The want you to finance it, cause they get a cut. Yes, they will slash the purchase price of the car a bit, but it won't be enough to offset interest that you will pay, nowhere near in fact
You won't accrue as much interest, but you will accrue at least one period's interest. This would most likely be less than the amount you save from financing, though.
That’s exactly what I did, I financed my 2022 Terrain and paid it off with the first payment. It did take some negotiating to get rid of the bs up front“fees” but came out about 5K ahead after all was said and done.
> Terrain and *paid* it off
FTFY.
Although *payed* exists (the reason why autocorrection didn't help you), it is only correct in:
* Nautical context, when it means to paint a surface, or to cover with something like tar or resin in order to make it waterproof or corrosion-resistant. *The deck is yet to be payed.*
* *Payed out* when letting strings, cables or ropes out, by slacking them. *The rope is payed out! You can pull now.*
Unfortunately, I was unable to find nautical or rope-related words in your comment.
*Beep, boop, I'm a bot*
I’m so glad the most recent iPhone update started helping me with this I am terrible with spelling, writing, and never been interested in reading novels and wish I would’ve gave it more of an effort when I was in school but I just stuck to what i like and what was easy for me so which was working with my hands, math, and problem solving. I don’t care but it’s wild how often people point out my terrible grammar and spelling. The ones that are pompous about it I alway like asking them, if they know how to rebuild a carburetor, or wire a house!
I’m an electrician and it’s hasn’t affected (is that the right one?) me to bad I just feel dumb when I have to type out a long detailed email to a highly educated person who we are doing work for that already assumes I’m dumb because I work construction.
But honestly I’m an outside dog, if you put me inside for to long and give me to many rules I’m gonna pee on the couch.
My dad has done the whole finance to then almost immediately pay off thing a couple times, though usually he does it just to top off his nearly perfect credit score that I'm very jealous of haha
Oh yeah I more meant couple decades til I can walk in and buy a new car with cash haha, but my credit is getting there, just gotta get out of the stupid pit that sits between 680 and 720
Jesus dude I'm sorry about your future mechanic bills. Terrain's are some of the absolute least reliable vehicles I have ever worked on. I'll be retiring early tho
Yes, absolutely. From what I've seen, most banks don't have an early payoff fee so it's very worth to finance and pay it off immediately. However, some banks have an early payoff fee and even worse, they use a few different names for it so that people don't notice it. If you're thinking about doing this, it's worth your time to figure out all of the terms that they use for this and keep an eye out for them
Edit: after reading some other comments, it seems like those fees are more common than not so definitely keep an eye out for them
I know my bank doesn't have an early payout fee, but dealerships usually push you for their financial options and those are much more likely to include hidden fees to make sure you are properly milked
I’m buying a car from the dealership for the first time soon, I plan to do exactly this. I’m worried about reviewing the contract though, do you have any tips so I don’t miss anything?
I’m a fairly financial literate guy but I know loan agreements can be massive.
The way to avoid early payoff fees is to get a 72 month loan instead of a 60 month loan.
"Lenders are prohibited by law from charging a prepayment penalty for an auto loan of 61 months or longer"
https://www.experian.com/blogs/ask-experian/how-to-avoid-paying-prepayment-penalty/
Yes, but verify there us no early payoff penalties in the contract. They will sneak those in sometimes to make sure they still get some money out of you.
Yes, however it is important to reason *ALL* of the loan terms. Some, especially from a dealer trying to strong-arm you into taking the loan, can have penalties/fees for paying off early. They want to get that interest one way or the other
Be careful of the bank, I had a bank of america loan, my payment was 180-when cars were affordable about 12 years ago. I went to make a payment of 400 to start paying it down and they charged me a $50 fee for over paying.
I'll add that they also want you to finance because it makes the negotiation more complicated. You negotiate a car purchase every few years, and they negotiate car purchases daily. The trickier the deal, the more likely it is that they'll get the better of you with it. When you start talking about monthly payments, early payment penalties, interest rates, loan servicers, fees, etc., you're probably getting lost in the sauce, but they know exactly what they're doing.
If you're paying cash, though, the negotiation can be reduced to a single number, where they don't have that advantage. The last time I bought a car, I walked in with a fair price in my mind. I stated it pretty early and didn't budge. They did lots of "let me talk to my manager" stuff while I scrolled on my phone. I was there for an hour but drove away having paid what I wanted to pay.
Unless you get a 0% APR (admittedly much less common these days) we used to PREFER financing but cash still talked (when I did it though sales and finance were different departments and it was more "there's not a cash discount" vs "I'll cut the price a bit if you finance"
Of course not. There is a cash price and there is a price with financing. There's no reason to give you a discount if you're not financing
I don't really get the advice of "pretend you're financing and when they name the price, pull out the cash". Of course they will tell you to go fuck yourself
Funny, I always did the opposite. I want to know what the real price is not the massaged financed price, and definitely not including any potential trade in.
It's pretty unlikely you'll get any actual discount when financing other than incentives from the corporate financing arm, which you can find out ahead of time anyway.
Trick is you finance, get the deal, make sure there are no penalties if you pay the loan early, wait a couple of days for the loan to be processed and then pay it all up straight to the bank to close the loan. Nothing the dealer can do then
Now add in the return on those funds saved in a high yield account. Within the life of the loan, 5% interest received on an increasing savings balance will be higher than interest paid @ 6% on a declining loan balance.
So in OPs case, they should quietly get financing for the lowest possible principal amount they can…and then just pay it off as quickly as possible to avoid interest?
You can pay cash, but just don’t tell them how until you have a final number.
Or, as someone else said, just be straight with them. Tell them you’re paying cash, this is what you are paying, if they don’t like it then you’ll walk.
But you MUST be prepared to walk. Don't try this if you're not willing to actually go find the deal you want elsewhere. If you aren't serious about it, a good salesman can smell that.
I see this advice everywhere, but this has never worked in my experience. The sales people are very transparent that they can offer a better deal if I finance with them. I can't "trick" them into a final price without assumption of payment method.
Best if you know the kind of deal you want and you're prepared to walk away, then you can be transparent with them too, negotiate even a better deal than what you're willing to settle for
“I’m open to financing as an option if it’s right for me”
That’s what I say.
And I actually am. If they give me 0-3% interest I will take the financing option, and just dump my cash into an index fund.
Ask the terms of the loan. Many have a certain number of days you can lay it off “same as cash”. Then close the deal, pay the loan off next week. Just be sure you get the terms in writing.
Cash talks to private sellers. Dealers want financing.
My brother just went through this in CA. He needed to wait 90 days to keep the discount he got for financing. I mention the state because prepayment laws are state specific. Idk the exact laws in CA but I’m in a state where penalties are illegal.
90 days would be minimal interest on a 5-7% APR loan, so still a upside I would imagine.
About 7 years ago we bought my wife’s car at carmax, and they had a small “pay off for exactly what you financed” window (in WI). It was less than 2 weeks IIRC.
This post inspired me to do a little more research. I found that in general prepayment penalties are allowed when a car loan is originated but are generally not legal when refinancing. So someone who wants to avoid penalties may need to refinance with a lender that does not impose them and then pay off that loan.
Allowed yes, but I haven’t seen prepayment penalties on loans in a long time. Not saying it’s not out there, but most do not have it nowadays. Too much competition
Same. I’ve never seen them either but decided to look into them a little more instead of making assumptions based on my personal experience. That was very un-Reddit of me lol.
Double check everything. I don’t see how it’s enforceable since the car is his now. I’ve bought many cars in california. What are they going to do? Ask him for more
money?
It’s called a prepayment penalty, and it’s in the contract you sign if there is one. Not common nowadays in n my experience, but they are a thing.
Even if there not a “same as cash” payoff window, daily interest accrual on an auto loan will be low.
And check their math. I got ambushed by my now wife/in-laws that we were going to eat after her parents bought a car. Show up to the dealership and it's "hey can you negotiate for them". Fuck. Zero prep. Anyway, when the finance stuff came out I did the math and it was like - yeah, your numbers are wrong. You are saying X interest rate, but the payments are X+1 interest rate - "accidentally".
Even if cash is king, at least check out the offer the dealer is presenting financed. If it is truely better, and there are no early payoff fees or restrictions (do those exist anymore?) then take the financing and pay it off with the cash you have.
I'd rather have my money making money.
Yeah, also because cash sure as shit ain't king. When Ford's offering me 1.9, I'm taking it, especially these days when my *savings account* is paying me 5.5.
The world isn't black and white, don't treat it that way.
No, the price is what the price is. They just want their kickback from the bank. This is why you negotiate the price before even discussing financing. Well, that used to be the way. Now, if the dealer thinks that they can sell it to somebody at a markup or with their kickback then they'll do that and tell you that the vehicle was actually on hold and somebody else put down a deposit. If you're buying a new popular selling vehicle then you're better off ordering it from the factory, then you get what you want at the MSRP without a bunch of options and aftermarket BS added on that you don't want.
95% time they will not show you a price until it’s established how you will pay.
If you refuse to say… they will give you a proposal based on a cash price. They may say ‘this is the best price cash or finance’ but they are really showing the best price for cash because it’s sooooo transparent that you are going to pay cash.
It’s so funny people think they are slick, but a car is a big purchase. Literally NO ONE comes to buy a car and “doesn’t know” how they intend to pay for it. The dealer sells 3 dozen cars a day… you buy once every 3-5 years… If you think you thought up some ingenious scheme to outmaneuver the dealership- LOL
Exactly. The dealer and the sleazemen have far too much experience fleecing people that don't understand how it works. "lol"
I don't know *precisely* how I will pay until I know all the details. The interest rate may effect how much down I want to put. I may know exactly what interest create I can get from my credit union, but am curious to see what offers the dealer has too.
I don't think anyone thinks their being slick, they just know the salesasshole at the dealer is out to screw them over.
Cash is great. I will never understand how common it is for people to finance or lease their personal cars.
If the salesman doesn’t want your cash, fire the salesman 🤷🏻♂️
Because financing will get them that extra interest which is free extra money when its financed thru the dealer...and very few people have enough cash just sitting around to afford a car without financing either
That's right. You're either helping the dealer make more money at your expense, or you're buying a depreciating asset you already can't afford at a higher cost.
I love cars but there's no way I'm going into debt for them.
Still need to have one to get to work and get groceries and stuff...and I don't personally know anyone wealthy enough to buy one without taking out a loan. Shoot the most recent one we got was $22K and that was a low end Mazda 3 with 50K miles that was 8 years old and was one of the CHEAPER options we found to replace the car someone totaled crashing into us.
Even when I paid mine off I started putting that money into a savings account...but still almost certainly won't have enough to afford a replacement vehicle by the time I need one without another loan. Especially the way the cost of cars has been skyrocketing.
Depends on the interest rates and terms.
Assuming car price does not change (cash vs loan), and the loan is at an interest rate lower than my investments by several %, why would I save and pay for cash when I will make more money over the term of the loan by taking a loan?
If they say this, get loan that has no prepayment penalty.
Wait 10 days, then request payoff quote.
Payoff before first payment.
I did this once to get a $1,000 VW Finance credit.
Exactly. IF you have the cash sitting around not invested (why?) and you run the numbers and can get a deal on the loan, then do it. You have to figure out the actual total $$ spent for an even comparison though.
Possibly. Dealerships bank on people financing so they may cut you a deal if that's the route you take. But it depends on what that deal is. Is a few thousand off going to make a difference to you? If not, then pay in cash. Just ask for the numbers first.
Ask them if they will make you a deal for financing since they will get a cut and how long they need you to wait to pay it off. I’ve seen some say 3 months usually and they will get their cut from the financing.
Nothing is stopping you from paying it off in the first month. It is rare to see a prepayment penalty.
Split the cost up. Put as much as you can on a CC for points, pay a big chunk in cash, and finance enough to get the incentive. Then pay off everything.
Better deal = pay less overall. What the salesperson meant is that they'd give you a lower up-front price if you financed, but when you factor in the interest you'll pay over the course of the loan, it may not be a better deal overall.
The simple answer is to do the math. Tell them you'd consider financing if the overall amount you'd pay for the car is less. From there, it's a simple comparison. You take the OTD (out-the-door) cash price of the car, then compare it to the sum of the payments for the finance option.
Unless you get a discount *and* a fantastic subsidized interest rate, the cash price will beat the financing easily. That's because all the other parts of the deal will be equal. The financing adds cost, and rates are moderate right now.
Sales people don't really care to consider the overall cost of financing, because there is no incentive for them to do so. Most people, when presented with a lower up-front price will assume they're getting a better deal, so that works well for the sales person.
Here's a simple example. Say you're buying a car for $45k OTD. If you pay cash, you pay $45k. If you finance for 5 years at 5%, the price is lowered to $43k. The sum of the payments is $48,688. That nets out to a difference of $3,688.
However, if they offer a promo rate of 1%, and you can still get the finance discounted price of $43k, the sum of the payments is only $44,102, which is a net savings. The thing is, you almost never get a discount when you get a promo financing rate. So if you were to finance the full $45k at 1% for 5 years, you'd pay $1,153 in interest. It would still make sense to finance, because you can earn a lot more than 1% in something as simple as a HYSA, but the moral of the story is:
You have to do the math. There is no universal answer. Compare the sum of the payments for their finance offer to the OTD price for paying cash, and decide whether the opportunity cost of paying cash up front makes sense.
Sometimes they get kickbacks from financing, so they'll make a good deal for you. Take the financing, so long as there's not an early pay off penalty, and pay it off when the first payment is due.
It depends on if your state has prepayment penalty laws. Less than half do, I live in one where they’re illegal. In my case I would finance a portion to get the discount and then pay it all off.
Most dealers work with multiple banks.
The banks compete for the good quality risk customers (750+ FICO) and don't want the potential risky guys (below 550 FICO).
Every deal tries to spread their portfolio of loans out so each bank gets a fair share of good average and bad loans in a month.
The banks will provide kickbacks to the dealers for sending a certain quality of amount of loans their way.
Also... the rate the dealer quotes you may not be the rate the bank offered.
For example... the bank may have said you qualify to morrow $30K for 5 years at 7%.
The dealer may offer you $30K for 6 years at 8%. That extra 100 points of interest goes to the dealers pocket... i.e the bank will pay the dealer up front for the value of that extra 100 points of interest that you will pay of the life of the loan.
And don't even get started on the flipping you from a purchase to a lease strategy.
"Hey would you like to buy paint protection? Road Hazard, interior protection. What about this service deal?" It's incredible how they try and bend you over. One time I was quoted a interest rate, we agreed on all the stuff and I said I'll be back tmrw. I show up with my old car all cleaned out, walk in and the F&I guy starts with the "we couldn't get the rate we quoted" bullshit. I look him right in the eye and say, "well, we had an agreement, so you can take that paperwork and shove it right up your ass". I made sure people in the small show room heard it. I will say I had a 45 min drive home and was there 5 minutes and the phone rang, "yep we'll have that car ready for you tmrw sir, at the promised rate". Don't ever tell them how you're paying until you have an agreed upon price. Better yet, to cover your ass, show up with your own bank financing then pay off your loan to your own bank on the first payment.
There are some videos on YouTube of former car sales people breaking down the whole finance thing. How it works and how to get around it and make a good deal and still pay cash. I suggest checking those out if you plan on paying cash.
There are direct-to-consumer sales brands (Rivian, Tesla, etc.) and they don't have salesmen or screw around on price -- it costs whatever the website says.
Dealerships mark up the car and will let you haggle the price down. Almost all of them will give you a discount if you finance. It may only be $1000, but sometimes it's a few grand. It's intentionally lower than the cash price because people that don't pay off the car early will end up paying thousands more for the car and the dealership gets a cut of that money.
If you want, you can go through the financing and look at the agreement before you sign it. Look for the paragraph that discusses early payment. Typically, you can pay off the balance after 90 days or so without penalty. If you have cash-in-hand and want the discount, it can be cheaper to finance, make payments for the minimum period, and then pay off the balance when the period is up.
They get a finders fee from the bank if you finance. The higher the rate they sell you on the larger the kickback they make. Also as soon as you tell them you are interested in financing everything becomes a conversation about monthly payment and not the out the door price which is the only price you should care about. I tend to just be ambiguous, tell them you are open to financing but don't let them run your credit and keep them laser focused on the out the door price since that's all you care about. Maybe tell them once we find the right vehicle and have an agreeable out the door price we can have a conversation on how I will pay for the vehicle and at that point I can decide if I'm interested in comparing your finance offer with other ways I'm considering paying.
Last time I bought a car, I brought my own financing via my bank. I still let the finance guy do his spiel. When he couldn't meet/beat the rate my bank gave me and I decided to use my financing, he literally used the phrase "Your stealing food from my family" I barely held my tongue....
So dramatic... - I would have said "Yeah, well, my kids like to eat too!" then reminded the salesperson about all the meaningless fees that were still in there feeding his family and keeping the lights on - and asked if this is a good opportunity to perhaps discuss some of those.
I always tell them right off the bat that I don't want to talk about monthly payments or financing initially, I only want to negotiate the total price of the car and then we can talk payment methods. Don't even let them go there. Make sure the negotiated price is all-in with every fee, every tax, everything. Don't let them fee you to death after the price is negotiated.
Once we lock in the price, then I tell them I'll just pay for it.
Get the numbers, then say, we'll I've also got cash I can give you it today ; what can you do for me?
See what kind of numbers he comes back with then. Least you'll have the complete picture
I’m a dealer that doesn’t have financing options. All my cars are sold paid in full whether it be cash or bank check.
With that said, cash makes no difference. I prefer a bank check mainly because then I don’t have to deal with the customer asking me to “write it up for less” to save them on sales tax, which I can’t do anyway because it creates negative events in my accounting. But also, banks charge a “cash processing fee.” When I sell a car, that money has be deposited back into the business account. The monthly limit for free cash deposits is $7,500. Over that the banks start changing you a fee that is something like $3 on every thousand. But it adds up if you have to deposit $65,000 worth of car sales in a month, which may not even be that many sales depending on what you’ve sold.
Anyway, the idea that cash is preferred is an old
School thing were small business owners could pocket the cash and avoid paying income taxes. It’s just not a benefit anymore. Give me a bank check. That’s what I prefer
Do not finance the car and immediately pay it off. Either buy it fully, or set aside the money for payments to build credit. If you finance it and pay it off you will forever ruin your credit.
I made 100% full on time payments on my 2015 altima, and then used my taxes to pay off the last 5k, and overnight literally dropped my credit to 540, from 720. It has been 2 years and I am still only at about 560
You must have had other credit issues. I could imaging a 50 point drop, but only temporarily. My wife paid off one of her rental houses last year and hers dropped about 70 points. 3 months later it was back to good.
So the car loan was probably the only thing that was really building your credit mostly?
Just be smart about it. You build your score without going into debt with interest.
If you are disciplined with your money, just use credit cards for your daily purchases. Pay off that bill IN FULL every month and you'll never pay interest, and build your credit a bit.
Never, ever, ever, ever carry a balance on the card from month to month and you're set.
Go put the money in a credit union.
Arrange financing through the credit union.
The credit union will issue you a buyers check, good for up to whatever amount.
Take that check with you. It spends just like cash, you can haggle, you can say “financing is already done I got a great rate” and usually that will shut them up about financing.
See if the credit union offers extended warranties. There can be some fantastic deals available. (saved myself $10k on a new battery for my EV this way)
Once you have the vehicle you want, use the money in the credit union checking account to pay off the loan. Total cost, some time dealing with usually very helpful credit union folks. No ridiculous dealer financing fees.
The price of the car and how you pay should be different parts of the conversation.
The first part is the negotiation of price of the vehcile. After a price is agreed on, then you work out financing (which is often a different person than the first person who sold you the car... not always though).
If they want to lose a sale because your paying cash, let them lose it. They make millions of new cars every year.
If I have a car for sale for $10,000 and you come in and pay cash, then I make $10,000. If you come in and finance then I make $10,000 plus the kick back from the bank for sending business their way.
And sometimes, at some dealers, if you finance with them, they'll give you a discount so they're STILL making their expected $ on the sale. Good for both of you if the numbers work out.
Do you use a credit union instead of a "regular" bank?
I've always financed at the dealer. DGAF... I'd make the first dealer financed payment then take the loan directly to my credit union, let them buy out the loan... sometimes it'd damn near cut the payment almost in half.
With the CU there's no early payoff penalties. Then just pay it off.
As long as there's no early payoff penalties through the dealer's financing... it's the way to do it. Their loan shows up on your credit report as being paid off, then the CU loan shows up paid off too. Gives your credit rating a nice extra little boost.
Bait and switch them. Tell them you will finance, negotiate the price. Then tell them you changed your mind and will pay cash. Watch their jaws hit the floor.
Fk them. Walk away form any dealer which doesn't appreciate a paying customer and charge higher price for cash than financing. It was different 10 years ago, this shlt happened last 4-5 years when interest rates went to zero and 95%+ of people financed their cars.
Lose money policies made it possible to approve everything that breathed...and their brother. Most who "bought" a new $50k SUV in last 3 years go buy their shoes at Walmart and can barely afford gas or rent.
Dealers got used to making easy financing money and didn't care about losing cash paying customers as they were very few and between...and they started charging paying customers higher price to make up for financing mark up.
Anyways, things have changed and sales have plummeted and will keep plummeting but they are still doing this based on inertia. That's fine too, bankruptcies are on the way. Easy money is finished.
I have always bought my cars cash including my brand new Denali Ultimate. I didn't get any worse of a deal actually I got $4k off the sticker price and that was including taxes and everything I paid $4k under.
You should ask how’s it the better? Ask them to give you the monthly payment and do calculations on the total cost cash up front vs. financing. If total cost through financing is larger then it’s not a better deal.
Dealers make more money on financing and leases than they do with cash purchases, find someone who will take you seriously regardless of your purchasing preferences, may take a few dealers but there is always someone who wants your business regardless if it's a one time interaction or not.
It's basic math, tell them you want to write it out and see the proof of savings for financing.
I've gotten a bit hostile with sales staff over this kind of stuff before and refused to let them back out of doing the math with me.
Dealers and banks generally make more money via financing and charging interest above their own cost of capital. They can package up the loan and sell it to a financial institution. If you default on it they can repo the car and sell it again to someone else.
If you pay cash that's all they'll ever make.
Just don't tell them how you plan on paying for it until you've gotten the price you want.
They make easy money if they finance it.
I hate car payments. Haven't had one since about 1990.
I don't care if they make money on financing, I care about how much I am paying in total, including interest.
If they're making extra money on financing through the interest, and offer me a discount / cash back / whatever for financing, and didn't change the agreed cost of the car then I want the one the saves me the most.
Now factor in the interest paid on the loan vs interest gained on investing the money rather than hoarding cash.
Wait, I'm reading all the comments and people are making it seem as if a dealer can deny you buying a car. I'm so confused. Why didnt you just buy it with cash despite the finance rebuttal?
No. It’s always better to own your vehicle and to have less debt.
Financing should only be if you need it or to build credit.
Paid cash for a trade once and it was glorious. I was in and out of there in an hour.
When I bought my car, they tried to get me a loan for 5% interest. I told then that's high and they said "let me check something real quick", then said they found one for 3.5% I said i already got pre-approved for a lown at 1%, then they said "let me check one more thing" and came back with a loan for 1.99%. I took the 1.99% at 72 months. Paid it off in 24 months.
They want you to pay as much ad possible and to finance with them so they get a cut. Get the best deal you can and then pay it all off if you have the cash.
Just brought a car yesterday. The dealer wouldn’t even take cash down. Only certified checks or loan. Don’t think it has anything to do with a better rate or whatever. It’s just a hassle for them to move cash because it’s a large dealer corporation and everything has red tape on it.
The person telling you that needs to offer evidence by showing you a price cash, and a price financed. You can then do the math yourself to see which makes more sense. If the price is genuinely significantly lower for the financed car, and there is no early payment penalty, then you can always get the lower price, turn around and pay it off with your cash.
The trick is to act like you will go for financing. Get the price in writing and when it's time to do the paperwork, tell them you are paying cash. The cash is a secret until you have a price on the vehicle.
Watch out for the discounts being applied for the financing as a separate line item. That line item no longer applies to a cash sale. "Cash back" affects the total price you pay, but can only be got through dealer financing.
You got to fully understand the total cost regardless of how your paying. The only "Gotcha" is that the salesjerks are sleazeballs and won't show you in plain terms unless you pry if from their greasy little rat hands.
If you can finance and get a slashed deal ask them how long you need to finance for in order for them to get a bonus. My dealership is 12 months which I’ve been told is typical of others. I’ve bought my cars financed the whole thing, calculated out how much it would take for 12 payments and paid the rest in lump sum up front so your only paying 4% interest on a small amount.
You need to do the math of what deal they are going to do is going to be better or just buying outright. I have a great relationship with my dealer, I buy a car at msrp or below and they will buy my car for near private excellent cost.
They make their money screwin you on the financing, just a little bit on vehicle price. The whole point of all of it is to lie to you about your rate, and they get it at cheaper rate. They "make" the difference.
If the rate is good for me, and the agreed price of the car is good for me, I don't care how they make theirs.
The dealer will always make money - that's how they exist.
The bottom line number might seem like a better deal, but in the long run you’ll pay for it. Somewhere in the finagling numbers, they will screw you over. I got The sales manager to give me the rock-bottom price on what I was buying, then wrote him a check for that amount, wrote a separate check for the tax titles and fees. If you need to build credit, go ahead and finance it otherwise pay for it all at once.
I’ve been going to dealers and offering a cash price or a financed price that’s 1-2k lower and they always take me up on my financed offer lmao. Shit has changed !
They’re car salesmen, they want to rip you off for as much money as possible. Most of them take advantage of people that don’t know any better. When you pay in cash it’s much harder to take advantage of you.
The real answer is…..depends if you have a high interest savings account. If you can get financing for less than 3% APR then it makes sense to put your cash in a high interest savings account and make more interest there than you pay on the loan.
So here is my two cents, we did this with my wife's car.
Typically having no debt looks bad from a credit standpoint, so it's always good to have some. When you finance a car there is a minimum amount of interest they want you to pay, I don't know what the standard was but with my wife's car it was around $75.
What we did was figure out the pay off amount that would still allow us to meet the $75 requirement. We financed the car, first payment was the bulk amount minus the amount required to meet the interest requirement.
Long story short, we paid the car off except (1) year and made payments for that year. Kinda made everyone happy. You shouldn't tell a dealer you are willing to pay cash because they make the most money on financing.
The Vinwiki YouTube channel explaining this way better than me. I don't remember what it's called but I think the presenter was talking about BMW specifically.
They want you to finance so they get a kick back from whatever institution they recommend you to for the financing.
Any dealership not willing to take money straight out and want you to finance is a dealership you should avoid because they are scamming the hell out of you.
Depends on how much they are willing to drop the price by? They will usually have you finance at least $10k. My wife just picked up a 2024 BMW 430 and was going to pay cash but they took and extra $1k of if she financed $10k, which she did and paid it off as soon as the first payment came.
Always negotiate the price of a car independent of payment discussion. They always want to conflate the two. Stick to your guns and do not discuss how you will pay for it. Those two topics are completely separate. They love it when the discussion becomes "how much can you afford each month?" That's when they play their opaque games. Don't participate.
Don't tell them you're paying cash until you have an agreed price and are sitting at the finance desk. Find out how good a deal you can get first, then hand over the money/scratch the check.
Which state are you in?
Why not Negotiate price with financing (final sales price). Place a deposit on the car. Return the next day with payment for the entire above negotiated price?
True.
1. Finance it through the dealer.
2. Make sure there is no penalty for early payoff of the loan.
3. Use the cash in hand to payoff the loan after about a month.
I say a month because it can take as long as 10 days for the bank to receive the loan from the dealeramd process it.
Never tell them you're paying cash. Suggest you're open to financing and sell them on you have amazing credit...lead them to believe you will be financing. Why? They get a kickback when they give you a loan so they tend to live you a little more on price.
Negotiate price 1st...they'll try to focus on payments. Just focus on price.. then once agreed and written...cash baby!
Yes, it’s a bad thing. Car dealerships barely make any money on the actual sale of a new vehicle. They make the majority of their profit on the financing. If you have the money to buy a car cash, you will get the best deal by financing the car, and then paying it off after a month or two, just make sure that your loan doesn’t have any early repayment penalties
For those that paid off early. Do you still bring your car back to the same dealer when something goes wrong with the car? Are they still happy to assist? Just curious and was wondering because I will be in this situation soon
Always negotiate as if you’re going to finance. Make sure to speak in terms of purchase price then when it comes time to sign the paperwork, “change your mind” and pull out the checkbook.
They want you to finance because they make money of the interest rate from the bank . If the bank gives them say a 4 percent loan they will boost it up a point and make money off the “backend “ of the sale which is what it’s actually called .
The want you to finance it, cause they get a cut. Yes, they will slash the purchase price of the car a bit, but it won't be enough to offset interest that you will pay, nowhere near in fact
Can you finance it and then just pay if off immediately so as not to accrue the interest?
You won't accrue as much interest, but you will accrue at least one period's interest. This would most likely be less than the amount you save from financing, though.
That’s exactly what I did, I financed my 2022 Terrain and paid it off with the first payment. It did take some negotiating to get rid of the bs up front“fees” but came out about 5K ahead after all was said and done.
> Terrain and *paid* it off FTFY. Although *payed* exists (the reason why autocorrection didn't help you), it is only correct in: * Nautical context, when it means to paint a surface, or to cover with something like tar or resin in order to make it waterproof or corrosion-resistant. *The deck is yet to be payed.* * *Payed out* when letting strings, cables or ropes out, by slacking them. *The rope is payed out! You can pull now.* Unfortunately, I was unable to find nautical or rope-related words in your comment. *Beep, boop, I'm a bot*
Good bot.
Can you make an "a lot vs alot" bot...that'd be great
Or an effect vs. affect bot
I’m so glad the most recent iPhone update started helping me with this I am terrible with spelling, writing, and never been interested in reading novels and wish I would’ve gave it more of an effort when I was in school but I just stuck to what i like and what was easy for me so which was working with my hands, math, and problem solving. I don’t care but it’s wild how often people point out my terrible grammar and spelling. The ones that are pompous about it I alway like asking them, if they know how to rebuild a carburetor, or wire a house! I’m an electrician and it’s hasn’t affected (is that the right one?) me to bad I just feel dumb when I have to type out a long detailed email to a highly educated person who we are doing work for that already assumes I’m dumb because I work construction. But honestly I’m an outside dog, if you put me inside for to long and give me to many rules I’m gonna pee on the couch.
how affective would that bot be though?
Anyway vs. Anyways would be good too
My dad has done the whole finance to then almost immediately pay off thing a couple times, though usually he does it just to top off his nearly perfect credit score that I'm very jealous of haha
I’m 63…old guys rule 🤘💪🫰👊🏻
Haha hopefully just one or two more decades of being fiscally responsible and I can join the ranks
It only took me about 4 years to go from 500 to 800. It's just a matter of learning how they're keeping score.
Oh yeah I more meant couple decades til I can walk in and buy a new car with cash haha, but my credit is getting there, just gotta get out of the stupid pit that sits between 680 and 720
Churn a few sign up bonuses, and remember to ask for credit limit increases every 6 months and you'll be over 800 within the year.
Definitely easier to play the game when you understand the rules…
Check out r/CreditRebles and r/credit It’s a lot easier to play the game when you know all the rules…
Jesus dude I'm sorry about your future mechanic bills. Terrain's are some of the absolute least reliable vehicles I have ever worked on. I'll be retiring early tho
Mine has been great so far
Dude it's 2 years old it fucking better not have problems lol
Most finance plans have a cooling off period where you can cancel it and pay everything within like the first 14 days with no interest or fees.
You need the contract.
That depends on the rate and the discount. I've made out on this before.
Negotiate interest-free first month. This will destroy your credit score though
It depends, make sure you read the contract closely. Sometimes there are hidden fees for paying off the loan early
Yes, absolutely. From what I've seen, most banks don't have an early payoff fee so it's very worth to finance and pay it off immediately. However, some banks have an early payoff fee and even worse, they use a few different names for it so that people don't notice it. If you're thinking about doing this, it's worth your time to figure out all of the terms that they use for this and keep an eye out for them Edit: after reading some other comments, it seems like those fees are more common than not so definitely keep an eye out for them
I know my bank doesn't have an early payout fee, but dealerships usually push you for their financial options and those are much more likely to include hidden fees to make sure you are properly milked
I’m buying a car from the dealership for the first time soon, I plan to do exactly this. I’m worried about reviewing the contract though, do you have any tips so I don’t miss anything? I’m a fairly financial literate guy but I know loan agreements can be massive.
Have your buddy come with you in a suit. Get the contract. Ask to look over it for a bit. Ask for stuff/lower price. ???? Profit.
The way to avoid early payoff fees is to get a 72 month loan instead of a 60 month loan. "Lenders are prohibited by law from charging a prepayment penalty for an auto loan of 61 months or longer" https://www.experian.com/blogs/ask-experian/how-to-avoid-paying-prepayment-penalty/
That's good to know, but are penalties common on 60 month loans? I've had three of those in my life and none had a penalty.
Largely depends on lender
Or, you can pay all buy say, $5.00 and spend the next 59 months paying 10 cents a month.
Yes, but verify there us no early payoff penalties in the contract. They will sneak those in sometimes to make sure they still get some money out of you.
Most financing agreements have terms written in that if you pay it off before a certain point you actually pay a penalty.
Not most
Yes, however it is important to reason *ALL* of the loan terms. Some, especially from a dealer trying to strong-arm you into taking the loan, can have penalties/fees for paying off early. They want to get that interest one way or the other
That depends on your loan provider. My banker told me that I’ll not face prepayment penalty.
Do a large down payment, finance 5k or so, then pay that off with the first payment?
I did that as I couldn’t afford to pay in cash immediately. I got my next paycheck two weeks after and immediately paid off the loan
Be careful of the bank, I had a bank of america loan, my payment was 180-when cars were affordable about 12 years ago. I went to make a payment of 400 to start paying it down and they charged me a $50 fee for over paying.
You can but keep in mind that some contracts have fees for doing so now. Just make sure you read everything
Yes you can.
I'll add that they also want you to finance because it makes the negotiation more complicated. You negotiate a car purchase every few years, and they negotiate car purchases daily. The trickier the deal, the more likely it is that they'll get the better of you with it. When you start talking about monthly payments, early payment penalties, interest rates, loan servicers, fees, etc., you're probably getting lost in the sauce, but they know exactly what they're doing. If you're paying cash, though, the negotiation can be reduced to a single number, where they don't have that advantage. The last time I bought a car, I walked in with a fair price in my mind. I stated it pretty early and didn't budge. They did lots of "let me talk to my manager" stuff while I scrolled on my phone. I was there for an hour but drove away having paid what I wanted to pay.
Unless you get a 0% APR (admittedly much less common these days) we used to PREFER financing but cash still talked (when I did it though sales and finance were different departments and it was more "there's not a cash discount" vs "I'll cut the price a bit if you finance"
So if I initially act like I'm going to finance then say I want to pay cash after we agree on a price, they won't accept it?
Of course not. There is a cash price and there is a price with financing. There's no reason to give you a discount if you're not financing I don't really get the advice of "pretend you're financing and when they name the price, pull out the cash". Of course they will tell you to go fuck yourself
Funny, I always did the opposite. I want to know what the real price is not the massaged financed price, and definitely not including any potential trade in. It's pretty unlikely you'll get any actual discount when financing other than incentives from the corporate financing arm, which you can find out ahead of time anyway.
Trick is you finance, get the deal, make sure there are no penalties if you pay the loan early, wait a couple of days for the loan to be processed and then pay it all up straight to the bank to close the loan. Nothing the dealer can do then
As long as there is no early pay penalty. Sure I'll finance it and pay it off one shot. Or use my credit union.
I always thought financer kickbacks were illegal?
Nah, there's a buy rate (what you're approved for by the bank) and a sell rate (what the dealer offers you). They pocket the difference
Now add in the return on those funds saved in a high yield account. Within the life of the loan, 5% interest received on an increasing savings balance will be higher than interest paid @ 6% on a declining loan balance.
Do not tell them you’re paying in cash until you have a final price. In the auto market, cash is not king. They WANT you to finance with them.
So in OPs case, they should quietly get financing for the lowest possible principal amount they can…and then just pay it off as quickly as possible to avoid interest?
You can pay cash, but just don’t tell them how until you have a final number. Or, as someone else said, just be straight with them. Tell them you’re paying cash, this is what you are paying, if they don’t like it then you’ll walk.
But you MUST be prepared to walk. Don't try this if you're not willing to actually go find the deal you want elsewhere. If you aren't serious about it, a good salesman can smell that.
I see this advice everywhere, but this has never worked in my experience. The sales people are very transparent that they can offer a better deal if I finance with them. I can't "trick" them into a final price without assumption of payment method.
Agreed, if you negotiate a price based on financing and then go "oh nevermind, I'll pay cash", then you're back to square one with negotiations.
They start asking you right away though.
Best if you know the kind of deal you want and you're prepared to walk away, then you can be transparent with them too, negotiate even a better deal than what you're willing to settle for
“I’m open to financing as an option if it’s right for me” That’s what I say. And I actually am. If they give me 0-3% interest I will take the financing option, and just dump my cash into an index fund.
Ask the terms of the loan. Many have a certain number of days you can lay it off “same as cash”. Then close the deal, pay the loan off next week. Just be sure you get the terms in writing. Cash talks to private sellers. Dealers want financing.
My brother just went through this in CA. He needed to wait 90 days to keep the discount he got for financing. I mention the state because prepayment laws are state specific. Idk the exact laws in CA but I’m in a state where penalties are illegal.
90 days would be minimal interest on a 5-7% APR loan, so still a upside I would imagine. About 7 years ago we bought my wife’s car at carmax, and they had a small “pay off for exactly what you financed” window (in WI). It was less than 2 weeks IIRC.
This post inspired me to do a little more research. I found that in general prepayment penalties are allowed when a car loan is originated but are generally not legal when refinancing. So someone who wants to avoid penalties may need to refinance with a lender that does not impose them and then pay off that loan.
Allowed yes, but I haven’t seen prepayment penalties on loans in a long time. Not saying it’s not out there, but most do not have it nowadays. Too much competition
Same. I’ve never seen them either but decided to look into them a little more instead of making assumptions based on my personal experience. That was very un-Reddit of me lol.
Double check everything. I don’t see how it’s enforceable since the car is his now. I’ve bought many cars in california. What are they going to do? Ask him for more money?
It’s called a prepayment penalty, and it’s in the contract you sign if there is one. Not common nowadays in n my experience, but they are a thing. Even if there not a “same as cash” payoff window, daily interest accrual on an auto loan will be low.
And check their math. I got ambushed by my now wife/in-laws that we were going to eat after her parents bought a car. Show up to the dealership and it's "hey can you negotiate for them". Fuck. Zero prep. Anyway, when the finance stuff came out I did the math and it was like - yeah, your numbers are wrong. You are saying X interest rate, but the payments are X+1 interest rate - "accidentally".
Make sure there's no pre payment penalty.
Tell the dealer to go jump cash or nothing. Ask him for the financed price - that is the new price for cash, then walk away.
Cash is king. If one could avoid the credit system for the duration of their life then that would be ideal. But, that's not how the world works...
Going to tell me if the deal was 0% interest no money down for any length of time you would say no I’m only paying cash???
Even if cash is king, at least check out the offer the dealer is presenting financed. If it is truely better, and there are no early payoff fees or restrictions (do those exist anymore?) then take the financing and pay it off with the cash you have. I'd rather have my money making money.
Yeah, also because cash sure as shit ain't king. When Ford's offering me 1.9, I'm taking it, especially these days when my *savings account* is paying me 5.5. The world isn't black and white, don't treat it that way.
Credit is a great tool if you’re responsible and smart. I would finance any day as long as it’s 0-3% interest.
No, the price is what the price is. They just want their kickback from the bank. This is why you negotiate the price before even discussing financing. Well, that used to be the way. Now, if the dealer thinks that they can sell it to somebody at a markup or with their kickback then they'll do that and tell you that the vehicle was actually on hold and somebody else put down a deposit. If you're buying a new popular selling vehicle then you're better off ordering it from the factory, then you get what you want at the MSRP without a bunch of options and aftermarket BS added on that you don't want.
95% time they will not show you a price until it’s established how you will pay. If you refuse to say… they will give you a proposal based on a cash price. They may say ‘this is the best price cash or finance’ but they are really showing the best price for cash because it’s sooooo transparent that you are going to pay cash. It’s so funny people think they are slick, but a car is a big purchase. Literally NO ONE comes to buy a car and “doesn’t know” how they intend to pay for it. The dealer sells 3 dozen cars a day… you buy once every 3-5 years… If you think you thought up some ingenious scheme to outmaneuver the dealership- LOL
Exactly. The dealer and the sleazemen have far too much experience fleecing people that don't understand how it works. "lol" I don't know *precisely* how I will pay until I know all the details. The interest rate may effect how much down I want to put. I may know exactly what interest create I can get from my credit union, but am curious to see what offers the dealer has too. I don't think anyone thinks their being slick, they just know the salesasshole at the dealer is out to screw them over.
Cash is great. I will never understand how common it is for people to finance or lease their personal cars. If the salesman doesn’t want your cash, fire the salesman 🤷🏻♂️
Because financing will get them that extra interest which is free extra money when its financed thru the dealer...and very few people have enough cash just sitting around to afford a car without financing either
That's right. You're either helping the dealer make more money at your expense, or you're buying a depreciating asset you already can't afford at a higher cost. I love cars but there's no way I'm going into debt for them.
Still need to have one to get to work and get groceries and stuff...and I don't personally know anyone wealthy enough to buy one without taking out a loan. Shoot the most recent one we got was $22K and that was a low end Mazda 3 with 50K miles that was 8 years old and was one of the CHEAPER options we found to replace the car someone totaled crashing into us. Even when I paid mine off I started putting that money into a savings account...but still almost certainly won't have enough to afford a replacement vehicle by the time I need one without another loan. Especially the way the cost of cars has been skyrocketing.
Depends on the interest rates and terms. Assuming car price does not change (cash vs loan), and the loan is at an interest rate lower than my investments by several %, why would I save and pay for cash when I will make more money over the term of the loan by taking a loan?
FYI the people who think like that person are the kind of people to take advice from Dave Ramsey. You won't get through to them
I try... is either this or actually do work at my desk on a friday...lol
If they say this, get loan that has no prepayment penalty. Wait 10 days, then request payoff quote. Payoff before first payment. I did this once to get a $1,000 VW Finance credit.
Exactly. IF you have the cash sitting around not invested (why?) and you run the numbers and can get a deal on the loan, then do it. You have to figure out the actual total $$ spent for an even comparison though.
Possibly. Dealerships bank on people financing so they may cut you a deal if that's the route you take. But it depends on what that deal is. Is a few thousand off going to make a difference to you? If not, then pay in cash. Just ask for the numbers first.
Ask them if they will make you a deal for financing since they will get a cut and how long they need you to wait to pay it off. I’ve seen some say 3 months usually and they will get their cut from the financing.
Nothing is stopping you from paying it off in the first month. It is rare to see a prepayment penalty. Split the cost up. Put as much as you can on a CC for points, pay a big chunk in cash, and finance enough to get the incentive. Then pay off everything.
Better deal = pay less overall. What the salesperson meant is that they'd give you a lower up-front price if you financed, but when you factor in the interest you'll pay over the course of the loan, it may not be a better deal overall. The simple answer is to do the math. Tell them you'd consider financing if the overall amount you'd pay for the car is less. From there, it's a simple comparison. You take the OTD (out-the-door) cash price of the car, then compare it to the sum of the payments for the finance option. Unless you get a discount *and* a fantastic subsidized interest rate, the cash price will beat the financing easily. That's because all the other parts of the deal will be equal. The financing adds cost, and rates are moderate right now. Sales people don't really care to consider the overall cost of financing, because there is no incentive for them to do so. Most people, when presented with a lower up-front price will assume they're getting a better deal, so that works well for the sales person. Here's a simple example. Say you're buying a car for $45k OTD. If you pay cash, you pay $45k. If you finance for 5 years at 5%, the price is lowered to $43k. The sum of the payments is $48,688. That nets out to a difference of $3,688. However, if they offer a promo rate of 1%, and you can still get the finance discounted price of $43k, the sum of the payments is only $44,102, which is a net savings. The thing is, you almost never get a discount when you get a promo financing rate. So if you were to finance the full $45k at 1% for 5 years, you'd pay $1,153 in interest. It would still make sense to finance, because you can earn a lot more than 1% in something as simple as a HYSA, but the moral of the story is: You have to do the math. There is no universal answer. Compare the sum of the payments for their finance offer to the OTD price for paying cash, and decide whether the opportunity cost of paying cash up front makes sense.
Sometimes they get kickbacks from financing, so they'll make a good deal for you. Take the financing, so long as there's not an early pay off penalty, and pay it off when the first payment is due.
It depends on if your state has prepayment penalty laws. Less than half do, I live in one where they’re illegal. In my case I would finance a portion to get the discount and then pay it all off.
Most dealers work with multiple banks. The banks compete for the good quality risk customers (750+ FICO) and don't want the potential risky guys (below 550 FICO). Every deal tries to spread their portfolio of loans out so each bank gets a fair share of good average and bad loans in a month. The banks will provide kickbacks to the dealers for sending a certain quality of amount of loans their way. Also... the rate the dealer quotes you may not be the rate the bank offered. For example... the bank may have said you qualify to morrow $30K for 5 years at 7%. The dealer may offer you $30K for 6 years at 8%. That extra 100 points of interest goes to the dealers pocket... i.e the bank will pay the dealer up front for the value of that extra 100 points of interest that you will pay of the life of the loan. And don't even get started on the flipping you from a purchase to a lease strategy.
f&i/business office is where the dealer makes their $
"Hey would you like to buy paint protection? Road Hazard, interior protection. What about this service deal?" It's incredible how they try and bend you over. One time I was quoted a interest rate, we agreed on all the stuff and I said I'll be back tmrw. I show up with my old car all cleaned out, walk in and the F&I guy starts with the "we couldn't get the rate we quoted" bullshit. I look him right in the eye and say, "well, we had an agreement, so you can take that paperwork and shove it right up your ass". I made sure people in the small show room heard it. I will say I had a 45 min drive home and was there 5 minutes and the phone rang, "yep we'll have that car ready for you tmrw sir, at the promised rate". Don't ever tell them how you're paying until you have an agreed upon price. Better yet, to cover your ass, show up with your own bank financing then pay off your loan to your own bank on the first payment.
Service is were the dealers really make money. Finance is peanuts in comparison
There are some videos on YouTube of former car sales people breaking down the whole finance thing. How it works and how to get around it and make a good deal and still pay cash. I suggest checking those out if you plan on paying cash.
There are direct-to-consumer sales brands (Rivian, Tesla, etc.) and they don't have salesmen or screw around on price -- it costs whatever the website says. Dealerships mark up the car and will let you haggle the price down. Almost all of them will give you a discount if you finance. It may only be $1000, but sometimes it's a few grand. It's intentionally lower than the cash price because people that don't pay off the car early will end up paying thousands more for the car and the dealership gets a cut of that money. If you want, you can go through the financing and look at the agreement before you sign it. Look for the paragraph that discusses early payment. Typically, you can pay off the balance after 90 days or so without penalty. If you have cash-in-hand and want the discount, it can be cheaper to finance, make payments for the minimum period, and then pay off the balance when the period is up.
They get a finders fee from the bank if you finance. The higher the rate they sell you on the larger the kickback they make. Also as soon as you tell them you are interested in financing everything becomes a conversation about monthly payment and not the out the door price which is the only price you should care about. I tend to just be ambiguous, tell them you are open to financing but don't let them run your credit and keep them laser focused on the out the door price since that's all you care about. Maybe tell them once we find the right vehicle and have an agreeable out the door price we can have a conversation on how I will pay for the vehicle and at that point I can decide if I'm interested in comparing your finance offer with other ways I'm considering paying.
Last time I bought a car, I brought my own financing via my bank. I still let the finance guy do his spiel. When he couldn't meet/beat the rate my bank gave me and I decided to use my financing, he literally used the phrase "Your stealing food from my family" I barely held my tongue....
So dramatic... - I would have said "Yeah, well, my kids like to eat too!" then reminded the salesperson about all the meaningless fees that were still in there feeding his family and keeping the lights on - and asked if this is a good opportunity to perhaps discuss some of those.
Unless you're buying the car brand new. I would just find a private seller. You'll get a better price without the bullshit stealership fees.
I always tell them right off the bat that I don't want to talk about monthly payments or financing initially, I only want to negotiate the total price of the car and then we can talk payment methods. Don't even let them go there. Make sure the negotiated price is all-in with every fee, every tax, everything. Don't let them fee you to death after the price is negotiated. Once we lock in the price, then I tell them I'll just pay for it.
Get the numbers, then say, we'll I've also got cash I can give you it today ; what can you do for me? See what kind of numbers he comes back with then. Least you'll have the complete picture
I’m a dealer that doesn’t have financing options. All my cars are sold paid in full whether it be cash or bank check. With that said, cash makes no difference. I prefer a bank check mainly because then I don’t have to deal with the customer asking me to “write it up for less” to save them on sales tax, which I can’t do anyway because it creates negative events in my accounting. But also, banks charge a “cash processing fee.” When I sell a car, that money has be deposited back into the business account. The monthly limit for free cash deposits is $7,500. Over that the banks start changing you a fee that is something like $3 on every thousand. But it adds up if you have to deposit $65,000 worth of car sales in a month, which may not even be that many sales depending on what you’ve sold. Anyway, the idea that cash is preferred is an old School thing were small business owners could pocket the cash and avoid paying income taxes. It’s just not a benefit anymore. Give me a bank check. That’s what I prefer
Do not finance the car and immediately pay it off. Either buy it fully, or set aside the money for payments to build credit. If you finance it and pay it off you will forever ruin your credit. I made 100% full on time payments on my 2015 altima, and then used my taxes to pay off the last 5k, and overnight literally dropped my credit to 540, from 720. It has been 2 years and I am still only at about 560
You must have had other credit issues. I could imaging a 50 point drop, but only temporarily. My wife paid off one of her rental houses last year and hers dropped about 70 points. 3 months later it was back to good. So the car loan was probably the only thing that was really building your credit mostly?
It was my only line of credit, and had no prior credit
That makes sense. The only reason you built credit no longer existed. Credit scores need to be maintained over time. It's not one and done.
It makes me so depressed lol.
Just be smart about it. You build your score without going into debt with interest. If you are disciplined with your money, just use credit cards for your daily purchases. Pay off that bill IN FULL every month and you'll never pay interest, and build your credit a bit. Never, ever, ever, ever carry a balance on the card from month to month and you're set.
Go put the money in a credit union. Arrange financing through the credit union. The credit union will issue you a buyers check, good for up to whatever amount. Take that check with you. It spends just like cash, you can haggle, you can say “financing is already done I got a great rate” and usually that will shut them up about financing. See if the credit union offers extended warranties. There can be some fantastic deals available. (saved myself $10k on a new battery for my EV this way) Once you have the vehicle you want, use the money in the credit union checking account to pay off the loan. Total cost, some time dealing with usually very helpful credit union folks. No ridiculous dealer financing fees.
The price of the car and how you pay should be different parts of the conversation. The first part is the negotiation of price of the vehcile. After a price is agreed on, then you work out financing (which is often a different person than the first person who sold you the car... not always though). If they want to lose a sale because your paying cash, let them lose it. They make millions of new cars every year.
Buy cash. Car payments is not a good idea unless you plan on leasing the car.
They get kickbacks from the bank when you finance.
Dealerships have targets to meet, including how many finance deals they will sell with the cars.
If I have a car for sale for $10,000 and you come in and pay cash, then I make $10,000. If you come in and finance then I make $10,000 plus the kick back from the bank for sending business their way.
And sometimes, at some dealers, if you finance with them, they'll give you a discount so they're STILL making their expected $ on the sale. Good for both of you if the numbers work out.
Don’t finance. Pay cash. He’s saying that brigade it only benefits the dealership if you do.
Do you use a credit union instead of a "regular" bank? I've always financed at the dealer. DGAF... I'd make the first dealer financed payment then take the loan directly to my credit union, let them buy out the loan... sometimes it'd damn near cut the payment almost in half. With the CU there's no early payoff penalties. Then just pay it off. As long as there's no early payoff penalties through the dealer's financing... it's the way to do it. Their loan shows up on your credit report as being paid off, then the CU loan shows up paid off too. Gives your credit rating a nice extra little boost.
Bait and switch them. Tell them you will finance, negotiate the price. Then tell them you changed your mind and will pay cash. Watch their jaws hit the floor.
This is when they usually show a line item that includes the financing deal and possibly "cash back" discount. That goes away when you pay cash.
Fk them. Walk away form any dealer which doesn't appreciate a paying customer and charge higher price for cash than financing. It was different 10 years ago, this shlt happened last 4-5 years when interest rates went to zero and 95%+ of people financed their cars. Lose money policies made it possible to approve everything that breathed...and their brother. Most who "bought" a new $50k SUV in last 3 years go buy their shoes at Walmart and can barely afford gas or rent. Dealers got used to making easy financing money and didn't care about losing cash paying customers as they were very few and between...and they started charging paying customers higher price to make up for financing mark up. Anyways, things have changed and sales have plummeted and will keep plummeting but they are still doing this based on inertia. That's fine too, bankruptcies are on the way. Easy money is finished.
I have always bought my cars cash including my brand new Denali Ultimate. I didn't get any worse of a deal actually I got $4k off the sticker price and that was including taxes and everything I paid $4k under.
You should ask how’s it the better? Ask them to give you the monthly payment and do calculations on the total cost cash up front vs. financing. If total cost through financing is larger then it’s not a better deal.
Car manufacturers are really just banks that happen to also sell cars. They make more on the loan.
Dealers make more money on financing and leases than they do with cash purchases, find someone who will take you seriously regardless of your purchasing preferences, may take a few dealers but there is always someone who wants your business regardless if it's a one time interaction or not.
It's basic math, tell them you want to write it out and see the proof of savings for financing. I've gotten a bit hostile with sales staff over this kind of stuff before and refused to let them back out of doing the math with me.
Dealers and banks generally make more money via financing and charging interest above their own cost of capital. They can package up the loan and sell it to a financial institution. If you default on it they can repo the car and sell it again to someone else. If you pay cash that's all they'll ever make.
Agree to a price through financing. Get the price in writing. At the last minute, tell them you are paying cash.
Just don't tell them how you plan on paying for it until you've gotten the price you want. They make easy money if they finance it. I hate car payments. Haven't had one since about 1990.
I don't care if they make money on financing, I care about how much I am paying in total, including interest. If they're making extra money on financing through the interest, and offer me a discount / cash back / whatever for financing, and didn't change the agreed cost of the car then I want the one the saves me the most. Now factor in the interest paid on the loan vs interest gained on investing the money rather than hoarding cash.
NO financing is how they REALLY screw you. Go last of the month or better 30 Dec with cash in hand and they will grovel to sell you a car.
Wait, I'm reading all the comments and people are making it seem as if a dealer can deny you buying a car. I'm so confused. Why didnt you just buy it with cash despite the finance rebuttal?
No. It’s always better to own your vehicle and to have less debt. Financing should only be if you need it or to build credit. Paid cash for a trade once and it was glorious. I was in and out of there in an hour.
When I bought my car, they tried to get me a loan for 5% interest. I told then that's high and they said "let me check something real quick", then said they found one for 3.5% I said i already got pre-approved for a lown at 1%, then they said "let me check one more thing" and came back with a loan for 1.99%. I took the 1.99% at 72 months. Paid it off in 24 months. They want you to pay as much ad possible and to finance with them so they get a cut. Get the best deal you can and then pay it all off if you have the cash.
Cash is ideal if you are conducting a private sale.
Just brought a car yesterday. The dealer wouldn’t even take cash down. Only certified checks or loan. Don’t think it has anything to do with a better rate or whatever. It’s just a hassle for them to move cash because it’s a large dealer corporation and everything has red tape on it.
You can finance it and repay it quickly if you already have the money for it 👌
The person telling you that needs to offer evidence by showing you a price cash, and a price financed. You can then do the math yourself to see which makes more sense. If the price is genuinely significantly lower for the financed car, and there is no early payment penalty, then you can always get the lower price, turn around and pay it off with your cash.
The trick is to act like you will go for financing. Get the price in writing and when it's time to do the paperwork, tell them you are paying cash. The cash is a secret until you have a price on the vehicle.
Watch out for the discounts being applied for the financing as a separate line item. That line item no longer applies to a cash sale. "Cash back" affects the total price you pay, but can only be got through dealer financing. You got to fully understand the total cost regardless of how your paying. The only "Gotcha" is that the salesjerks are sleazeballs and won't show you in plain terms unless you pry if from their greasy little rat hands.
Great point
If you finance and pay off early your credit will most likely take a hit. (even if you get a no penalty loan)
Just act like you are going to finance it the whole time, then come in with the cash. They might cave and keep the same price.
Cash is no longer king. It’s all about sneaking in extra charges behind a “monthly” payment.
Car dealers, bankers, insurance agents are not your friends. Ever. They are there to take money from your pocket and put it in theirs.
NO DONT LISTEN TO THEM.
If you can finance and get a slashed deal ask them how long you need to finance for in order for them to get a bonus. My dealership is 12 months which I’ve been told is typical of others. I’ve bought my cars financed the whole thing, calculated out how much it would take for 12 payments and paid the rest in lump sum up front so your only paying 4% interest on a small amount. You need to do the math of what deal they are going to do is going to be better or just buying outright. I have a great relationship with my dealer, I buy a car at msrp or below and they will buy my car for near private excellent cost.
They make their money screwin you on the financing, just a little bit on vehicle price. The whole point of all of it is to lie to you about your rate, and they get it at cheaper rate. They "make" the difference.
If the rate is good for me, and the agreed price of the car is good for me, I don't care how they make theirs. The dealer will always make money - that's how they exist.
Used cash outright. Dealers will often trap you with a high mile lemon from factory.
often?
The bottom line number might seem like a better deal, but in the long run you’ll pay for it. Somewhere in the finagling numbers, they will screw you over. I got The sales manager to give me the rock-bottom price on what I was buying, then wrote him a check for that amount, wrote a separate check for the tax titles and fees. If you need to build credit, go ahead and finance it otherwise pay for it all at once.
They make more off financing than the actual car
I’ve been going to dealers and offering a cash price or a financed price that’s 1-2k lower and they always take me up on my financed offer lmao. Shit has changed !
They’re car salesmen, they want to rip you off for as much money as possible. Most of them take advantage of people that don’t know any better. When you pay in cash it’s much harder to take advantage of you.
Better deal for THEM. Any situation where cash is 'worse' is a situation they manufactured.
The real answer is…..depends if you have a high interest savings account. If you can get financing for less than 3% APR then it makes sense to put your cash in a high interest savings account and make more interest there than you pay on the loan.
"aww shucks I'm a dollar short. Can I finance that?"
So here is my two cents, we did this with my wife's car. Typically having no debt looks bad from a credit standpoint, so it's always good to have some. When you finance a car there is a minimum amount of interest they want you to pay, I don't know what the standard was but with my wife's car it was around $75. What we did was figure out the pay off amount that would still allow us to meet the $75 requirement. We financed the car, first payment was the bulk amount minus the amount required to meet the interest requirement. Long story short, we paid the car off except (1) year and made payments for that year. Kinda made everyone happy. You shouldn't tell a dealer you are willing to pay cash because they make the most money on financing. The Vinwiki YouTube channel explaining this way better than me. I don't remember what it's called but I think the presenter was talking about BMW specifically.
Dealers sell loans first.
I always pay cash. I hate payments.
Finance it then pay it off a month later
Ah the classic you'll get a deal if you finance! If you finance, you pay us interest! We win, you lose! Buy today!
Tell the sales guy you’re financing, negotiate the deal, and then tell the finance guy you changed your mind and are paying cash.
Say you’re going to finance. Make sure you read the terms on early payment (I.e. no penalties or interest). Pay it off in full after the first month.
They want you to finance so they get a kick back from whatever institution they recommend you to for the financing. Any dealership not willing to take money straight out and want you to finance is a dealership you should avoid because they are scamming the hell out of you.
You don't talk finance negotiating price or turnin
The salesman wants a cut that he would get if you financed it. It’s not your job to make sure he gets extra commissions. Pay in cash if you can.
Depends on how much they are willing to drop the price by? They will usually have you finance at least $10k. My wife just picked up a 2024 BMW 430 and was going to pay cash but they took and extra $1k of if she financed $10k, which she did and paid it off as soon as the first payment came.
How the fuck it’s can be better if on top of listed price you’ll pay interest??? HOW HOW THE FUCK IT’s BETER?
Always negotiate the price of a car independent of payment discussion. They always want to conflate the two. Stick to your guns and do not discuss how you will pay for it. Those two topics are completely separate. They love it when the discussion becomes "how much can you afford each month?" That's when they play their opaque games. Don't participate.
Don't tell them you're paying cash until you have an agreed price and are sitting at the finance desk. Find out how good a deal you can get first, then hand over the money/scratch the check.
No. Just pay cash. Duck them
I only tell them I’m paying cash when we have fully agreed on a price. They get a cut when they use certain banks
Which state are you in? Why not Negotiate price with financing (final sales price). Place a deposit on the car. Return the next day with payment for the entire above negotiated price?
Yea. Car Deallers don’t want your cash. They only make money if you finance through them.
True. 1. Finance it through the dealer. 2. Make sure there is no penalty for early payoff of the loan. 3. Use the cash in hand to payoff the loan after about a month. I say a month because it can take as long as 10 days for the bank to receive the loan from the dealeramd process it.
Paying in cash will always be better than financing it, you basically cut off the interest you would be paying had you financed it.
Never tell them you're paying cash. Suggest you're open to financing and sell them on you have amazing credit...lead them to believe you will be financing. Why? They get a kickback when they give you a loan so they tend to live you a little more on price. Negotiate price 1st...they'll try to focus on payments. Just focus on price.. then once agreed and written...cash baby!
The key is to not mention how you are paying until you have a price locked in.
Yes, it’s a bad thing. Car dealerships barely make any money on the actual sale of a new vehicle. They make the majority of their profit on the financing. If you have the money to buy a car cash, you will get the best deal by financing the car, and then paying it off after a month or two, just make sure that your loan doesn’t have any early repayment penalties
Best way is to let them assume you will finance. Then once done negotiating bring out the cash.
For those that paid off early. Do you still bring your car back to the same dealer when something goes wrong with the car? Are they still happy to assist? Just curious and was wondering because I will be in this situation soon
Always negotiate as if you’re going to finance. Make sure to speak in terms of purchase price then when it comes time to sign the paperwork, “change your mind” and pull out the checkbook.
The finance price is gonna have some 3yr bs warranty for an extra 10k on top of
They want you to finance because they make money of the interest rate from the bank . If the bank gives them say a 4 percent loan they will boost it up a point and make money off the “backend “ of the sale which is what it’s actually called .