Calgarypuck Forums - The Unofficial Calgary Flames Fan Community - View Single Post - Financing A Vehicle And Protection Package/Extended Warranty Questions

pylon · 07-08-2013, 03:12 PM

Lots of sketchy advice in this thread.

I will negotiate all sorts of things on a deal with my clients. Warranty, protection options, accessories etc, but no finance manager at a dealership who values his relationships with the banks or his job, will EVER negotiate on reserve.

This is the problem:

Most banks will charge back the reserve to the dealer if the loan is paid out in the first 60 to 120 days, depending on the lender. So the dealer ends up eating the reserve, and is put in the hole. Then you have a lender that doesn't trust his dealer in the fear they were coached into a transaction that's designed to rip off the bank. In fact, 5 or 6 years ago, there was some dealers that were putting through loans at high rates for maximum reserves, and coaching the customer to ride the loan for the first 6 months, splitting the reserve with the customer, then telling them to pay it out after 120 days. Voila a free 1500 rebate or whatever it was, at the expense of the bank. Unfortunately, not everyone waited the 120 days, and when the banks caught wind of what was going on, they weren't happy. It is a kinky, dishonest way to do business.

It should not matter if the dealer is making 10 bucks, or the entire value of the interest, if they are getting you a better rate than the bank, what does it matter? I know everyone is mortified that a car dealer might make a few bucks on your transaction, but at the end of the day, they are businesses, not non-profit charities.

edit: If I am ever in a scenario where the client can obtain a better rate from his bank on a fixed term loan, I let them take their business there with no resistance. Because 9/10, the better rate they are getting is almost always a floating rate or line of credit, which is not smart to use on a depreciating commodity like a car. And in most cases the reserve is so small, it isn't worth arguing over. FYI, the best fixed rates available from the banks right now is 4.9%. There are a few banks marginally lower if you take a floating rate, and if you go over 25 or 35k, which isn't smart IMO.

07-08-2013, 03:12 PM	#9
pylon Lifetime Suspension Join Date: Jul 2007 Exp:	Lots of sketchy advice in this thread. I will negotiate all sorts of things on a deal with my clients. Warranty, protection options, accessories etc, but no finance manager at a dealership who values his relationships with the banks or his job, will EVER negotiate on reserve. This is the problem: Most banks will charge back the reserve to the dealer if the loan is paid out in the first 60 to 120 days, depending on the lender. So the dealer ends up eating the reserve, and is put in the hole. Then you have a lender that doesn't trust his dealer in the fear they were coached into a transaction that's designed to rip off the bank. In fact, 5 or 6 years ago, there was some dealers that were putting through loans at high rates for maximum reserves, and coaching the customer to ride the loan for the first 6 months, splitting the reserve with the customer, then telling them to pay it out after 120 days. Voila a free 1500 rebate or whatever it was, at the expense of the bank. Unfortunately, not everyone waited the 120 days, and when the banks caught wind of what was going on, they weren't happy. It is a kinky, dishonest way to do business. It should not matter if the dealer is making 10 bucks, or the entire value of the interest, if they are getting you a better rate than the bank, what does it matter? I know everyone is mortified that a car dealer might make a few bucks on your transaction, but at the end of the day, they are businesses, not non-profit charities. edit: If I am ever in a scenario where the client can obtain a better rate from his bank on a fixed term loan, I let them take their business there with no resistance. Because 9/10, the better rate they are getting is almost always a floating rate or line of credit, which is not smart to use on a depreciating commodity like a car. And in most cases the reserve is so small, it isn't worth arguing over. FYI, the best fixed rates available from the banks right now is 4.9%. There are a few banks marginally lower if you take a floating rate, and if you go over 25 or 35k, which isn't smart IMO. Last edited by pylon; 07-08-2013 at 03:31 PM.