Just wondering something, today i went down to one of the stealership i have been looking at for my future vehicle purchase (in 2weeks ) anyways the sales rep told me that i can apply to the FMCC and get the extra 1k bonus cash and then when my paybook comes in i could go to my credit union bank and refinance through them. since its saturday i decided to ask here. since i am smelling something fishy about his statement.

i will be contacting the bank on monday to verify if that can be done either ways. Thanks in advance.

~Q

 

Yep that is pretty common actually. If you're credit union has a better rate do it.

 

Sounds like an incredibly sleazy way for them to get you to sign the paperwork today, using the loan that they want to sell you. Back away from the desk immediately.

$1000 is not a big deal, especially if your credit union or bank can offer you a better rate than FMCC.

For example, let's say you finance a $25,000 vehicle for 60 months. (assuming no sales tax, extra fees, etc.)

A loan at 7.9% will result in approx $30,342 in total payment.
A loan at 5.9% will result in approx $28,929 in total payment.

That $1,000 "incentive" to get you to buy now doesn't seem like that big a deal if the APR on the loan is even 2 points higher. In fact, going with the higher APR loan and taking the "rebate" actually costs you more in the long run.

Hope that example helped. (I used Edmunds.com's calculator for the examples)

 

thanks for the info.

my credit unions APR is 4.15% which i would be using for the 72month loan i would be getting.

hopefully though on tuesday the new incentives will be better since the current ones expire on 04/04/05. with ford recent drop in sells, they might up the rebates or atleast keep them at what they currently have.

~Q

 

Actually guys they were trying to help you get the extra money, not sign today. Fmcc is the only one getting ripped there, they book your loan and you pay it off in 30 days with no penality..they lose. Take the extra cash upfront regardless of FMCCS rate and refinance at your bank if the rate is better, YOU will be $1000 ahead. It is NOT a pressure tactic. By the way, I've been doing this 24 yrs so I am shooting you straight!

 

i just wasnt sure about it, cause it sounded like something farfetched to get me to buy from him is all. but if its legit then i will sure as hell take that tip to the bank . again thanks for the info.

~Q

 

Your welcome Q and good luck and enjoy your new truck!

 

And when he goes to refinance the loan, what amount is he going to refinance? Will he be able to refinance just the principal?

Before considering this option, make sure you check out the terms of the FMCC loan and be sure there are no prepayment penalites, often referred to as the "Rule of 78s" in how it calculates how interest is paid.

Make sure you familiarize yourself with all the fees (transfer fees, etc. $50 here, $75 there can add up) and make sure they don't eat into whatever "bonus" you would have otherwise saved.

Buyer beware. If it sounds too good to be true, there has to be a catch somewhere.

 

Fmcc has not been rule of 78's for many years now. If he finances say 28000 today with me (after the extra 1000 is deducted) Then his payoff will still be 28000 next week or the week after. The only penality involved is whatever small interest fmcc charges him if the loan is open 30 days, usually 25-30 dollars. This is interest on 28k for one month, not a penality. If he goes to his bank and skips FMCC then he finances 29000 upfront, even at better rate but he lost the 1000 extra rebate. Its no gimmick guys, just fmcc trying to get extra business on the books but if they're rate is to high, take your grand and go elsewhere.

 

Ok, I think I understand the concept here, but can you help me reconcile these two completely contrasting statements:

and

Why would a company voluntarily rip itself off?

 

Good question sir. When I said fmcc was losing...what they lose would just be internal admin and processing fees to set up the loan. Obviously any lender makes money from the interest on the loan. They have processing expenses (credit bureaus etc) to set up a new loan. If its paid off right away they cant recoup them. As to your second question they dont really encourage the dealers to tell customers to payoff early like this but it is a competitive business and if one doesnt tell you to do it the next one will. Heres a news flash, the dealer loses money also. If you go thru FMCC and the dealer makes a point of rate on you and you pay it off right away they get that point charged back!

 

So, just to get this straight...

FMCC loses money and potential earned interest on the loan.

The dealership loses their share of the interest that would have been earned on the loan.

Then why present the option to the customer?

Like I said in my first reply, it's a sales tactic to close the deal and get the customer to buy now.

Yes, it may end up being the case that it is a good financial move for the customer (if all the T&C's and fine print make sense), but it's still a sales tactic. Right?

The dealership is (rightfully so, I am not complaining), a business and a business has to make money. But it seems to me that the only reason to even present this as an option to a customer, given that everyone essentially loses on the financing side, is to get the deal.

 

pretty much, i think it boils down to that fact alone. See the sales rep knows that i've been searching around at different dealerships in town and in the adjacent areas. i told him upfront that i am still looking around and will be making my purchase in 2 weeks. so i think he might have given that bit of info up just to snag me up into thinking that he is a straight up and honest sales rep. though i quickly debunked that thought, when i asked him what FDAF/LMAF stands for....he said he didnt know, i replied its Ford dealer advertisement fee, which is a 300$ fee added to the invoice he showed me. i laughed to myself to think they want me to pay 300 dollars for their advertising cost.

but back to my original post, i just wanted to find out if its T or F, i will do check up with my bank to confirm. that i can do this in fact, to get the extra 1k bonus cash from FMCC.

~Q
ps. i assume the LMAF stands for lincoln/mercury advertisement fee.

 

Well, it sounds like it's something that can be done. Admittedly (in case you could not tell) it's the first time I'd ever heard of this, so I am skeptical.

My guess is the logic on the dealership's part is similar to the logic that retailers and manufacturer's employ with other consumer products. Offer the product with a rebate, knowing that sales will incrementally increase and only a small percentage will bother to send in the rebate paperwork.

True, the rebate is "instant" in this case, but they probably figure that few customers, once they drive off the lot happy with their vehicles, will go through the hassle of refinancing and they will still make their money on the loans for the majority.

The dealership and the customer win either way in a sense, I suppose.

 

The salesman is just willing to sacrifice his employer's dollars in order to get himself a commission check. FMAC loses, the dealership loses, but the salesman has already gotten his commission check and doesn't get backcharged if you refinance.

And this scenario has been discussed multiple times on these boards, I've read many threads on this in the last six months.