How does financing and different interest rates work at bike dealerships?

[Bloodshot]

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So I've recently been interested in a new Yamaha. Perusing their website it's showing an offer for .99% APR this month. Sounds like a good deal.

But reading the forums, it looks like dealers don't have to give you that rate. Is it arbitrary, or solely based on your financial situation?

My credit is stellar. I have a reasonably well paying job. I'm able to put down a few grand as down payment. Is this enough to give me that rate or would they still pull the old bait-and-switch and say i don't qualify for the best rate?

Thanks.

 

[Lightcycle]

Motorcycle and car dealerships are incented to move vehicles, because that's their primary business.

If you've got even half decent credit, their finance departments will move heaven and earth to get you out the door with a new car or bike.

Banks are a bit more discerning about credit checks, because lending is their primary business.

As an aside, at 0.99% APR, I'd put as little as I could ($0 is preferable) as a down-payment and have that money earning more in a higher interest savings account or Money Market fund. Easy money.

 

[guzzirider]

So I've recently been interested in a new Yamaha. Perusing their website it's showing an offer for .99% APR this month. Sounds like a good deal.

But reading the forums, it looks like dealers don't have to give you that rate. Is it arbitrary, or solely based on your financial situation?

My credit is stellar. I have a reasonably well paying job. I'm able to put down a few grand as down payment. Is this enough to give me that rate or would they still pull the old bait-and-switch and say i don't qualify for the best rate?

Thanks.

It is not only just your credit rating that effects the rate.
Certain areas of the country have better prospects than others and that effects everybody's rates in that area.
In the early 2020s the low oil prices was pushing up layoffs and loan defaults in Alberta so nobody was getting the preferred rate
whereas Saskatchewan was looking better and people could finance for less.

 

[Lightcycle]

It is not only just your credit rating that effects the rate.
Certain areas of the country have better prospects than others and that effects everybody's rates in that area.
In the early 2020s the low oil prices was pushing up layoffs and loan defaults in Alberta so nobody was getting the preferred rate
whereas Saskatchewan was looking better and people could finance for less.

Most vehicle manufacturer subvented finance rates are national programs, not provincial.

The one that OP is talking about is offered via Yamaha Financial Services:

 

[Mad Mike]

So I've recently been interested in a new Yamaha. Perusing their website it's showing an offer for .99% APR this month. Sounds like a good deal.

But reading the forums, it looks like dealers don't have to give you that rate. Is it arbitrary, or solely based on your financial situation?

My credit is stellar. I have a reasonably well paying job. I'm able to put down a few grand as down payment. Is this enough to give me that rate or would they still pull the old bait-and-switch and say i don't qualify for the best rate?

Thanks.

Chances are the financing is done thru a bank, dealerships/manufacturers buy down the rates (basically they pay the bank the difference between the banks rate and what they charge you).

Auto/motorcycle loans are secured instalment loans - the easiest to qualify for and have the lowest rates. If you’re above 650 or have more than 42% of your gross income going to loans and mortgage/rent, you should qualify for the posted rate.

 

[Sochi]

I bought my Yamaha in 2022 with manufacturer promo 0% loan and 3 months no payments delay (covered the winter months), it was an easy process and dealer told me right away that if my credit score is "good" I'll get it.
My issue was that they did run my Credit Score check x2 times! One by dealer and one by Yamaha Credit and that dropped my score number by 6 points! (I have subscription to Equifax so I get email right away with every change).
I still don't know if it's possible to have it checked only once only or if it's a standard process - so might worth to ask them abotu this..

 

[nakkers]

They can basically do as they wish. There is the lender criteria and what stock the dealer is trying to move. If the machine is in demand, they do not have to offer the incentive. Or they may have a discount for service or merchandise at time of purchase but, the financing isn’t part of the package.

Most dealers can explain it easily. Your credit, career and residential status will be the factors on best lender rates. The actual promo is to move the product that is costing the dealer and supplier money for sitting on the showroom.

 

[GreyGhost]

Most vehicle manufacturer subvented finance rates are national programs, not provincial.

The one that OP is talking about is offered via Yamaha Financial Services:

View attachment 75006

I'd run the numbers, but using your strategy, my initial inclination is 48 months at 1.99%. I financed my current car for seven years as that was the longest I could stretch out 1.99%. OP also needs to check out what the instant rebates are that are missed when financing and run that math too. Without all of the numbers, there is no path that is guaranteed to be the best.

 

[Mad Mike]

I bought my Yamaha in 2022 with manufacturer promo 0% loan and 3 months no payments delay (covered the winter months), it was an easy process and dealer told me right away that if my credit score is "good" I'll get it.
My issue was that they did run my Credit Score check x2 times! One by dealer and one by Yamaha Credit and that dropped my score number by 6 points! (I have subscription to Equifax so I get email right away with every change).
I still don't know if it's possible to have it checked only once only or if it's a standard process - so might worth to ask them abotu this..

That is a dealer trick. They know running your credit score lowers your credit score a bit and they do it to qualify you as a prospective customer before investing time in a sale.

They know if they drop your score, it will be higher than the next dealer, so if you’re shopping around the next dealer sees an owner score. See 6 dealers and your score drops each successive credit check.

Car dealers do this too

Advice: when shopping a car, boat, bike or power sport product, never let a dealer run a credit check until the moment you are ready to sign.

The reason this happens is a bit of a long explanation, but dealers understand it and do it for their own benefit.

 

[timtune]

They know if they drop your score, it will be higher than the next dealer, so if you’re shopping around the next dealer sees an owner score. See 6 dealers and your score drops each successive credit check.

This is why I put no stock in credit scores. My credit is is mortgage free property.

 

[Mad Mike]

This is why I put no stock in credit scores. My credit is is mortgage free property.

That’s good for credit, but may not be a good financial plan.

Getting a mortgage 5 years then placing those funds in conservative investments with a wealth planner would have generated enough cash to pay off that mortgage by now.

Even today, borrowing $200k at 4% would cost $8k a year in interest. conservative investments should generate $20-24k, an easy way to make a $1000 a month.

 

[Robp]

The best thing about credit scores, is that the number you see isn't the same one they see.

Why Are Credit Scores Different for Consumers vs. Lenders? | Equifax

Your credit scores may appear different for lenders versus when you look at your credit report. Learn more about the different factors that may affect your credit scores here.

www.equifax.com

 

[GreyGhost]

The best thing about credit scores, is that the number you see isn't the same one they see.

Why Are Credit Scores Different for Consumers vs. Lenders? | Equifax

Your credit scores may appear different for lenders versus when you look at your credit report. Learn more about the different factors that may affect your credit scores here.

www.equifax.com

While they may be different, they should be close. If you see 850, the number they see will be good enough that the exact number doesn't matter. If you see 650, the number they see may be different enough to matter.

 

[NuggyBuggy]

Motorcycle and car dealerships are incented to move vehicles, because that's their primary business.

The primary business of car and motorcycle dealerships is not selling vehicles.

They make money by selling service, upselling high-margin products like rustproofing and extended warranties, making money from financing, and making money selling trade-ins purchased at low cost.

It's not uncommon for car dealerships to lose money on any given sale.

 

[PrivatePilot]

Even today, borrowing $200k at 4% would cost $8k a year in interest. conservative investments should generate $20-24k, an easy way to make a $1000 a month.

Where are you getting a $200k loan at 4% and getting ~12% on “conservative” investments right now?

 

[GreyGhost]

Where are you getting a $200k loan at 4% and getting ~12% on “conservative” investments right now?

A 4% mortgage is in the ballpark of currently available rates. A more flexible loan would probably be closer to 5%. As for conservative investment at 12%, I think that's pushing the definition. Something like S&P index fund gets you close to that return and there is zero chance of permanently losing a substantial chunk of your money. There is a high chance that you lose some money for some time though. Also dividends from that fund wouldn't cover mortgage payments on the borrowed money.

When traditional conservative investments like bonds return less than the real rate of inflation (Canada's headline numbers are political.pandering and have major problems like including housing at grossly under what the vast majority pay), I don't consider them that conservative. Sure, the number grows but you are locking in a loss in purchasing power. Painful.

 

[800over]

That is a dealer trick. They know running your credit score lowers your credit score a bit and they do it to qualify you as a prospective customer before investing time in a sale.

They know if they drop your score, it will be higher than the next dealer, so if you’re shopping around the next dealer sees an owner score. See 6 dealers and your score drops each successive credit check.

Car dealers do this too

Advice: when shopping a car, boat, bike or power sport product, never let a dealer run a credit check until the moment you are ready to sign.

The reason this happens is a bit of a long explanation, but dealers understand it and do it for their own

This is not normal practice. Most car and motorcycle dealers do not run your credit in Canada before you are asking for financing. No one is running your credit without your permission except the rarest of scumbags. Social media is too powerful. Having said that if they are running your credit you should already have a signed deal.

 

[Lightcycle]

The primary business of car and motorcycle dealerships is not selling vehicles.

They make money by selling service, upselling high-margin products like rustproofing and extended warranties, making money from financing, and making money selling trade-ins purchased at low cost.

It's not uncommon for car dealerships to lose money on any given sale.

The topic is not about *where* dealerships make most of their profit margin on, but about *how stringent* the requirements for credit are at a dealership.

OP's original question:

My credit is stellar. I have a reasonably well paying job. I'm able to put down a few grand as down payment. Is this enough to give me that rate or would they still pull the old bait-and-switch and say i don't qualify for the best rate?

My response is that banks are more stringent about enforcing credit-worthiness, because the loan in and of itself is the primary revenue generator. A risky loan impacts a bank's bottom line.

By contrast, a dealership can afford to be less stringent because of the follow-on business with parts and service and the up-sell opportunity when the customer returns to the store on a regular basis. Also, there are secondary benefits to moving inventory because most dealers' allocation for new models are dependent on how many units they've previously sold.

More units sold in the past = more units allocated by the manufacturer in the future to that dealer.

But all of this is predicated by first getting the vehicle in the customer's possession. No unit sold = no service sold, no extended warranty sold, no financing business, no future trade-ins

 

[Lightcycle]

Where are you getting a $200k loan at 4% and getting ~12% on “conservative” investments right now?

Curious too.

100% safe investment to me is a HISA or Money Market. As of today, (apart from introductory/promotional teaser rates) they are hovering around 3%.

Dividend aristocrats like Enbridge are paying out 6%.

A 12% return would be phenomenal if it was truly conservative.

My ears are open!

 

[Mad Mike]

This is not normal practice. Most car and motorcycle dealers do not run your credit in Canada before you are asking for financing. No one is running your credit without your permission except the rarest of scumbags. Social media is too powerful. Having said that if they are running your credit you should already have a signed deal.

Yes they do, it’s common practice.

When I was a banker I’d often see a slew of credit checks when people were shopping for cars.

Yes dealers get permission, but it’s not after the customer commits to purchase.

Is it illegal? No. But take it for what it’s worth - dealers do it to advantage themselves in the sale knowing full well the consumer doesn’t really understand the implication of a pre-application credit check.

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