[Vic55]

Lets dummy it down...

What the finance manager may have told you is that he is making a split on the rate BMWFS charged you.

EG- the sell rate or the rate on the RIC is 7.99 and his buy rate was 6.99 (FS is a 100 bip cap I think) sooooooooo

you take the payment at 7.99 minus the payment at 6.99 and the difference is multiplied against the term for a dollar amount. Thats the margin but wait there is more!! The dealer only earns a split on that margin and most FS dealers are at a 75/25 split so that finance manger would make 75% of the dollar on margin. But wait there is even more LOL:

EG:

Lets the say the 75% dollar amount is 5000---the finance manager doesnt get that; they get a percentage of that and its normally very small. Sometimes as low as 5%.


That amount is vouchered in his pay and he gets it whenever the dealer process payroll. But FS runs a 90 chargeback in their Master Dealer Agreement meaning if the loan is paid off prior to 90 days from date of contract (or closed account) the 75% split is charged back to the dealer and subsequently that finance manager will get that deduct against a future pay check for what he or she was paid. The dealer usually is on a net monthly payout for reserve from FS so it gets the larger amount on all deals (the 75% part) paid at the end of the month and the chargebacks are hit against that number.

Its really how most finance managers make their money; via reserve (lesser amounts) and a percentage of the net profit on back end products like VSC's, GAP, Mop and Glow LOL, etc.... Most products dont chargeback but VSC's do as they are insurance products and cancelable in nature and so is GAP.

For most larger dealer groups the CA doesnt get much, if any, payout on the back end aka reserve, products but some payplans do include that if they are part of the up front selling process. Their monies are made on a percentage of the gross.

As a buyer your contract is with BMWFS which has no pre pay 90 days or not so that was just the Finance Manager asking for consideration but is up to you. Another thing to ponder is there sales tax in your state. If so you paid it on the original RIC and then most refi lenders will tax you yet again- fuck the double taxation.