company if they were not able to also mark up that rate as the payment for the promotional rate to the dealer is pretty small. F&I is a huge profit center, nearly half the total take on new car sales and I would guess that without it they couldn't turn a profit. That said, what is happening today is an aberration. All the publicly traded dealer groups are reporting record gross profits per retailed unit.
I call out marked up rates but accept them whenever I buy a new car if doing so allows me to negotiate a larger % off. I know that the dealer makes a good amount from this markup from the manufacturer, but I also pay my loans off way early, so the extra fiance charges I incur isn't much. I wouldn't suggest this path unless you have cash on the sidelines that would otherwise earn near 0. Paying off what is still a low rate loan to spite a dealer for charging what the market will bear if you have other debt and/or under-allocating your investment portfolio would hurt you more than them.