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Old 07-28-2020, 10:34 PM   #46

Drives: 2018 1SS M6
Join Date: Nov 2014
Location: Houston
Posts: 2,610
Originally Posted by ember1205 View Post
Initially, I wanted to cry for the first part of this post. Then I realized something...

There's a HUGE difference between "buy here, pay here" financing (what is truly a "dealer loan") and loans secured through a legitimate lender that are "brokered' by the dealer (you fill out a general loan app at the dealership and they shop your loan to various banks). The former should be avoided at all costs. They are huge rip-off's financially. The latter seldom will have penalties for early repayment.

Credit Unions are 100% -NOT- the panacea that so many people claim them to be. As mentioned before, I have only gotten a better rate from a credit union ONCE than I did from any other lender when buying a car. And, honestly, I was quite surprised that I got the rate that I did as the manufacturer was already offering reasonable rates for their CPO cars.

If you are shopping for a loan based on the rate, Credit Unions seldom have better interest rates than banks if you have a high credit score (over 700-725). Sometimes they have better rates if you have a significant amount of money on deposit with them.
I too was thinking WTF at that post until I realized what he was talking about.

Financing through a dealer, especially if you have Tier 1 credit can be beneficial to you. First, the dealerships have contracts with several lenders. Whereas, if we, the customer, go to our own bank, we are going to get a rate that is profitable to the bank. The only thing a bank does is sell money. However, a dealership has more bargaining power with lenders because dealers generate more business for them.

There is truth that a dealership can bump the rate up to 2 points. However, how that really happens is not that raise your rate, they negotiate with the bank to lower the buy rate for the dealer. This is why many people show up with pre-approval from their bank at 3or 4% and the dealer gets them out of finance at 2.5 or 2.9%, from the same bank. The dealer negotiates the buy rate down. Sure, dealers are out to make money, they are not 501c operations, and neither are the banks.
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