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Dealer Relationship Management
Member One Federal Credit Union
One additional reason dealers often actually prefer "flats". Dealer reserve is subject to chargeback for early payoff (typically 90 days). It is not at all uncommon for dealers to write large monthly checks for chargebacks. "Flats" generally are not subject to chargeback (whether paid by banks or CU's) And, with the "enhanced" flats many lenders are paying, the difference between the flat and reserve is relatively small. Remember also that the dealers aren't paid the entire amount of the spread. It is typically split 70/30 with the bank retaining 30%. And also, many F & I people aren't paid a commission on reserve, but only on products sold.
This is just silly. In order to get paid, the dealers will send the loans to a bank which will charge the borrowers other fees in every conceivable way. F&I people at the dealership work on commission, and will send their business where the money is. Why should Member One allow this business to go to a bank?
for those of you that have moved to a flat fee; 1) when you were paying a percentage, how much did you payout as a base and who did you pay when the dealers increased the rates in a buy-up? 2) when you went to the flat fee, did you average what you were paying prior, including the buy-ups; 3) on the flat fee program, did you considered dollar amount tiers and term tiers or do you payout the same regardless of loan amount or term?
Koodos to Member One FCU
Flat rates are what we do at U T Federal Credit Union. And yes, anyone should know and must also accept the fact that in order to get business from dealers there must be an attractive incentive. Next, how can a credit union, being a credit union, even justify allowing dealers to have the a rate markup capability?
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