Beehive Direct vs Dealer Indirect Automobile Loans
Shane Berger, President/CEO
When you finance the purchase of an automobile, you have choices. You may finance directly with Beehive or through the finance manager at a dealership. Either option can result in a loan to get you behind the wheel of your new car. But Beehive and auto dealers compete for your auto loan and there are many differences, advantages, and disadvantages between Beehive Direct and Dealer Indirect financing of which you should be aware. During the coming months we will produce articles, videos and website posts to make the case that a Beehive direct loan is your best choice and will almost always save you money. Providing this information is not meant to disparage dealers, only to point out some dealer tactics that could significantly impact the cost of your automobile financing. The following is one example. We will educate you about others in the future.
Many dealers have agreements with banks or credit unions regarding customer auto financing. The dealer agrees to originate loans with the customer and the bank or credit union buys or assumes the loans and services them. The arrangements between financial institutions and some dealers allow them to mark up the interest rate a customer is charged to a rate much higher than market rates. For example: recently a dealer marked up the rate of a Beehive member auto loan to 8% when that individual could have qualified for a direct loan from Beehive with a rate as low as 4.5%. On a $25,000 loan repaid over 72 months, the member would have paid almost $3,000 more in interest. That is a big price to pay for the convenience of financing at the dealership. The dealer and the bank or credit union often have an agreement that allow them to split the interest income from the “marked-up” rate, so both parties benefit at your expense.
Please know that Beehive is an advocate of our members and has NEVER allowed a dealer to mark up your rate. This is one of many reasons why you should finance your automobile directly with your member-owned financial cooperative…Beehive Federal Credit Union. Watch the website and future newsletters for more examples of how to save money with a Beehive Direct Auto Loan.