by mbowers » Wed Apr 08, 2009 9:25 am
The answer is:
Bi-weekly is more profitable.
You are all correct in pointing out that the total interest paid will not change. That would be true even if the customer made only one annual payment.
By accelerating the payment schedule to bi-weekly, the principal balance on which the interest is paid declines faster. So, in theory at least, the dealer's finance reserve should be larger relative to the amount being financed.
I'm working on an article about bi-weekly payments. The concept has moved beyond the BHPH stage and is beginning to get some traction in conventional dealerships.
I'd be interested in hearing from any dealers that are using bi-weekly payments as part of their F & I program.