One of the first things that a Finance Manager trainee begins to learn is something called 'credit union conversion'. Dealerships spend millions of dollars and many hours of training time on this most important of disciplines, and the reasons are many and varied. It is not wrong for them to attempt this, nor is it evil; it is simply good business. Of course, that doesn't mean you have play along!
When a person obtains their own financing through a credit union, very often they are limited in the amount of funds that are approved. Additionally, they may have stipulations concerning 'back end products', including-but not limited to- such items as service contracts and GAP policies. The job of the Finance Manager is, obviously, to maximize the amount of profit generated in the finance office, so it is always in his interest to obtain financing for you.
The recently enacted California 'Car Buyers Bill of Rights' placed a limit of 2.5 percent on the amount of mark-up that a dealership can apply to an auto loan for a used car. On a larger loan, or a longer term, this amount can run into the thousands of dollars. The dealership shares these profits with the financing entity. The division of this money varies according to the policies of the lending institution, but this is profit in the deal that the consumer is not aware of.
It is a little known fact that the products offered in the finance office are highly negotiable. Those in the business can recall countless instances where a customer has worked for hours to gain a concession on the purchase price of $100, only to overpay by thousands on products of debatable value in the finance office!
Remember, it is not the responsibility of a Finance Manager to determine which products are appropriate for you! In fact, it is his job to present each and every one of them to you, in detail, with enthusiasm. It should also be mentioned that it cannot be wrong for him to collect a commission for arranging your financing for you. After all, you could have done that yourself, and anyone acting as a broker in a financial transaction is generally compensated for their efforts.
As always, work with a dealer that you trust, understand which products are appropriate for your set of circumstances (don't pay $2000 for a service contract on a $4000 car!), and do not relax until the entire deal is concluded. Remember, whomever greets you in the finance office has been preparing for your arrival for years--maybe decades, so you should at least be a little bit ready to meet them. After all, that would only be common courtesy, wouldn't it?
