Lenders are showering dealership finance managers with cash and fancy gifts to steer customers their way.
Some lenders pay finance managers bonuses of $50 to $75 for every car loan they arrange. That can add up to tens of thousands of dollars a year in extra income. Others lenders enable managers to earn trips, plasma TVs, furniture and designer jewelry.
Gift-givers include such large national and regional lenders as Chase Auto Finance, Fifth Third Bank, U.S. Bank and AmTrust Auto Finance. And a lot of dealers don't like it.
The practice is neither new nor illegal. But dealers say banks are getting more aggressive and generous in offering incentives to dealership employees.
Some dealers allow finance managers to accept the payments. But many other dealers declare the incentives off-limits. They say such arrangements encourage dealership employees to prod buyers to finance vehicles through banks that provide the most appealing goodies, instead of those that offer the lowest interest rates.
Two years ago, Randy Fuller, a Ford and Jeep dealer in Show Low, Ariz., discovered that his finance manager was sending most of the store's loan business to a few banks that paid the manager cash bonuses. Fuller would not identify the banks.
He halted the incentive payments. But last year, Fuller said, another bank offered his finance manager a $50 bonus per finance contract. "I get upset with the banks and tell them to knock it off," Fuller said.
Higher interest rates mean bigger finance charges for the customer.
"We don't let banks pay incentives to our finance managers," said Ken Gilman, CEO of Asbury Automotive Group, the nation's sixth-largest dealership group. "It is not in the customer's best interest."