Blowing The Lid Off Of Credit Union Referral Fees

Hey Cool Car Fans,

As The Cool Car Guy I have been buying, selling, trading, consigning and leasing vehicles for people around the country for the past seven years.  I have my salesperson’s license hanging on the wall at a local car dealership here in Denver, Colorado.  I’m very selective about the company I keep in this industry that has such a “great reputation”. This article is not going to make a number of used car dealerships very happy, but I believe the truth will set you free and save you money.

Once in a while, I will have a client who contacts me that they went to their credit union to get approved on their own and their friendly loan officer recommended that they go to a local “buying service”.  Unfortunately, what the consumer doesn’t know is that there are no real “buying services” per se’, but they have been recommended to go to a car dealership that is no different than any other car dealer in town.  What makes them a “buying service” is the fact that this car dealership, that has been “highly recommended” to the buyer by the credit union, has an “arrangement” with the Credit Union.

The arrangement usually goes like this:

A decision maker at the credit union has been contacted by a dealership that “specializes” in working with Credit Unions.  How do they specialize?  Each time the credit union refers one of their clients to the dealership, the dealership will in turn give a commision or what some may call a “kickback” to the credit union for sending their clients to them.  This can turn into additional income for the credit union at the expense of the consumers, who are not fully aware of the commission and the “arrangement”.  Let’s face it, there is no free lunch and the only way the dealership can pay the commission to the credit union, is if they build it into the price of the vehicle. Unlike banks, are not credit unions supposed to look out for the best interest of their “Members”? Let’s see if that is true based on the following situation.

I delivered a vehicle last month to a buyer who worked with their credit union to get financing, but wanted a vehicle that a client of mine had me consign for them.  While I was there, I said to the loan office, “Hey, here’s some of my cards in case you have anyone looking for a vehicle and I’ll be happy to assist them for you.”  Her response was, “I can’t do that, but I wish I could because so many people know you.  I can only recommend “XYZ Car Dealership” because of the arrangement our credit union has with them.”  I said, “Really?  How much are they paying you for each referral?  Fifty dollars, a hundred dollars or more?”  She said, “I’m not at liberty to say.”.   Now I ask you, does that seem like a good deal for the Member?

The arrangement also usually means that the dealership will allow the credit union to underwrite the loan and they will not shop it for the client with other lenders.  Why would they?  They don’t want to jeapordize the “arrangement” that they have with the credit union by getting the person a better rate at a bank or other credit union.

I don’t operate this way.  I give people movie tickets out of my own pocket when they refer someone to me because I think it’s a much cleaner transaction for all parties involved.  I’ve had people refuse to refer people to me unless I paid them $250 for a referral and they instead refer them to other “brokers” – lol.  On the contrary, when I handle the financing for a client, the bank or credit union is often paying me a commission to put the loan with them, rather than the other way around.  They are going to give me the best rates possible because they know that I may not place the loan with them, unless they give me the best rate for my client and it makes sense for everyone involved.

Besides the credit unions that take an incentive for referrals to car dealerships, bankruptcy attorney’s often take even much larger commissions for sending their clients to car dealers.  That again is going into the cost of the vehicle, that could be used for reconditioning or getting someone a lower interest rate, mechanical repairs, etc.  Many of these dealers will not even recondition or properly check out the vehicles before sending them down the road.  I’ve had some of these people contact me, after the fact, and they are in a worse financial position with their vehicles than before they filed for bankruptcy.

So before you just hop into a deal with a car dealer, make sure you know what you’re getting into and who else is on the take for your transaction before you sign on the dotted line.  It’s always Buyer Beware when buying a motor vehicle, especially a used one.   Once you buy it – you own it.

That’s what makes me different as The Cool Car Guy.   I recondition vehicles, check them out with third-party safety inspections by certified mechanics, I make sure that the person getting the vehicle is getting the most bang for their buck, I don’t give “kickbacks” to anyone and I still earn a fair profit in the process that my clients are happy to pay me for my personal service.

John Boyd

Auto Consultant – John Boyd: The Cool Car Guy

John is an auto consultant with his license at a car dealership in Denver, Colorado. He can help you save time and money on any make or model, new or used, lease or purchase – nationwide! Call or email John about your next vehicle! or Twitter @coolcarguy