Actually, your both right..................Ford does set the rate, the dealership can then go above that by 3 points, so if the rate was 5%, the dealership could set the rate at 8%. Once the deal is accepted, Ford "kicks back" the difference, or "reserve" money. If you then find a better rate and refinance, the dealership is faced with a "chargeback" situation where they will have to pay Ford back a portion of the difference.

Each dealership negotiates the amount or percentage of the reserve that FMC retains. Usually its a 25% - 75% split to the dealers favor, but it all depends..............like everything in the auto sales business, its not always what it seems to be...............

 

You both said the same thing.

If FMC will finance at 4% and the dealer decides to finance you at 7% - DO you think that the 3% difference goes to Ford Corporate ? Surely the difference is split between the dealer and the finance company. ( FMC )

The same thing happens on ALL loans. Refinances, Mortgages, Lines of credit etc etc. The rate the bank pays for money is less than they charge you- They pocket the difference. The difference is typically based on your credit score ( risk ) and your negotiating position.

Doug

 

Bottom line is that Ford Credit determines the rate the customer is approved for. The dealer then jacks it up to whatever the customer will pay. How is that Ford Credits fault? How are they running a scam? Do your homework and shop around. Don't blame others for your ineptness. If you don't like the rate don't do it. I have a problem with his insinuation that Ford Credit is crooked.
Jeff

 

All indirect lenders to car dealers use a “buy rate” and the dealer is allowed to “mark up” the rate as they see fit (usually 3 pts max), and that rate spread is then split with the bank. The buy rate from any bank is either based on your beacon (credit) score or the lenders own internal scoring system (Ford credit). Ford credit cannot compete with most banks in the area of super low rates, but it can extend credit to those that other lenders will not. Just because XYZ customer got a 3.9% rate does not mean just anybody can. Loan to value, term of the loan, and credit score all play a part in what rate a customer may get. There is nothing dishonest or illegal with this practice as it is done with almost all loans.

 

I agree with you, his approach leaves a bit to be desired. Ford does set the rate, and from that point on it's the dealer's finance department who plays with the numbers.

Also, his comments concerning the "computer" spitting out numbers based on formulas may be the way they are supposed to do it. But I've watched as a good finance manager/director spends time on the phone with Ford Credit analysts and their supervisors, hashing out numbers etc unitl they have convinced Ford to take a loan they otherwise would have turned down.

Like I said, the auto finance business is not always what it seems to be, and no one puts a gun to your head. If you don't like it, don't buy it..............

 

I think the Dealership finance group can certainly make it's own choices...or at least I think. When I got my '00 GT, the finance guy at the dealership had me all set up for 7.9% for 60 months and a $315+ monthly payment... At the time, they were offering 0.9 if you could pay it off in 36 monhts. I kept telling the guy that was what I wanted, regardless of payment, but for some odd reason, he didn't think I could handle the payment. I also didn't have much leverage back then as my FICO score was in the very low 600s. Anyway, it came down to him trying to sell me an ext warranty and life insurance and every other kind of insurance and I kept declining. He already had this chit on the contract as he was hoping that I would just sign the contract and be on my merry way. Finally, at the end, he said that he could get me that 0.9% if I'd just buy the $255 insurance. I jumped on it quick. Some much for $315+ for 60 month. I now had $285 for only 36 months. If FOMOCO didn't approve me for the 0.9, how was it that the dealer assured me that he could give it to me?

 

Yeah thats all good and fine but not many of us are walking around with 35K in cash to blow on a truck.

 

A lot of us are walking around with 35K to blow on a truck.

Financed or not, you are blowing the 35K if you buy the truck. Financed you are acutally blowing more...

You should have the forsight to save before you purchase the vehicle instead of after.

I have paid cash for every single vehicle I've ever owned. The first car I got was a 10 year old subaru from my parents, but other than that, it's been all me.

Just my opinion.
Coldie

 

If you do have to make payments, this will save you a little bit:
Fall two months behind.

They will come to your door and pick up a payment.
(I haven't had to lick a stamp in three years and save 37 cents a month)

 

Financing is the american way. Your like 1 out of 5000 people that pay cash for cars. I used to sell cars, almost EVERYONE finances.

I don't want to wait 5 years to save up 35K. I want my truck NOW!!! NOW!!! I dont care if it costs me 3-4K extra... I'll never notice over 5 years.

 

Hence the phrase.........

It's the American way

--Joe