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  • Nov 15th, 2021 7:36 pm
[OP]
Newbie
Apr 14, 2012
27 posts
6 upvotes

Car Loan Kick Back

The car dealer offered us $1300 for taking a car loan at 7% instead of paying cash. He said we can paid the loan off in 6 months. So we get $900 after interest and lien. Has anyone heard of this before? Is it legal?
13 replies
Deal Addict
Nov 11, 2006
1208 posts
741 upvotes
He probably gets a larger commission or some sort of payout for sticking you on a car loan...lol. Make sure you read the fine print to ensure you can pay it off in 6 months without penalty or fees.
Jr. Member
Jul 3, 2017
158 posts
146 upvotes
Southern Ontario
Large finance reserve being paid to the dealership by the bank. They want you to wait 6 months so the bank doesn't charge the store back for the commission. Risky game for the dealer as they will lose the full reserve if you pay it out before the 6 months and there is nothing they can do to force you to compensate them.
Deal Fanatic
Apr 16, 2007
8127 posts
3459 upvotes
Financial District B…
Thackers wrote: Large finance reserve being paid to the dealership by the bank. They want you to wait 6 months so the bank doesn't charge the store back for the commission. Risky game for the dealer as they will lose the full reserve if you pay it out before the 6 months and there is nothing they can do to force you to compensate them.
Agreed, we have actually caught a few auto dealers in our dealer network doing that exact thing.
Result was charge back of the finace reserve and cancellation of the dealer agreement. Now they have one less finance option.
----------------------------Licensed Credit Bureau member, S1, FI Automotive, CCP forums most banned = x 13 and counting, guess who that is?... stomped to the curb once again
Newbie
Jul 31, 2006
40 posts
9 upvotes
Purchased a car today at a large car dealer, was intending to pay cash and got the same sales pitch. A financing “scheme” was proposed where the dealer provided financing for 60 months but the financing would actually be for $1K below selling price and the dealer would subsidize all interest payments for the first six months of the loan at which point I would just pay off the remaining loan amount in its entirety with no penalty and essentially save $1K from the actual car selling price. The only difference here is that the full payment date would be agreed to ahead of time in writing with the dealer. Obviously the dealer's kickback from the bank for the loan exceeds the cost of the interest they would subsidize for the six months plus the $1K presumably. Any experiences with such a “scheme” or is this just a big headache?
Deal Expert
User avatar
Jul 30, 2007
31369 posts
18022 upvotes
Toronto
How much is the financing admin fee ? $600 ? $700?
Sr. Member
Jun 2, 2017
760 posts
372 upvotes
As long as you understand the terms and its in writing (i.e when you can pay in full and no fee to do so etc.) there should be no issue. Of course make sure you are getting a benefit from this as well.
Deal Addict
User avatar
Nov 2, 2008
1653 posts
639 upvotes
The Capital
This is how I buy my cars... the used car dealer is a good friend. I already get near-cost on vehicles, so I offered to "finance" the deal so they get at least commission from the banks.
I do an "open loan" and pay it off way before the end of the term. Everyone wins, and it's not like the interest is a lot of money.

The worse your credit, the better their commission of course... this is why the really shady, borderline predatory dealers love people with shit credit (divorce/fraud/unfortunate circumstances), since they hit you with 10%++ and/or the GPS module, so that you can't make a payment - it gets repoed (where they will likely take the car back for a nominal fee from said service provider) and resell it again.
Deal Expert
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Aug 18, 2005
20922 posts
5489 upvotes
Burlington-Hamilton
mikeymike1 wrote: Agreed, we have actually caught a few auto dealers in our dealer network doing that exact thing.
Result was charge back of the finace reserve and cancellation of the dealer agreement. Now they have one less finance option.
Since this behaviour appears to be in breach of some kind of agreement or contract, it suggests that the dealership offering it is inherently dishonest.

I would walk away from the deal. If the dealership is willing to misrepresent things to their finance partners, they're willing to be dishonest to their customers as well.
- casual gastronomist -
Deal Fanatic
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Sep 9, 2012
5501 posts
4675 upvotes
Oakville, ON
Jucius Maximus wrote: Since this behaviour appears to be in breach of some kind of agreement or contract, it suggests that the dealership offering it is inherently dishonest.

I would walk away from the deal. If the dealership is willing to misrepresent things to their finance partners, they're willing to be dishonest to their customers as well.
This. It also tells me that they’ve probably puffed up the vehicle’s price by the $1,300 value of the kickback. I bet they’d say NO if OP countered with asking them to take $1,300 off the price and he’ll take the loan so that they can have the loan commission themselves. They know the bank will claw it back when OP pays it off after a week.
Deal Addict
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Nov 2, 2008
1653 posts
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The Capital
Jon Lai wrote: Considering the size of the kickback, it really begs the question how much is the bank giving them? Can't imagine the dealership doing this only for a couple hundred bucks?
It is a couple hundred bucks upwards of thousands... all depending on the buyers credit & lender

The thing is new cars don't have too much profit, hence why they push you on buying additional shit. Ie. Overpriced "tint" for 500$, when it really costs 200$ wholesale to do a car. "rust modules", mats, mudguards.
With the covid used car shortage, some dealers try to do this with used cars, really pushing "3rd party warranty" as well. Say, a basic one is ~700$, but the dealer sells its for ~1100$... easy money.
*This is one of those things that I've bought in the past, but again, I get at cost due to my relationship. I've seen some of that larger dealers really hose their clients with this...

A bunch of little things add up... including the bank commission to yield pure profit(s)...

I mean, a couple hundred bucks pays the base rate of all the sales floor over an hour or two (min./low wage, assuming no sales made over that hour/two) for a dealership...
Deal Fanatic
Apr 16, 2007
8127 posts
3459 upvotes
Financial District B…
Jon Lai wrote: Considering the size of the kickback, it really begs the question how much is the bank giving them? Can't imagine the dealership doing this only for a couple hundred bucks?
The payout reserve is highly predicated on signed rate on the contract
Banks with auto-loan dealer plans offer their dealer network a interest rate scale.
ie: If they sign up a customer at 3.50% the reserve may be $300
If signed at 4.50% the reserve may be $500
If signed at 6.25% the reserve may be $700 etc etc
Rate scale can be anywhere from 3% up to 9.75% subject to qualifying, subject to vehicle age, subject to amount to be financed.
----------------------------Licensed Credit Bureau member, S1, FI Automotive, CCP forums most banned = x 13 and counting, guess who that is?... stomped to the curb once again

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