Finance and Insurance - The Profit Center I would like to make myself clear on a few items of interest before I get too deep into the sales processes at any dealership, including: automobile, recreational vehicles, boats, motorcycle, and even furniture or other big ticket items. A business has to turn a fair profit in order to stay in business. I believe that they should make this profit and use it to pay better quality employees a premium wage in order to serve you better. The financial strengths or weaknesses of any business can definitely have a dramatic effect on your customer service and satisfaction. I do not, in any shape or form, wish to hurt a dealerships profitability, as it is essential for his survival. I merely want to advise people how to negotiate a little better in order to make the profit center more balanced. Let's get right down to this! Every dealership has a finance and insurance department. This department is a huge profit center in any dealership. In some cases, it earns more money than the sale of the automobile itself. Profits are made from many things that most buyers do not understand. You as a consumer should understand the "flow" of the sales process to understand the profit centers that are ahead of you. Most negotiating from the consumer seems to stop after the original price is negotiated and agreed upon. Let's examine just a small portion of what leads up to that point. The first thing that every consumer should understand is that when you go to a dealership several things come into play. One of the most important things that I could point out to you is that you are dealing with a business that has been trained to get the most amount of money from you as they can. They are trained and they practice these tactics everyday, day after day, week after week, month after month, and year after year. Let me point out a couple of important facts that I have said in this paragraph. First, you'll notice that I said a dealership and not a salesman and secondly, I emphasized times of day after day, week after week, etc. etc. This was done to let you know that the salesman is working very closely with the sales managers in order to make as much money as he can. Your interests are really not their objective in most cases. One tactic that is used heavily in the business is that the salesman says he is new to the business. This may be true or not, however; keep in mind that he does not work alone. He is working with store management, who gives him advice on what to say and when to say it. These guys or gals are very well trained on how to overcome every objection that you may have to buying from them. They have been trained in the psychology of the buyer and how to tell what your "hot buttons" are. They listen to things in your conversation that you may say to one another as well as to the salesman. They are trained to tell their desk managers everything that you say and then the desk manager is trained to tell the salesman exactly what and how to answer you. A seasoned salesman does not need as much advice from his desk and may negotiate a little more with you directly without going back and forth. The process of negotiation begins the moment that you walk into the front door or step foot out of your car and begin to look at vehicles. Different stores display inventory in different ways. This is done for crowd control or more commonly known as "up control". Control is the first step in negotiating with a customer. Ever who asks the questions controls the situation. Let me give you an example: A salesman walks up to you and says "Welcome to ABC motors, my name is Joe, and what is yours?" The salesman has just asked the first question- you answer "My name is George." He then asks you what you are looking for today, or; the famous "Can I help You?" As you can see, step after step, question after question, he leads you down a path that he is trained to do. Many times a well trained salesperson will not answer your questions directly. In some cases, they only respond to questions with other questions in order to avert the loss of control. An example of this could be something like you asking the salesman if he has this same car with an automatic rather than a stick shift. Two responses could come back to you. One would be yes or no, the other could very well be something along the lines of: 'don't you know how to drive a stick shift?" In the second response the salesman gained more information from you in order to close you. Closing means to overcome every objection and give your customer no way out other than where do I sign. The art of selling truly is a science of well scripted roll playing and rehearsal. We have established that the negotiating process begins with a series of questions. These questions serve as two main elements of the sales process. First and foremost is to establish rapport and control. The more information that you are willing to share with you salesman in the first few minutes gives him a greater control of the sales process. He has gathered mental notes on our ability to purchase such as whether you have a trade in or not, if you have a down payment, how much can you afford, are you the only decision maker (is there a spouse?), how is your credit, or do you have a payoff on your trade in? These are one of many pieces of information that they collect immediately. Secondly, this information is used to begin a conversation with store management about who the salesman is with, what are they looking for, and what is their ability to purchase. Generally, a sales manager then directs the sales process from his seat in the "tower". A seat that generally overlooks the sales floor or the sales lot. He is kind of like a conductor of an orchestra, seeing all, and hearing all. I cannot describe the entire sales process with you as this varies from dealer to dealer, however; the basic principals of the sale do not vary too much. Most dealerships get started after a demo or test drive. Usually a salesman gets a sheet of paper out that is called a four square. The four square is normally used to find the customer's "hot points". The four corners of the sheet have the following items addressed, not necessarily in this order. Number one is sales price, number two is trade value, number three is down payment, and number four is monthly payments. The idea here is to reduce three out of the four items and focus on YOUR hot button. Every person settles in on something different. The idea for the salesman is to get you to focus and commit to one or two of the hot buttons without even addressing the other two or three items. When you do settle in on one of the items on the four square, the process of closing you becomes much easier. One thing to keep in mind is that all four items are usually negotiable and are usually submitted to you the first time in a manner as to maximize the profit that the dealer earns on the deal. Usually the MSRP is listed unless there is a sales price that is advertised (in may cases the vehicle is advertised, but; you are not aware). The trade value is usually first submitted to you as wholesale value. Most dealers request 25-33% down payment. Most monthly payments are inflated using maximum rate. What this all boils down to is that the price is usually always negotiable, the trade in is definitely negotiable, the down payment may be what you choose, and the monthly payment and interest rates are most certainly negotiable. If you do your homework prior to a dealership visit you can go into the negotiation process better armed. You still need to keep two things in mind through this process. The first item is that you are dealing with a sales TEAM that is usually highly skilled and money motivated. The more you pay the more they earn. The second item to remember is that you may have done your homework and think that you are getting a great deal and the dealer is still making a lot of money. The latter part of this statement goes back to the fact that it is essential for a dealer to make a "fair" profit in order to serve you better. Once your negotiations are somewhat settled, you are then taken to the business or finance department to finalize your paperwork. Keep in mind that this too is another negotiating process. In fact, the finance manager is usually one of the top trained sales associates that definitely knows all the ins and outs of maximizing the dealerships profit. It is in the finance department that many dealers actually earn more than they earned by selling the car, boat, RV, or other large ticket item to you. We will break these profit centers down for you and enlighten you as to how the process usually works. Remember that finance people are more often than not a superior skilled negotiator that is still representing the dealership. It may seem that he or she has your best interests at heart, but; they are still profit centered. The real problem with finance departments are that the average consumer has just put his or her guard down. They have just negotiated hard for what is assumed to be a good deal. They have taken this deal at full faced value and assume that all negotiations are done. The average consumer doesn't even have an understanding of finances or how the finance department functions. The average consumer nearly "lays down" for anything that the finance manager says. The interest rate is one of the largest profit centers in the finance department. For example, the dealership buys the interest rate from the bank the same way that he buys the car from the manufacturer. He may only have to pay 6% to the bank for a $25,000 loan. He can then charge you 8% for that same $25,000. The dealer is paid on the difference. If this is a five year loan that amount could very well be $2,000. So the dealer makes an additional $2,000 profit on the sale when the bank funds the loan. This is called a rate spread or "reserves". In mortgages, this is disclosed at time of closing on the HUD-1 statement as Yield Spread Premium. This may also be disclosed on the Good Faith Estimate or GFE. You can see why it becomes important to understand bank rates and financing. Many finance managers use a menu to sell aftermarket products to you. This process is very similar to the four square process that I discussed in the beginning. There are usually items like gap insurance, extended service contracts, paint and fabric guard, as well as many other after market products available from this dealer. The menu again is usually stacked up to be presented to the consumer in a way that the dealer maximizes his profitability if you take the best plan available. The presentation is usually given in a manner in which the dealer wins no matter what options are chosen. With the additional items being pitched to you at closing, your mind becomes less entrenched on the rates and terms and your focus then turns to the after market products. Each aftermarket item can very well make the dealer up to 300-400% over what he pays for these items. Gap coverage for example may cost the dealer $195.00 and is sold to the consumer for $895.00. The $700.00 is pure profit to the dealer and is very rarely negotiated down during this process. The service contract may only cost a dealer $650.00 and is being sold for $2000.00. The difference in these items are pure profit to the dealer. You see, if you only paid $995.00 for the same contract, the dealer still earns $345.00 profit from you and you still have the same coverage that you would have had if you had paid the $2000.00. The same is true for the gap coverage. You are covered the same if you paid $395.00 or $895.00 if the dealers costs are only $195.00. The only difference is the amount of profit that you paid to the dealer. Another huge profit center is paint and fabric protector. In most cases the costs to apply the product are minimal (around $125.00 on average). In many cases the dealer charges you $1200-$1800 for this paint and fabric guard. As you can see, these products sold in the finance department are huge profit centers and are negotiable. I also have to recommend the value of most all products sold in a finance department. It is in your best interest to get the best coverage possible at the best price possible. Always remember this: The dealer has to make a fair profit to stay in business. It just doesn't have to be all out of your pocket.
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Property Finance For Foreigners In Thailand Are foreigners allowed real estate finance in Thailand? Can foreigners in Thailand borrow money to buy a villa or condo? Are you looking to buy a villa, condo or different property in Thailand? And are you in need of finance? Then scan this report with all you need to know concerning property finance for foreigners in the Land of Smiles. Property financing for foreigners in Thailand is possible nowadays. But within the past foreigners typically could not acquire a mortgage from local Thai banks to finance their dream condo or beachfront pool villa since most of the money establishments in Thailand solely provided finance for property purchases to Thai nationals and Thai Corporations. But things changed in 2005 after I saw Bangkok Bank PLC offerering loans to foreigners in their Singapore branch and once more in 2008 when I witnessed Bangkok Bank finally issued foreign loans via their Thailand primarily based branches virtually like we see it in our home countries. Within the past mortgage lending by native banks to non-thai-nationals was just about extraordinary in Thailand, but lately I actually have seen a considerable amendment in policies to permit foreigners limited access to financing. Initially this was launched by the Thai government's eagerness to increase tourism and to stimulate economic development in Thailand. When we want to purchase a property in our home country, one of the main things we consider is financing. Whether or not you have adequate funding and liquidity to purchase, financing is largely seen as a way of smoothing our investments. For people with less access to funding, financing is a very important vehicle they use to own that home of their dreams. Thailand do not differ from any other country in this instance since most of the banks (but not all of them) in Thailand give loans for real estate purchases to native Thais and Thai firms primarily based on similar criteria we are used to in our home countries. But for foreigners the similarities do finish here when buying property in Thailand! Some Thai banks do offer mortgage services to foreigners but they impose quite strict terms and conditions for the foreigner to qualify. One overall important condition is that the property has got to be owned in the foreigner's own name and hence the property should be registered as a condo under the Condominium Act because foreigners are not allowed owning other sorts of properties in Thailand. Also the buyer must pay minimum 30% down with the remainder 70% financed over 3 to 20 years, depending on the age of the borrower. You can only borrow money in the bank if you are less than 65 years old - and the mortgage must be paid back in full when you turn 65 years old. So if you are say 55 years old today you can borrow the money for 10 years. Bangkok Bank PLC was the first financial institution in Singapore to provide this kind of financing services to foreigners. But in 2011 I saw my first real estate client visiting the United Overseas Bank (UOB) in Singapore and they offered my client a loan so he could purchase his dream condo in Phuket. And hey... the interest rate is not that bad: 5.25% p.a. if the loan is in USD. If in SGD the interest is 7% p.a. (Better check their website.) It is a relatively new scheme for UOB and now they also offer this sort of finance on the Thai market with several offices located in most provinces. At the same time also several other Thai financial institutions, including Siam Commercial Bank, Kasikorn Bank and Tisco Bank, have jumped aboard and I also recently found out that you as a foreigner also can borrow money in "The World's Local Bank" HSBC. This is great news for "farangs" in Thailand, right? I also note that HSBC offers mortgages on all sort of property in Thailand not restricted only to condominiums, but I guess that is on a case by case basis and whether or not the foreigner is married to a Thai national. In this case I can imagine that the foreigner and his Thai wife will share the loan and the property between them; the Thai wife/husband will own the land and the foreigner will own the property on the land. I find this solution much better and safer for the foreigner than a 30 year lease agreement on the land because when it expires he will not own the property on the land anymore; this property will then be in the possession of the actual owner of the land. Also if the Thai wife/husband dies the bank will for sure secure that the foreigner will not lose his house, since the bank want to ensure the foreigner keeps paying the monthly mortgage instalments. I find it a really good thing that we now see some (hopefully fierce) competition in this area and in the future this will probably improve the Thailand foreigner's position with several banks making an attempt to outdo the other parties with more competitive rates. I welcome with open arms UOB's and HSBC's entrance into this niche market and hopefully this is a start of a new era of financing to foreigners in Thailand. Lending terms for foreigners in Thailand The terms regarding loans in Thailand depend on policies of The Bank of Thailand for each fiscal year. The policies might vary from one year to another so better act quick if you won't miss the boat! The terms also dependent largely on each bank's own policies that similar to the Bank of Thailand vary year by year. Banks in Thailand normally give personal loans to people and this includes VISA and Mastercard facilities, business loans, personal loans for education or medical treatment and of course the purchase of a condominium or a Mercedes Benz. These loan facilities are also, subject to every bank's own policy, on the market to "farangs" who live and work in Thailand. To qualify for these personal loans for the purchase of a condo, some conditions must be met, and it's very important for you to notice that these loans are typically granted on the truthful market value of the condo and this is always based on the bank's own valuation. And this often surprises the foreigners, because the bank's valuation is often (not to say always!) lower than the market value! Let's see an example here: - You want to buy as condo priced by the seller at 5 million THB. - You know you can only borrow max. 70% of the price, so you will have to pay down 1.5 million THB and the bank will lend you 3.5 million THB plus interest. - But now the bank value the condo at only 3.5 million THB. - So they offer you a loan of 2.45 million THB. - That leave you with a down payment of 2.55 million THB instead of the 1.5 THB you originally were entitled to pay down. The second vital criterion is the qualification of the foreigner. These are started below in the subsequent: - A 1 year work permit or a Thai resident permit. - A letter of employment attesting your years of work in Thailand and your annual salary. - Computorized pay slips must usually be provided. - The bank might request the employer's company documents. - The bank usually conducts credit checks on you. - The your age combined with the loan period should not exceed 65 years. (If say you are 55 years old, your loan period is 10 years.) - You must have a stable and secure job. - You should have a monthly income three times above each monthly installment. You must also supply the following documents to the bank upon application: - Copies of passport and/or official ID card. - Marriage certificate (if applicable). - Confirmation of income and copies of bank statements. - Copies of land or unit title deeds, sale and purchase contracts. When applying for a loan I advise you to shop around and not accept the first offer you get, since the interest rates vary from bank to bank...so go for the best offer! TIP: In case you do not qualify for a mortgage right away you could use a lease structure to make your dream property more affordable. So far the lease with option to buy is the best way to go. Just note that any lease for a term of more than 3 years must be registered on the title deed at the land office. Most local Thai lawyers can handle this transaction on your behalf for a small fee. But I suggest that your Thai wife (if you have one) take care of it since it is actually not too complicated. By leasing to buy there are some benefits: 1. You pay monthly lease of the property for say 1 year, then you purchase the property and the money you spent on the lease can now be deducted the down payment according to the contract you signed with the property owner. 2. This give you 1 year to see if this property and the location is actually right for you. If not, just walk away and lease a new home in another location. Other Options If you cannot get a mortgage to buy your dream property in Thailand, don't worry. There are other available options for you. From Developer Direct developer financing has become more common in Thailand over the past years. The developer deals are usually ranging from 2 to 10 years financing and are available to buyers of new Thailand villas and condominiums. These financing deals are ready straight from the developers. This means of course that the structure of each finance deal varies from one developer to the next. So make sure you check out every option on the market before you engage in something. Be aware of "too good to be true" offers like "zero interest" or "100% free finance". Of course the purchase price under these conditions has been inflated to compensate the expense of capital to the developer. It is always better to negotiate the most favorable purchase price than negotiate the financing deal with no concern on the actual price for the property. Assure you know exactly what is going on at the property market and do your best to investigate the market prices for this kind of property before engaging yourself in a financing arrangement. From Owner/Seller Some property owners are now offering financing to buyers of Thailand villas, bungalows and condominiums as a way to sharpen interest in their Thai property. The buyer and owner/seller then sign both a purchase and a sales agreement and a promissory note. Assure yourself that the seller is actually also the owner of this property. Ask for a copy of the title deed and check carefully at the land office with the assistance of your Thai wife or partner. The land office can also tell you if this property is actually mortgaged or not. Most likely if the seller cannot provide you with a genuine title deed, then the property is mortgaged and the land title is kept at the bank or at the money lender as a security for the monthly payments. In case you are engaging a real estate agent to assist you find your dream villa, then you can let them know you require financing. Most likely they will have a few listings where the sellers are offering payment terms. If you negotiate directly with the seller, then you simply ask if they are willing to accept payment terms over a fixed period of months and rate of interest. Similar to developer financing, you must negotiate the sales price separate from the terms and conditions of the loan. It is very important for you to note that the seller will keep the title deed (Chanote) to the property until the final payment is made. Assure that your attorney reviews the deal and ensures that all documents are up-to-date and properly safeguarded to protect your investment. Here you find a list of banks where you as a foreigner can get finance when buying a condo in Thailand: 1. Bangkok Bank 2. Kasikorn Bank 3. Siam Commercial bank (SCB) 4. Thai Military Bank (TMB) 5. Tisco Bank 6. HSBC - Both in Thailand and Singapore 7. United Overseas Bank (UOB) - Both in Thailand and Singapore Best of luck to you finding and purchasing your new dream home in Thailand.




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