If you pay cash to the dealer, neither the dealership nor their finance people get any sort of commission/kickback from their finance company. As CCorn mentioned, the dealership will tend to knock money off the negotiated price or offer some sort of incentive to use their affiliated finance companies. They may offer additional incentive to not pay off the loan for 60-120 days since their finance guys get a full commission after a certain period of time.
The incentive money comes from the motor company, not the dealership. So that $x amount they drop won't be there if you do not qualify for that incentive. That does effect the price of the car. A dealership will lose money on a new car, half the new cars I sold were for less than invoice ( I sold used but sold a few new during my stint at the dealership). The dealership makes the bulk of it's money from step programs through the motor company (units sold per month) and the service department.
Hey P what you're saying applies more to used cars. There isn't near as much back end money on used cars as new, so using in house financing won't effect the price of a car very much when negotiating.
I've seen financing deals written in a way that penalizes you for paying off the car too soon. Just something to look out for.
I'm not an advocate of cash except for used car purchases. Just asking questions about the inhouse financing "game" One more question. Aren't the first months of payment nearly all interest. If so, you'd have to consider that would be money that you don't have to pay if you pay cash
Yeah if you have a bad interest rate it is. Generally the first payment is going to be mostly interest for anything due to they'll put the first due date 40 days out from the closing date and it will accrue interest dring that whole time. But if you have a good rate maybe 3% or less, after that first payment you should already be eating into the principle amount
Regardless, they will get their interest if you let them talk you into paying the first 120 days. You would have to subtract that from any savings for a better offer in financing vs cash. My gut instinct is there's no little win worth hassling over Even at 1.9%, that's $500 for a $25k car. You have to get a $500 better offer for financing vs cash
The type of financing where you pay off the interest first doesn't exist on car notes any more. I remember my manager talking about it one day. Anyways you'll save much more than $500 unless you're going for a base fiesta or something around this time of year with the incentives out there to get rid of the 14s before the 15s come out.
As for OP's question of which vehicle to go for I'd personally suggest a Honda CRV. One of the higher ranked affordable SUVs in the market. But the newer ones I've seen are not AWD they are FWD. My sister has an older model CRV that has served her well over the years.
Just to be clear, when we are discussing savings in this thread we are discussing saving using cash vs financing. Is that what you meant in your last post. My calculation was financing vs cash on a $25k car at 2% financing would have to net a $500 better offer to beat the cash transaction.
What you're not understanding is if there's a $2,000 incentive for using the dealerships financing group, you are not eligible for that incentive unless you finance through that group. If you pay it off after the first 30 days, you just netted the incentive AND only paid a little bit of interest. And as I said earlier a dealership might even sweeten the pot if you agree to not pay it off for the first $120 days. The interest is not going to be front loaded on a car note. So you might end up paying $150 in interet over the first 120 days , but they might give you something in addition to balance that out. As in my friends case they have him a $200 visa gift card after the three months were up
Thanks for the info. Ccorn. Much appreciated. I'm following you. However I had to see a contract that states the first payments aren't laden with interest before I'd believe what your boss told you I've never seen a loan that doesn't collect interest first. But I'm not that experienced at loans
Loans charge interest as it's accumulated. The portion of your payment that is interest is higher in the beginning because your principal is higher in the beginning - but it's not just paying off interest early. On a $25k loan at 2%, you'd pay about $500 in interest in the first year (a little less since your principal goes down over time). Over the first month, it would be about $41 in interest. The remainder of your payment goes to principal, meaning your next month would be slightly less interest, and on.
We have the Honda CRV 2014, we like it a lot but we are looking into Subaru for our next car right now. The Outback is good but it looks too much like a station wagon. We really like the Forester. It looks and drive like a real SUV, and Subaru is well known for driving in the snow. Look it up on YouTube. You should look into its Eyesight system also.
Major and CCorn are right about cash vs financing. When I bought my CRV, they said I had to use their financing company to get the $500 incentive. I paid 1/2 total price then. I think I got a real low rate, maybe 1% or 1.9% . After the 1st month, I paid off the remaining 1/2. The interest I paid was $20+ total. The details of how to handle the transaction like above were explained to me by the salesman. He did that to make the sale. Years ago I seem to remember dealer gave you rebate for paying cash, maybe because they knew you could afford to buy and they could make the sale right there. The opposite is true today because there are plenty of cash in the market, they want to loan you the money to make the interest off you.
at the end of the day..when you decide to buy a car...you're already accepting the fact that you are going to lose a bunch of money. unless of course you keep it for 12-15 years.
