Purchase note: does (very) early payoff cost the dealer?

Just to be clear, I asked two questions.

The first was related to any adverse impact of an early pay off of the loan on the waived lease turn in charges. That is clearly NOT addressed in the loan contract. Its not clear to me why anyone thinks that this would be addressed in the loan contract. The loan contract addresses early payoff, but not its relationship to waiver of lease turn in fees for a different car.

As I've thought about this more about this issue over the past couple of days, I realize that BMW FS really has no way to recoup the waived lease turn in fees from me once I pay off the loan since they will not have any of my money to dock (they have already sent me the end of lease statement and I expect a check for my full security deposit to arrive soon). So, from that end, I think I can pay off the loan as soon as I want.

The second question related to any adverse impact of an early payoff on the dealer (actually the finance guy). That is also clearly NOT stated in the loan contract. Why anyone would think that the loan contract would spell out the details of compensation (i.e., incentive payments) to the finance guy at the dealer is bizarre.

I realize that the finance guy at the dealer makes his living based on originating loans and leases and he has been very upfront and helpful in our transactions. This is the 4th BMW we have leased/purchased from this dealer in the past 5 years and he has "closed" each of our deals. He has not been pushy about any of the add ons, such as tire insurance, and has been very efficient and friendly in processing the paperwork and getting us on our way. This past weekend he even gave our son some pointers on Angry Birds (he was playing on our iPAD while we were completing the deal). I went in to the closing thinking that the best rate from BMW FS was 4.9%, which is what they show on the website. The finance guy immediately told us that we qualified for a loyalty discount, which he did not have to do since we had already decided to finance the car and pay of quickly even before he mentioned the lower rate. Based on earlier posts in this thread and the advice from the finance guy, I think we will pay off the loan in 3-4 payments and hope that does not have an adverse impact on his compensation.

Thanks for those who tried to be helpful in answering my questions.

John

In defense of ard:

He makes no bones about being a curmudgeon, and while he is never exactly "warm and fuzzy" he is usually helpful, and often shows a nice sense of humor. From time to time he does cross over the line from "curmudgonly-ness" to "a-holiness", but then so do I.

The last time ard got this worked up it was because someone made an insulting comment about short people. (He is 4' 9" - recent photo attached).

Again, I do applaud you for trying to be "fair" to the F&I guy - sounds like you've got a good one, and not all of us can say the same. (If you took notes onthe Angry Birds tips, feel free to OM those to me).

Originally Posted by Daniel@Pacific BMW

The dealer does get paid from the bank for originating the loan so if you pay it off early they can be charged back. The time frame of 4 months that the finance advisor told you sounds about right, so if it matters to you that they get there money you need to make at least that many payments. As far as you yourself getting charged I know, at least in California, that BMW Financial does not have any pre-payment penalty. So you can pay it off early and you don't get penalized regardless of how much time has gone by. Hope this helps.

Bingo! We have a winner. btw, notice the poster's title.

For those of you who care about the dealer that you obtained your financing from... wait until after having made your 4th payment to pay off the loan and there will be no financial repercussions of any kind to your dealer.

On another note... those of you in 0.9%/1.9% loans shouldn't be looking at them as debt but, as an opportunity to make money. I don't know about you but, I earn more than 2% on my investments. You earn a negative rate of return when you pay cash for your car (it becomes worth less as each money passes by). I have a BMW financed with BMW FS for 0.9% and the only way I'd prepay it is if I sell/trade the car

We had a small credit at the end of the day (<$100) from refi'ing. Got a check in the mail from BMW FS. No worries on getting "docked" there was no prepayment penalty. The only complication we had was that when the new lender tried to get the payoff info it wasn't available yet since it was just 3 days after taking delivery of the X5.

It worked out that our new lender is also the bank that BMW FS uses. We tried to get them to use "new" car rates, but they said as long as the vehicle has already been titled (BMWFS) then they have to use "used" rates. Still saved more than 2%.

While buying I had 2 options, 0.9% APRs or 6.9% APRs + 2 years "free" maintenance for around $1300 (regular value is about $2400 I believe). None of the documents I signed have any wording about early payoff penalties. I paid the loan off after 2 months. Before paying it off, I called BMWFS to double check. The Customer Rep. said there are no penalties (the same states my BMWFS loan agreement). A finance guy from the dealer called me, saying he got a notice from BMW North America saying I'll have to pay a bill for around $1100 due to the early pay off.

Based on your emails and my loan/maintenance documents, I'm thinking the dealer is trying to make me pay the penalty they got from BMW.

What are you guys thinking?
Thanks!

Originally Posted by mplanet

While buying I had 2 options, 0.9% APRs or 6.9% APRs + 2 years "free" maintenance for around $1300 (regular value is about $2400 I believe). None of the documents I signed have any wording about early payoff penalties. I paid the loan off after 2 months. Before paying it off, I called BMWFS to double check. The Customer Rep. said there are no penalties (the same states my BMWFS loan agreement). A finance guy from the dealer called me, saying he got a notice from BMW North America saying I'll have to pay a bill for around $1100 due to the early pay off.

Based on your emails and my loan/maintenance documents, I'm thinking the dealer is trying to make me pay the penalty they got from BMW.

What are you guys thinking?
Thanks!

Tell him you want to see the "notice". Then pass it along to your state attorney general. This is beyond shady - it is a crime.

And do everyone else on here a favor by posting the name of the finance guy and the BMW Center he works at.

If this turns out to be the scam I'll consider taking some serious steps. At this point I'll hold off with the name and details. I'm planing to call BMW directly, confirm this is the scam and fill out the official complain. Do you have any advice who should I contact? My guess is the general Customer Relations: 1-800-831-1117.

Additional question, is this a common procedure to sign Arbitration Agreement prior signing the contract? I signed this and I'm wondering how does that limit my legal steps.

ARBITRATION AGREEMENT??????? I am on my 7th BMW and never signed one. And I spend a lot of time on Bimmerfest and never heard of anyone else signing one either. Something is very, very wrong.

BTW you will find you are wasting your time calling BMW.

Originally Posted by quackbury

ARBITRATION AGREEMENT??????? I am on my 7th BMW and never signed one. And I spend a lot of time on Bimmerfest and never heard of anyone else signing one either. Something is very, very wrong.

BTW you will find you are wasting your time calling BMW.

Have you read the fine print on your purchase and sales agreements? An arbitration agreement is VERY common these days, it is usually one of the boxes you sign on the purchase and sales agreement. Most people glance right over it and just sign it without reading what they just agreed to. I'd be willing to bet you that you've signed at least one, if not more, on your recent purchases.

Originally Posted by mplanet

A finance guy from the dealer called me, saying he got a notice from BMW North America saying I'll have to pay a bill for around $1100 due to the early pay off.

Based on your emails and my loan/maintenance documents, I'm thinking the dealer is trying to make me pay the penalty they got from BMW.

What are you guys thinking?
Thanks!

My comments mirror quacks...

It is really shocking how brazen these guys are... they just assume people are idiots. And when they get caught they'll just lie and say they never said it or you misunderstood.

Screw them, pay it off.

A

Lesson learned for the future. I'm not going to pay $1100. I'll try with BMW and then I'll post the feedback.

Many Thanks

Originally Posted by SARAFIL

Have you read the fine print on your purchase and sales agreements? An arbitration agreement is VERY common these days, it is usually one of the boxes you sign on the purchase and sales agreement. Most people glance right over it and just sign it without reading what they just agreed to. I'd be willing to bet you that you've signed at least one, if not more, on your recent purchases.

Interesting. I checked and there is NO arbitration clause in my purchase and sales agreements. However, there is one buried in tiny type on the back of my lease agreements. I did not have to sign or initial it.

Originally Posted by ard

My comments mirror quacks...

It is really shocking how brazen these guys are... they just assume people are idiots. And when they get caught they'll just lie and say they never said it or you misunderstood.

Screw them, pay it off.

A

Interesting that the F&I guy CALLED the OP, presumably so there would not be a paper trail. Bet this wasn't the first time he's tried this, and makes you wonder if he was successful getting other "sheep" to pay up.

But how would the Center defend itself if a customer cut a $1,100 check, and then had second thoughts? Pretty brazen and dangerous game this jamoke is playing - makes you wonder if his management knows?

Originally Posted by quackbury

But how would the Center defend itself if a customer cut a $1,100 check, and then had second thoughts? Pretty brazen and dangerous game this jamoke is playing - makes you wonder if his management knows?

Managment absolutley knows, and is the one forcing the F&I manager to make this call. Any money a customer pays to the dealership has to be accounted for, in order for this money to be added back into the deal and the finance manager repayed for his charge back it would require several other people at the dealership to oversee and approve. Nobody in any business writes their own checks for this reason.

In most states pre payment penalties are illegal. I could not find anything for auto loans in Illinois, but for mortgages the buyer must be given a discounted rate and sign that he declines a no prepayment loan.

to be honest, it's bad business for BMw to provide a upfront discount assuming customers do not repay a "repayable at anytime" loan.

Originally Posted by quackbury

Interesting that the F&I guy CALLED the OP, presumably so there would not be a paper trail. Bet this wasn't the first time he's tried this, and makes you wonder if he was successful getting other "sheep" to pay up.

I'll do you one better:

When people complain to BMWNA consumer relations about 'issues', those little c__ts will NEVER respond via email or mail- they call. If you do not give them a phone number that will send you a note telling you to send them a number, or asking you to call them.

As a corporate policy they actively avoid any accountability.

Originally Posted by mplanet

A finance guy from the dealer called me, saying he got a notice from BMW North America saying I'll have to pay a bill for around $1100 due to the early pay off.

I can see the dealer being steamed about the penalty but holy cow that's seriously underhanded. . .

any updates from the OP?

Calling BMWNA Customer service is indeed waste of time, no help at all. BMWNA provides service & maintenance but they do not send invoices directly to customers (BMWFS does).
BMWFS customer rep was actually helpful and confirmed - no penalties for early pay offs.

So now that you have verified the "truth", how are things playing out with the dealer?

Wanted to bump up this thread and see if anyone knows for sure if I must keep the BMWFS loan for 4 month or 6 month in order for the dealer not to get hit with chargebacks from BMWFS. My dealer mentioned 6 month but I read that it's 4 month elsewhere.
Does anyone know for sure?

Man I was such a dick....

(My 2010 was in the middle stages of lemoning... but still.)

A

PS I'd go with 4 months based on multiple BMW sales people confiorming this. That is for a BMWFS note.

Thanks ard. I also posted in ask a dealer just to confirm.

4 months i.e. you have to make at least 4 payments and dealer does not get charged back...

Thanks so much. Scheduling those payments right now. Gotta love the BillPay.