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Lower price for car if I go with non-VW loan

MichaelB1969

New member
Location
San Francisco
Working with a dealer that is offering a pretty aggressive price on a new GTI under the stipulation that I finance through a bank of their choosing with a higher rate and not through VW. Obviously they are getting commission on the loan in order to subsidize the aggressive pricing on the car.

I would need to keep the loan for 4 months, and then I could pay it off or refinance it with a lower rate. So I'd only have to absorb 4 months of higher interest, or around $160. Not a big deal.

Just curious if anyone has seen this tactic, and also whether or not anyone can see any additional downside on my end that I'm not thinking through.

By the way, my last two cars were an Audi RS5 and a Porsche 911, and I am almost as excited about this GTI! Have always wanted one!

Thanks,
Mike
 

mopar22

Autocross Newbie
Location
Michigan
Car(s)
16 GTI
Most of the time it's through the dealer/vw. most times they have a really great deal but if they come back with a crazy number jsut walk away
 

MichaelB1969

New member
Location
San Francisco
Be curious to see how you came up with $160. Ever look at an amortization schedule?

The higher interest is around 5.5% while the VW financing is 0.9%, so if I keep the loan for 4 months, the delta between the two rates over that 4 month period is about $49 per month. So it's a little more than $160... more like $200.

After the 4 months I'll probably payoff a large portion of it and carry a new lower interest loan of around $12,000 for the remainder, which will probably be at 2.0% - 2.5% APR vs VW 0.9%, which over 60 months is a delta of around $360. So total cost of doing it this way is an incremental $560 ($200 + $360). The purchase price of the car without the initial high interest loan is more than $1,700 higher, so still makes sense. Make sense? :)
 

Diggs24

Autocross Champion
Location
de plains! de plains!
Car(s)
2015 GTI
Assuming simplistic scenario where you finance exactly $30k for 60 months.....

Total interest paid after 4 months on $30k@5.5% is $538.
Total interest paid after 4 months on $30k@0.9% is $88.

$450 more paid.

That money is now gone when you refi. You will then be refinancing $28,687 after making 4 months of payments.

Yes, the 5.5 deal is better as it lowers the price of the car. I'm just saying if there is any way to refi before that 4 months you will be saving a few hundred bucks. Just because they say you have to, unless it is in the contract, then they are just hoping you will so they can get max kickback from whomever they got you the loan with. That's not your problem.
 
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MichaelB1969

New member
Location
San Francisco
Assuming simplistic scenario where you finance exactly $30k for 60 months.....

Total interest paid after 4 months on $30k@5.5% is $538.
Total interest paid after 4 months on $30k@0.9% is $88.

$450 more paid.

That money is now gone when you refi. You will then be refinancing $28,687 after making 4 months of payments.

Yes, the 5.5 deal is better as it lowers the price of the car. I'm just saying if there is any way to refi before that 4 months you will be saving a few hundred bucks. Just because they say you have to, unless it is in the contract, then they are just hoping you will so they can get max kickback from whomever they got you the loan with. That's not your problem.

Yeah, I think our numbers jive, I was just going by my purchase price plus tax and fees which totals $27K vs $30K. Thanks for the tips though, I'll definitely see what the contract states as you suggested.
 

xacid

Passed Driver's Ed
Location
West Reading, PA
You mention you are going to pay off a large portion of it after four months. Why not do a down payment and go with the 0.9% VW is offering instead of refiancing? Is the dealership non-vw loan deal that much better? i.e what is the out the door cost?

An SE should only be around 27-29 out the door pending transmission and dealership.
 

MichaelB1969

New member
Location
San Francisco
You mention you are going to pay off a large portion of it after four months. Why not do a down payment and go with the 0.9% VW is offering instead of refiancing? Is the dealership non-vw loan deal that much better? i.e what is the out the door cost?

An SE should only be around 27-29 out the door pending transmission and dealership.

I guess the dealers don't get the same kickback on a VW loan as compared to other loan providers. So they told me that if I get the VW loan, my cost for the car would go up about $1,700. And this was consistent across a few dealers.

The price I am paying is $24,697 + tax and license fees for a '17 GTI Sport w/ Manual Transmission. List is $29,050.

So comparing going with the 0.9% financing versus the better price, for me it is better to go with the better price (as the math further above in this thread showed).
 

xacid

Passed Driver's Ed
Location
West Reading, PA
I guess the dealers don't get the same kickback on a VW loan as compared to other loan providers. So they told me that if I get the VW loan, my cost for the car would go up about $1,700. And this was consistent across a few dealers.

The price I am paying is $24,697 + tax and license fees for a '17 GTI Sport w/ Manual Transmission. List is $29,050.

So comparing going with the 0.9% financing versus the better price, for me it is better to go with the better price (as the math further above in this thread showed).

That price isn't bad at all. Are they stonewalling on the rate? i.e. for this price it has to be 5.5%? Try to play hardball with them and see if they'll honor the lower price with a lower apr also.
 

MichaelB1969

New member
Location
San Francisco
That price isn't bad at all. Are they stonewalling on the rate? i.e. for this price it has to be 5.5%? Try to play hardball with them and see if they'll honor the lower price with a lower apr also.

Yes, the price is contingent on the loan being just over 5%. But since I will quickly replace that loan with one at a lower rate, doesn't really matter. Another dealer that at first declined to match the price (even though they had one on the lot sitting there), ended up calling me with "good news" that they could match the price. When I asked them if they could match it with the VW loan, they said no. So clearly the loan kickbacks are enabling these dealers to price more aggressively.

This craziness is all the fault of the car manufacturers. They should just set lower prices that are no haggle prices, so dealers can start to compete solely on customer service. Would be better for consumers, and I'd even be fine paying a slightly higher price to avoid all these shenanigans and get a better customer experience.
 

xacid

Passed Driver's Ed
Location
West Reading, PA
Yes, the price is contingent on the loan being just over 5%. But since I will quickly replace that loan with one at a lower rate, doesn't really matter. Another dealer that at first declined to match the price (even though they had one on the lot sitting there), ended up calling me with "good news" that they could match the price. When I asked them if they could match it with the VW loan, they said no. So clearly the loan kickbacks are enabling these dealers to price more aggressively.

This craziness is all the fault of the car manufacturers. They should just set lower prices that are no haggle prices, so dealers can start to compete solely on customer service. Would be better for consumers, and I'd even be fine paying a slightly higher price to avoid all these shenanigans and get a better customer experience.

Toyota tried that with the Scion brand. They had no haggle prices with their "True Pricing". The dealers weren't allow to sell below the price Toyota priced them at. Was shitty imho

And as you said - if VW or all manufacturers just sold all cars at near to cost then most people would be happier when buying cars. Car costs 20k to produce then sell it for like 22k instead of 30k or some random number.

Honestly I think it comes down to the way cars are sold least in the States. Dealership has to buy it from the manufacturer at a cost. Then they try to sell it above invoice so when they knock off money they are still making profit. All I've ever wanted is a dealer to be transparent and say this is how much we buy it for and this is how much we'll sell it for no haggling required.

As for your deal - I hope I can get a similar one when I start shopping around. Looks to be a steal.
 

cW6mT mKviGTi

Ready to race!
Location
Massapequa, NY
So they stated a bank of their choice? Usually it's as long as you dont finance through vw credit you can get the additional discount.

I did the credit app with the bank and they were the ones who got the rate for me through various lenders and i picked the best offer.

In my case capital one auto finance gave me the same rate as the promotional financing that VW credit was offering so it was a win win for me.

Sent from my SM-G935T using Tapatalk
 

cW6mT mKviGTi

Ready to race!
Location
Massapequa, NY
So they stated a bank of their choice? Usually it's as long as you dont finance through vw credit you can get the additional discount.

I did the credit app with the dealer and they were the ones who got the rate for me through various lenders and i picked the best offer.

In my case capital one auto finance gave me the same rate as the promotional financing that VW credit was offering so it was a win win for me.

Sent from my SM-G935T using Tapatalk

Correction, i did the credit app with the *dealer*
I'm curious what financial institution you end up with... just wondering.


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