Talon Honda financing

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Scrappapotamus

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No, I actually got the definition from an article on ConsumerFinanceMonitor.com. Your description wasn't in line with what I remember being told, so I looked it up. But, hey, I'll take your word for it - you learn something new every day.


Also, NADA.org describes it the same way I did in a publication titled Fair Credit Compliance POLICY & PROGRAM:

On March 21, 2013, the Consumer Financial Protection Bureau (“CFPB”) issued a fair lending guidance bulletin to indirect auto finance sources (which the CFPB refers to as indirect auto lenders) stating “that certain lenders that offer auto loans through dealerships are responsible for unlawful, discriminatory pricing” and that lender policies “that allow auto dealers to mark up lender established buy rates and that compensate dealers [for originating credit contracts] in the form of dealer [participation]” create a “significant risk” of fair lending violations.5
Actually your article refers to points. Points being where a lending institution say in the automobile or housing market has a buy rate from their lender and they have the ability to raise the rate, and bank the difference. You're also dealing in larger sums financed where a small bump in the rate can be very profitable. Of course it also refers to implied racism where some may single out minorities and charge them more than say someone who may be more experienced or educated. Automobile dealers are also known to sell extended warranties, gap insurance, paint sealant and the like for inflated costs in these sorts of situations as well. Honda Finance (Not affiliated with their Automotive financing product) is an arm used by Honda and its dealers to facilitate the sale of their products. They have a published rate on their site. Often a dealer is required to participate in these sorts of programs. Ever wonder why the cash price for something is less than the financed price? Lower interest rates sell more product. Read your article again and digest the meaning of the article. Dealer participation is a monetary sum put forth by the dealer or the consumer to secure a lower rate, say for a lawn mower, side by side or a tractor or implement, not a home or automobile. Some dealers don't use these types of programs as they prefer not to participate in relinquishing their profits doing so. Take a moment to Google "current fed lending rate" and see how this compares to Honda's 4.99 % rate. Someone once told me, It doesn't matter what the perceived cost of something may be, it only matters what someone is willing to pay for what they desire. I'm retired from the construction and development industry while my family operates an automobile dealership. While in the building industry, we owned and operated a mortgage business as well. Although I don't claim to know everything, my grasp of finance and lending is fairly extensive.
 
Scoop

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Actually your article refers to points. Points being where a lending institution say in the automobile or housing market has a buy rate from their lender and they have the ability to raise the rate, and bank the difference. You're also dealing in larger sums financed where a small bump in the rate can be very profitable.
The first sentence in the first paragraph (aka the sentence right before the one I quoted) says:

At the CFPB’s auto finance forum on November 14, Director Cordray and other CFPB officials reiterated their distaste for dealer finance charge participation as a method of dealer compensation in the indirect auto finance market.

Two mentions of 'auto finance' in one sentence. No mention of 'larger sums' (e.g., hundreds of thousands for mortgages).

Beyond that, I've financed well over a dozen new vehicles and bought four houses in the past ~25 years, and I've never heard points mentioned when financing a vehicle, only when obtaining a mortgage. I'm no financial analyst, but I'm very well versed in finance, especially consumer lending (and credit risk scoring, the FCRA and the FDCPA, mortgage origination and underwriting).

As I said, I like learning new things every day and will stand corrected. Do you have some credible citations that define dealer participation as dealerships paying part of the cost for a (vehicle) buyer, just to make the sale and get the contract signed? I haven't been able to confirm that.
 
trigger

trigger

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No idea about the stuff you guys are talking about. I do know the last two cars and the TH I bought that the dealer told me they deal with several lending institutions and could probably get me a better rate than my CU. Told them it really didn't matter as I'd probably have them paid off within a yr. They did get me a better rate but then asked me not to pay them off within 6 mos. Whether they get some kind of kick back or it's just so those lenders could actually make some money I have no clue? RV dealer tried to sell me gap insurance which makes no sense bc it's not like a car, you insure them for a certain amount and that's it, they don't go by depreciation like a car.
 
onecreeper

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Their financing is just like cars. They get a loan origination fee (from Honda or a bank)...likely $100-200. You can always tell a knucklehead these days who goes in and wants a "cash price". The price is the price and they may negotiate with you but not because you are paying cash. Remember the dealer GETS their price whether from the bank check or yours. If they do give you a "better rate" they then ask you to not pay it early..like above. The prices are set by Honda so the only real room is off the "premium" they charge when inventory is low. I refused to pay any premium back in 2021 during Covid shortages and finally found an honest dealer. His answer was we make X amount on each one and we value the repeat customer and the service business....we dont gouge on the price upfront. THAT is the right answer.
 
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Scoop

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The dealership (typically the finance manager) asks you to NOT pay the loan off right away because they would have to give back the incentive ($) that the lender pays them for getting you to finance through that lender.

The only reason to NOT go through your CU (or wherever you get the best fixed rate at) is if you're getting additional money up front by going through a different lender. Always do that, then pay the loan off or refinance ASAP somewhere else (assuming you can get a lower rate somewhere else).

On at least 4 occasions, I was offered $1,000 up front if I financed my vehicle purchase through Ford Credit. I got the loan through Ford Credit (and the $1,000), and the very first payment I made was to pay off the loan in its entirety, whether by paying cash or by refinancing through our CU for a lower rate. My regular salesman is the guy who told me to do this. He said he didn't care if we paid it off early, as the only one who will lose money is the dealer (owners) when they have to give back the incentive from Ford Credit. It did not affect him at all. I've saved $4K by doing this.

@trigger - He tried to sell you GAP insurance when you had an agreed value insurance policy? 😂 What a clown!
 
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