Posted Dealer Price - ONLY FOR FINANCED SALE

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Bekeart

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Posted Dealer Price - ONLY FOR FINANCED SALE

Some area dealers post a price that is :
ONLY FOR A FINANCED SALE
Cash Price is HIGHER!

I had to apply and get financed for the Chrysler Pacifica.
At a HIGHER INTEREST RATE than my credit union would charge.
It took several (almost seven) weeks before I got payment information.
I paid it off.
But having to wait for the payment information cost me almost two moths of interest.

Bekeart
 
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Sounds to me like a dealership to avoid.

Abusive gimmicks like that would make me wonder what other ripoff schemes they run.

Some years ago, local Ford dealers were adding a 5000-6000 dollar additional dealer markup during introduction of a new model they thought would be overwhelmingly popular (Thunderbird).

It killed any initial enthusiastic interest. Model floundered and was eventually discontinued.

Dealers continue to come up with schemes that seem intended to do little more than make us hate them.
 
The last couple I've bought (GM) the dealership didn't seem to care whether it was cash or financed and actually seemed to prefer financed and no discount for cash. That might make sense if we understood the relationships between the dealership, the manufacturer and the finance organizations. "Kickbacks" of one form or another I suppose drive actions that otherwise might not make sense.
 
Auto dealers do indeed prefer you to finance. Their 'kick back' can range from only a few hundred dollars up to a few thousand. If you finance a vehicle, or other rather expensive item, always, ALWAYS, ask what rate you qualified for. Show me the buy rate! If they won't- run to the next dealer. Many times, especially if you have good credit, they will mark up the rate so more money goes into their pocket. Occasionally, you can get a better deal if you finance. So, finance. Then when you get your lender paperwork, pay it off!
 
Dealers prefer financing because of indirect lending. They get a percentage of the interest rate. When I worked in banking I once had a guy ask me why we had a sign saying "new care loans 10%" ( or whatever the rate was at the time), but he just got a loan from our bank through the car dealer n a new car at 12%. I explained to him that the dealer had added 2% to the loan for themselves. He went through the roof, but that's the way indirect lending works. Some people thinks they're going to get a better deal by paying cash, but it's normally the opposite.

As 4bodiddley wrote, you can always finance then pay it off that week or the next. I've done that myself to quality for a promotional offer.
 
diyj98 said:
Dealers prefer financing because of indirect lending. They get a percentage of the interest rate. When I worked in banking I once had a guy ask me why we had a sign saying "new care loans 10%" ( or whatever the rate was at the time), but he just got a loan from our bank through the car dealer n a new car at 12%. I explained to him that the dealer had added 2% to the loan for themselves. He went through the roof, but that's the way indirect lending works. Some people thinks they're going to get a better deal by paying cash, but it's normally the opposite.

As 4bodiddley wrote, you can always finance then pay it off that week or the next. I've done that myself to quality for a promotional offer.
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^^ That. The dealers are offered a rate from the lender and charge as much as they can over that rate.
Zero percent financing and other discounted rates come from the manufacturer and are built into the sticker price.

I try to get the best deal I can, but bottom line is the dealer will make money or wait for the next buyer. I generally buy nice, used these days and keep them for several years.
 
Denverd0n said:
You bet they do. They make a lot of money off of the financing. Do not EVER tell them you are going to pay cash until AFTER you have settled on the price!
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Yes, but I don't really understand the math. The price was some $8k off the sticker and I couldn't get less with a cash offer. GM financed it for 2.9% for five years. I bought treasuries and dividend paying stock; at this point I'm about $10k ahead of where I would have been paying cash. The question is, why would GM loan money at 2.9% when they could get almost 5% risk free in treasuries and do far better investing in the S&P or their own stock if they took my cash?
 
While some manufacturers have low interest deals (<4%) going on, you have to have spotless credit and the loan is for three years. Given the insane prices of new cars these days, $10k down on a $50k vehicle at 3.5% over three years has you at $1159/month before you spend a penny on gas, insurance, or registration. That's not a car payment, it's rent.

Most new car deals today are a MINIMUM of 60 months and between 8% and 11% for good credit. Got bad credit? Rates over 22% are common. When the dealer is getting a cut on the financing, the higher the interest rate the more he wants to have you finance.

Wife and I bought a used 2025 truck for her son. It was stupid expensive, but we still got a chunk off the top because we needed to pay cash. The complications of taking a loan and then moving the vehicle to another state can get weird, and we wanted no part of that. Oddly enough, there was little or no pressure to go with finance, and this was a large Ford dealer.
 
22hipower said:
...The question is, why would GM loan money at 2.9% when they could get almost 5% risk free in treasuries and do far better investing in the S&P or their own stock if they took my cash?
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One reason could be that the 2.9% rate helped sell a vehicle. So many people could care less about the price as long as they can make the payments. So GM makes the interest plus profit off the sale of the vehicle that Joe Public may not have bought if it wasn't for the promo financing rate. The same with Ford Motor Credit and other manufacturer financing.
 
They are probably holding points, usually 1-3%.

I would have walked away over the higher price for cash though.
 
22hipower said:
Yes, but I don't really understand the math. The price was some $8k off the sticker and I couldn't get less with a cash offer. GM financed it for 2.9% for five years. I bought treasuries and dividend paying stock; at this point I'm about $10k ahead of where I would have been paying cash. The question is, why would GM loan money at 2.9% when they could get almost 5% risk free in treasuries and do far better investing in the S&P or their own stock if they took my cash?
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I don't finance, but is the 2.9% rate really 2.9%? How is this possible?
 
22hipower said:
Yes, but I don't really understand the math. The price was some $8k off the sticker and I couldn't get less with a cash offer. GM financed it for 2.9% for five years. I bought treasuries and dividend paying stock; at this point I'm about $10k ahead of where I would have been paying cash. The question is, why would GM loan money at 2.9% when they could get almost 5% risk free in treasuries and do far better investing in the S&P or their own stock if they took my cash?
Click to expand...
Manufactures target selling cars, it’s what they are in business to do, so they prioritize volume over making money off financing.

Banks prioritize making money off financing.

You’ll typically get better rates from the manufacturers financing, if you have the credit rating to qualify.
 
Never finance thru a dealership...Unless you qualify for 0 percent rate.
ask your bank or credit union first...(after you get the out the door price from the dealer).
Also check with some of your CC companies that offer vehicle financing....
Dealerships will add on percentage points for extra profit....you qualify for 3 percent and they tell you 5 percent.
 
Denverd0n said:
You bet they do. They make a lot of money off of the financing. Do not EVER tell them you are going to pay cash until AFTER you have settled on the price!
Click to expand...
Yes! Same with a trade in. I just bought a new truck last month and all of the financials were discussed after the out the door price was given. Saves a lot of back and forth.
 
22hipower said:
Yes, but I don't really understand the math. The price was some $8k off the sticker and I couldn't get less with a cash offer. GM financed it for 2.9% for five years. I bought treasuries and dividend paying stock; at this point I'm about $10k ahead of where I would have been paying cash. The question is, why would GM loan money at 2.9% when they could get almost 5% risk free in treasuries and do far better investing in the S&P or their own stock if they took my cash?
Click to expand...
The dealer gets an up-front kickback from the lender for bringing a new loan. They don't care about how the math works out over the 4-6 years of the actual loan.

Besides that, the overwhelming majority of people who borrow to buy a car, pay the loan back slowly, over the entire term of the loan. So the lender has an on-going income stream as you pay. Which makes them very happy.

Not to mention, that a significant percentage of the borrowers will default on the loan, and end up owning penalties and interest that makes the lender even more money.

It's a win-win, enough of the time, for everyone except the borrower. Everybody, except the guy who borrows to buy a car, makes money most of the time.
 
Denverd0n said:
The dealer gets an up-front kickback from the lender for bringing a new loan. They don't care about how the math works out over the 4-6 years of the actual loan.

Besides that, the overwhelming majority of people who borrow to buy a car, pay the loan back slowly, over the entire term of the loan. So the lender has an on-going income stream as you pay. Which makes them very happy.

Not to mention, that a significant percentage of the borrowers will default on the loan, and end up owning penalties and interest that makes the lender even more money.

It's a win-win, enough of the time, for everyone except the borrower. Everybody, except the guy who borrows to buy a car, makes money most of the time.
Click to expand...
Then there's the resale of the now repossessed car to tack on.
 
Denverd0n said:
The dealer gets an up-front kickback from the lender for bringing a new loan. They don't care about how the math works out over the 4-6 years of the actual loan.

Besides that, the overwhelming majority of people who borrow to buy a car, pay the loan back slowly, over the entire term of the loan. So the lender has an on-going income stream as you pay. Which makes them very happy.

Not to mention, that a significant percentage of the borrowers will default on the loan, and end up owning penalties and interest that makes the lender even more money.

It's a win-win, enough of the time, for everyone except the borrower. Everybody, except the guy who borrows to buy a car, makes money most of the time.
Click to expand...

"The dealer gets an up-front kickback from the lender for bringing a new loan. They don't care about how the math works out over the 4-6 years of the actual loan."

In my experience as a lender, the dealer receives a percentage of the interest over time--not a lump sum up front. The bank agrees to a set interest rate for the loan and the dealer gets any overage that he can "sell" to the buyer which it receives over time.

"...a significant percentage of the borrowers will default on the loan, and end up owning penalties and interest that makes the lender even more money. It's a win-win, enough of the time, for everyone except the borrower. Everybody, except the guy who borrows to buy a car, makes money most of the time."

No lender wants an auto loan to default. Vehicles depreciate at a quick pace. With the average buyer putting little down, the loan is upside down very quickly for a couple of years. Additionally, by the time a vehicle is repossessed, they are generally not in the best condition.

About the only people who can make money repossessing autos (other than the wrecker company) are the "buy here, pay here" dealers. They are generally dealing in high mileage vehicles that they purchase at auction for very little. Many of these are trade-ins that the larger dealers won't put on their lots. When a "buy here, pay here" dealer advertises a vehicle for $xxx down and $xx per month, they generally bought the unit for the amount of the required down payment and each additional monthly payment is 100% profit. These are the only people who potentially make money repossessing autos. No one else does.
 
Got loan for my F-150 at credit union 4.9%.
Could have sold some stock and paid cash.
But, stock has been going up at 12% .
My math shows a 7% gain . . .
Loan officer at credit union grinned when I explained my math.

Bekeart
 
sjmjax said:
Sounds to me like a dealership to avoid.

Abusive gimmicks like that would make me wonder what other ripoff schemes they run.

Some years ago, local Ford dealers were adding a 5000-6000 dollar additional dealer markup during introduction of a new model they thought would be overwhelmingly popular (Thunderbird).

It killed any initial enthusiastic interest. Model floundered and was eventually discontinued.

Dealers continue to come up with schemes that seem intended to do little more than make us hate them.
Click to expand...

I believe some dealers pulled this move when the Bronco was reintroduced.
 
22hipower said:
Yes, but I don't really understand the math. The price was some $8k off the sticker and I couldn't get less with a cash offer. GM financed it for 2.9% for five years. I bought treasuries and dividend paying stock; at this point I'm about $10k ahead of where I would have been paying cash. The question is, why would GM loan money at 2.9% when they could get almost 5% risk free in treasuries and do far better investing in the S&P or their own stock if they took my cash?
Click to expand...


Because they are in the bussiness of selling cars.
 
Unless in a small town and dont want to drive may have to deal with such. Otherwise just walk out. Bought my last vehicle and financed it as the deal was very good. After couple payments paid it off and saved some $$$$. To me the quality of dealer service departments decides a lot for me. Dealer I bought from service department is run by CROOKS that think no one knows anything. I drive about 75 miles one way to the best service department and see a long time buddy nearby as he comes and picks me up and we hit some gun shops after lunch....
 
Bald1 said:
Because they are in the bussiness of selling cars.
Click to expand...
GM is in the business of manufacturing cars. The dealership sells cars but is primarily in the business of selling service, maintenance and parts. GMAC, the provider of the loan, doesn't sell cars or service, it makes money loaning money. I would think GMAC would follow practices that maximize their profit not that of GM or the dealership or their customers.
 
22hipower said:
GM is in the business of manufacturing cars. The dealership sells cars but is primarily in the business of selling service, maintenance and parts. GMAC, the provider of the loan, doesn't sell cars or service, it makes money loaning money. I would think GMAC would follow practices that maximize their profit not that of GM or the dealership or their customers.
Click to expand...
Don’t over think it.
 
Every vehicle sale is cash. But here pay here excluded.
Either your cash, or the finance company's cash.
If you finance, the dealer sends in the finance contract and then receives a check.
 
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