posted on Feb, 2 2009 @ 08:42 PM
I have worked a lot of years in the car business. So did the majority of the Watergate burglars, which ought to tell you something.
Typically a financially healthy car dealer will pay off a trade-in within ten days from the time you turn in your car to the dealer. Interest accrues
daily on car loans and when the transaction on your new car is being finalized one of the many numbers being dangled in front of you is your old
car’s payoff priced with ten additional days of interest thanks to a phone call to your lender who tells the dealer what the payoff will exactly be
on that given day.
Believe me most dealers want to pay it off before 10 days if at all possible. Though the additional profits are small, picking up a few pennies on the
deal by getting the trade-in paid off a couple days early is just more profit to the deal. If the dealership doesn’t get that check to that lender
in 10 days they end up having to foot the additional interest which is profit being taken away from the deal.
For anyone who wants to better understand the system of how the majority of all New Car Franchise Dealers work here is a basic break down.
The Factory sells the brand new cars priced based on the make model and options at a wholesale price the same to all dealers. The dealer is required
to pay the Factory/Manufacturer for the vehicle the moment vehicle identification numbers are tagged onto the new car rolling off the assembly line.
Each vehicle being built rolling off the assembly line has been built to the buying dealer’s specifications. A small size dealer usually has around
150 new cars sitting on the lot at an average cost of around 24,000. This represents an investment of 3.6 million dollars, a medium size dealer
typically carries about twice that, and a mega dealer typically carries twice that still.
For most dealers around 99% the luxury of buying 3.6 to 12 million dollars worth of cars in cash on hand is not possible. So they borrow the money
from banks or finance companies. A new car does not have a title but a Manufacturers Certificate of Origin. The MSO is shipped to the bank that is
loaning the dealer money to purchase the cars from the factory and the car itself is sent to the dealer. The Manufacturer issues a credit against the
wholesale price of the car known as hold back finance credit which is designed to cover approximately 90 days worth of interest on the new car the
dealer has sitting on his lot. If he can sell it earlier they make a little more money. If they can’t it starts costing them money. A dealer with a
medium size inventory might spend upwards of 50,000 a month in interest charges on his inventory.
The second a sale takes place the clock starts ticking on the dealer. The bank that paid the factory for the car typically wants to be paid for the
MSO and note they are holding within 72 hours, after that they start charging penalties. The lender who is loaning you the money for this car will not
pay the dealer until he can provide the MSO, the bank who has the MSO will not release it before the dealer pays them. The lender who owns the loan on
the car you are trading in likewise will not release your title that secures your loan until your loan is paid in full. Additionally the States have
different time requirements regarding temporary registrations, usually thirty days and they want all the paperwork on everything before then. The
lender who approved you for your loan has extended an approval for 30 days too, likewise if your signed loan agreement and the original MSO is not
included with the agreement is not received by then, then the whole process has to start over from scratch, while hundreds of dollars in additional
interest has sometimes accumulated on the dealer on the new vehicle and the old vehicle. That’s why dealers push for ten days to accomplish paying
everyone. They have to have the cash on hand to buy your title for your trade, pay off the Manufacturers Certificate of Origin on the New Car and pay
the state and counties all taxes and fees and shoot paper work to the two different lenders, you, the manufacturer letting them know you are their new
customer, which is a process they will collect any incentives they have already also paid out of pocket on your and the manufacturer’s behalf. They
also have to get all this paperwork to the state and county. A financially healthy dealer has everything in the mail within 3 to 7 days including all
Right now…there are no healthy dealers.
A word to the wise…let the buyer beware!
Why yes, one of the dealerships I have worked for did employ the Watergate burglars!