[MrChevyDC3]

Ok, can the dealer lie and tell me an inflated APR? This is the highest I've had to pay in APR in yrs! Can I call GMFinanncial and inquire about it myself? I'm sure my credit is 750+. Gnuchoice and Jofu- not trying to be in your business but would u say your score is along the 850 tier?

[Gnuchoice I]

Mine was 820 at the time.

[Kblanton2]

I would call GM Financial and ask. Yes, he can lie and raise the rate to make the dealership extra on the backend.

[JKSully]

There are a lot of comments about "kickbacks" and inflated rates that seem to imply the dealer is being dishonest or doing something illegal. I've worked on the lending side of auto financing, and while it is possible for the system to be abused by a shady dealer (or lender), I can tell you that none of this is inherently illegal or even out of the ordinary. In fact, it's standard practice.

The interest rate that you pay on any auto loan is made of two separate rates - one percentage is what the bank earns, and the other is paid to the dealer. You as a borrower will likely never be told what the split is, just the total rate. The portion made by the lender is usually higher than the portion paid to the dealer - on a 2.9% rate, the lender is probably making 2% and the dealer 0.9% - but the exact splits will vary by lender. A finance company owned by the manufacturer (known as a "captive finance" lender) like GMAC will usually have lower rates because they are also making money on the car itself via the MSRP. Captive lenders can also afford to use some of the MSRP to offset the dealer rate - so in the days of 0% financing, the dealer was likely still getting their monthly payment of 0.9%, but it was being paid out of the lender's pocket because the lender was actually set up with a negative 0.9% interest rate to offset it.

The lender is going to have rules about how to set their portion of the rate, and it's basically non-negotiable. It is based on things like your credit score and history, the various rate indexes used by all banks in the country, and the ratio between the amount of the loan to the value of the collateral. This last one, by the way, is why a higher down payment can lower your rate, because there's less risk to the lender of losing money. If you do default on the loan and they repossess the car to sell it at auction, they are more likely to get the amount you still owe if you put more down up front.

These rates are regulated by both state and Federal rules, and can result in heavy fines and penalties if the lenders exceed the limits. We've been in a low-rate environment for many years, so rates have been well under the legal usury rates - with inflation being what it is now, the rates will be rising for all financing, and there's quite a bit of room between what we've been used to and what the legal rate limits actually are.

The agreement between the lender and the dealer will specify the maximum percentage rate that can be paid to the dealer - this gives them some leeway when setting up a deal to offer lower rates to buyers when they need to. Generally speaking, the dealer is going to start by offering you a rate based on the lender's (non-negotiable) rate and the highest percentage they are allowed to set for themselves. When they "go talk to the sales manager" to see what they can do, they're deciding if they can come down from this maximum and by how much.

That agreement also governs the terms of how often the dealer gets paid or if it is over time vs a lump sum. There are usually penalties in the agreements, where the dealer loses some or all of their earnings or even has to pay back previous earnings - these penalties kick in for various reasons, such as a loan being paid off or defaulting within x months. These are in place to keep a dealer from knowingly making risky deals and/or manipulating the information on the application to earn more from the lender than they otherwise would. So you'll want to be careful about telling the dealer if you plan to refinance - if they know they're going to lose any of the money they would normally make from the financing, they really have no incentive to sell you the car any longer.

Anyway, sorry for the novel, just wanted to give some background on how the industry works for those who may not know.

[LateBrakeU2]

[QUOTE=MrChevyDC3;11141660 I see on the Chevy buildsite, 1.9% for Well Qualified, which I thought I was. Roughly a 750 credit score across the board. He offered me MSRP minus $750 incentive, and said GM returned with 5.4APR. I Asked about the advertised offer and he said that's for the 850 tier credit score. I offerd another 2k down and he GMFinancial returned with a 4.1APR loan. I can refi in 6months.
[/QUOTE]

If your FICO is 750 that's "A" paper, and should qualify you very few people have a score of 850. FYI March incentives for Camaro are both conquest rebate and 0% APR for 48 Months..might vary by state but i think it's a national program.

[Sindri]

JKSully, thanks for that write up, very informative. I didn't know about the split rates.

I will add that, from talking to other folks in the business, the dealers are looking for any way to make profit on vehicles they do have, due to the inventory shortages. So there's really nothing stopping them from saying you have to finance with the bank we choose or we won't sell you a car. I feel like it's kind of shitty but it is what it is.

In the before times, I had a GMC dealer I worked with, and usually GM would offer some sweet incentives if you financed through them at higher rates - for example in 2018 my wife and I bought a Terrain, and GMs deal was 20% off the sticker price but at 5.9% APR. My credit union would give me 1.9%. He was very honest with me and said take the discount, make 3 months of payments, and then refinance. The 3 months was his term to get his kickback from the financing, and since I liked the guy I did that.

So my advice is play your cards close, if they are willing to sell at MSRP with no other markups or bullshit adds, but they want you to use their financing, take the deal and then go refinance at a better rate at your bank or credit union.

One other thing to watch out for is "tied selling", which is when the dealer offers you a better interest rate in exchange for buying extra "products" (extended warranty, maintenance plan, etc.). This happened to me when I bought my 2021 Camaro. If they suddenly offer you a lower rate on the condition of buying something like an extended warranty, it likely means you were qualified for that warranty to begin with, and as JKSully said, the dealership is eating part of their profit they would make on the interest rate in exchange for more profit they are going to make from selling you that warranty or whatever it is.

[armycop71]

Originally Posted by MrChevyDC3

Ok, can the dealer lie and tell me an inflated APR? This is the highest I've had to pay in APR in yrs! Can I call GMFinanncial and inquire about it myself? I'm sure my credit is 750+. Gnuchoice and Jofu- not trying to be in your business but would u say your score is along the 850 tier?

My score was 831 when they ran it, and I got the GM 1.9% for 72 months. I am guessing the cutoff is probably around 780, which is usually the benchmark for the best rates. They could never finance anyone if they pushed it to 850 as a minimum for the special rates.

[MrChevyDC3]

Aww thanks guys that's why I frequent this site!

JKSkully- Write an informative novel like that in any of my threads anytime you feel- I appreciate the time, effort, and knowledge.

Rest of crew- Thanks for the input. I know my score is not at 780, the highest I've seen for this and last month was 768 on Transunion and Equifax. I use Credit Karma, Credit Sesame, Cap One Creditwise, et al. I called GMFinancial and asked them, and they said they don't set the APR rate that the dealer gives me? Blew my mind. I thought that was how it worked.

I don't think the dealer is budging from the 4.1APR. And I just thought about something else-

Have you guys heard of the "Peace of Mind" Warranty? It's a $3000 ADD ON. But,
Before you start chitting bricks, let me explain:
It is a Bumper to Bumper warranty that lasts for as long as I own the vehicle- or 100,000 miles- whichever comes first.
If I turned it down, price would have been 3k less. I thought about it, and said what the hell, leave it in the write up. A/C goes in 4 yrs? Rod knock in 6? Trans slip in 8? All covered- free of charge- any dealer of my choice nationwide.

[fielderLS3]

Statistically, extended warranties are a terrible deal. And one that only goes out to 100k miles isn't even that extended.

If I thought more than 3k worth of repairs was likely to be needed between factory warranty expiring, but before 100k miles, I wouldn't be considering the car. And if the company selling the warranty thought so, they wouldn't be selling it.

I wouldn't be worried about engine or trans problems. If there was a defect that was going to make either fail, it would happen long before the 60k factory warranty expires.

[mariojas]

Yup, just set that 3k aside and use when something breaks...

[Jofu]

Originally Posted by MrChevyDC3

Ok, can the dealer lie and tell me an inflated APR? This is the highest I've had to pay in APR in yrs! Can I call GMFinanncial and inquire about it myself? I'm sure my credit is 750+. Gnuchoice and Jofu- not trying to be in your business but would u say your score is along the 850 tier?

Sorry I just saw this. Yes my score is quite high (upper 800s at least with some scoring systems) but I agree with others that such a high score shouldn’t be needed to qualify for the low GM Financial rates.


Geoff

[armycop71]

This is the Experian chart, with the average rates for credit scores. The rate they quoted you looks a little high, I would try a credit union or your own bank. MSRP shouldn't be dependent on where you finance, but dealers are free to charge whatever they want. A percent or two on interest can add up to thousands over a loan period.

[ckt227]

Even though GM has some really excellent rates right now, no you do not have to use them. Don't be conned by the dealer. I wish they would do the 0 or 0.9% for 72 months again, but they sure do not have to nowadays.

[JKSully]

Originally Posted by ckt227

Even though GM has some really excellent rates right now, no you do not have to use them. Don't be conned by the dealer. I wish they would do the 0 or 0.9% for 72 months again, but they sure do not have to nowadays.

Not true. If that particular dealer decides they will only sell a car for MSRP if the buyer uses GM financing, they are absolutely allowed to do that. It's not that they're conning you - they are allowed to set their own prices and conditions even if it runs the risk of losing a sale. But it is an individual dealer's policy, not a global GM mandate - not all dealers will have the same policy. They may also upset the GM sales manager, but GM would stand to make more money if it's financed through GMAC, so maybe not.

So, the reality is, if that's the only dealer that has a car configured the way you want it, and you don't want to wait, then you DO have to use the financing they dictate to make the deal for MSRP. Your other options are to walk and find another car/dealer, which may require a lengthy wait, or pay whatever they will accept for using other financing, which will probably cost you more money.