Saturday, July 11, 2015

Charged more to pay for a car in cash?

I was astonished to come across a blog article where the author claimed that car dealers had tried to charge her more for paying in cash than if she used dealer financing.

While wheeling and dealing, come to find out, if you will finance through the dealership, they will cut you a deal. Nope, no discounts for cash. They really don't want cash, who cares that you've been saving for years knowing this time would come.

. . .

When I mentioned cash, this competitor told me it would  be an extra $1,000. Thinking my hearing was going out, I asked, "So, it's $1,000 discount for cash?"

"No, actually, it's an extra $1,000 cash. Instead of $13,988, it would be $14,988."

There's more at the link.

I haven't purchased a vehicle from a dealer since 2005, but back then cash discounts were the norm.  Have things really changed so much in today's market?  Can any other readers confirm that they've run into the same thing?  If so, please let us know in Comments.

BTW, if you're looking to buy a car, there's a ton of helpful information out there.  Check out these articles for starters.



Phssthpok said...

So...what's wrong with doing the financing thing then paying it all off with the first payment?

Rob Robideau said...

I was under the impression that the dealership/salesmen receive kickbacks from the financing deals. It only makes sense that if those kickbacks are big enough, that gets reflected in where they steer customers and their cash price.

Well Seasoned Fool said...

My bonafides. I spent 30+ years in the retail automobile business as a salesman, finance manager, and sales manager.

No dealer is obligated to sell any vehicle. They want to; that is what they are in business to do, but they do not have to sell you a vehicle. Get over it.

Dealers make profits in two areas, referred to in the biz as front end and back end. Front end is the vehicle itself. Back end is financing,insurance, extended warranties, etc.

On new vehicles there are few secrets a savvy consumer can't find out including what the dealer paid for the vehicle and any public rebates and nonpublic dealer incentives from the factory. Often a dealer will sell a vehicle with little or no profit on the front end and make a profit on the back end.

Most vehicles are financed. The front end is hard money. Once you make (usually) the first payment, the lender has no recourse on the dealer. The back end is full recourse against the dealer. You, consumer, default on the loan and the balance of the back end is charged back against the dealer.

Harsh reality. I didn't care what the customer wanted. I only cared what the customer was willing to do, right now. The rest was just blah, blah, blah. One last word. Want to baffle car sales people? Tell them the Truth about everything. They encounter that so seldom they have trouble dealing with it.

Anonymous said...

"No dealer is obligated to sell any vehicle. They want to; that is what they are in business to do, but they do not have to sell you a vehicle. Get over it."
^^^ If only that applied to folks making wedding cakes.

kurt9 said...

many states actually make it illegal for manufacturers to sell directly to customers. Tesla Motors has actually had to sue or lobby to get these corrupt laws overturned so that they can sell directly to customers. Anyone who has ever had to put up with the dealership should contact their state legislative person and get them to overturn any laws that require manufacturers to sell through dealerships. Dealership are an obsolete business model that needs to go away permanently.

richard mcenroe said...

We ran into the same thing when buying our truck for the property here in Texas.

Anonymous: Try, "But I'm gay and want to pay cash for my car!" and see if that helps...

Mark said...

Yep, dealers are more interested in selling loans than cars. I'm told by a friend who is a dealer consultant that if they process too many cars without financing, they're dinged by their financing group.

Crazy world. Independent lots are still happy to sell for cash though.

Anonymous said...

I tried to put a new 2011 Hyundai Accent on my credit card (1% cash back!) but the dealer wouldn't do it - because he saw his razor-thin profit margin swallowed up by the credit card fee he would have to pay.

Then after the finance manager spent 15 minutes trying in vain to sell me undercoating, extended warranty, etc, he actually forgot to ask for payment for the car itself! I had to remind him. A salesman told me it was his first day on the job. Bet he never lived that down.

Don in Oregon

Theother Ryan said...

This is not representative of my experience in buying vehicles. We have purchased two vehicles from dealers in the last 4 years. We pay cash and do not 'trade in' vehicles. Here is why we do that.

1- I have never had a vehicle loan. When I was young my income fluctuated and was usually bad in the winter so it didn't make sense to have a loan.

2- Borrowing to buy a depreciating commodity fails the common sense test.

3- Even know that my income is decent and stable paying cash is a good forcing function to keep our vehicle purchases reasonable. Sure we could pay loans on a 3 series BMW for her and a shiny F250 for me but that is probably not a smart play.

When you finance or do a trade in you lose any negotiating power. Yeah they can give you 2 grand for a rig worth $700 but you are paying sticker price which is a suckers move.

I find buying vehicles with cash to be easy. It goes like this. Walk into dealership. Say "I am interested in Such and Such and want to buy it today."

Look at Such and Such.

Say something like "I like this vehicle and am interested. Would like to pay X for it out the door, including taxes, under coating, etc all."

He goes back and talks to his manager. Says he can do X+20%.

I say "How about X +5%"

He says he worked real hard and can do X plus 7%.

I say OK. Sign some papers and write a check.

My in laws bought all their vehicles with cash. They bought slightly used vehicles and were pretty specific about what they wanted. They sent an email to three or four local dealerships CCIng so each could know the others got it that they wanted to purchase X vehicle with Y options and would pay Z for it in cash that day. They usually had a vehicle in 2-3 weeks, a month at the long end.

BC said...

This isn't a new thing. My grandmother did this 20 years ago. The incentives were such that the price netted out lower with the financing than paying cash, so she went back the next month and paid the balance of the loan down to zero after the other stuff cleared through.

Jonathan H said...

Since dealers get a cut of the financing, they make more if you finance it than if you buy outright with cash. In my experience, many dealers won't deal, period, especially on pick up trucks and SUVs - in my area, the price is what it is, take it or leave it, and often they do a poor or even non-existent job of detailing or cleaning used vehicle.
My last 2 vehicles were bought from dealers out of the area because the drive was worth it for a better deal - drive 1.5 hours to say $3,000 for a better condition vehicle? Sure!