reply to post by markfelt
And if you have the money, well, go ahead. Try to pay cash for a new car. Try to pay cash for a home. People literally don't want to deal with you,
even if, by some miracle, you walk in with $200,000 in freshly-minted 20s. I'm not saying you won't be able to -- they have to take your money,
because the government says so -- I'm saying that the salespeople will make you wait, try to aggravate you into leaving, try to talk you into buying
something that costs more than the cash you have, etc. All the profit is in the loan making, not in selling the actual goods.
This is essentially correct, Finance and Insurance is a more significant source of profit for people selling large ticket items like cars, furniture,
boats and homes than the actual markup of their cost to purchase the item and the profit of then retailing it for a profit to you.
On a 72 month car loan for a 25,000.00 car, the dealer might make 1,200.00 off the actual physical sale of the car.
The interest on a 72 month car loan for the average consumer will actually exceed the entire cost of the car in some cases. You will pay in excess of
25,000.00 in interest to carry the note that long.
The bank that makes the loan will award percentage points of the loan to the originating dealer on the loan.
Usually 1 to 3 points depending on how high of an interest rate the Finance Manager closed the contract at.
The finance managers usually have 1 to 3 points that they can add or shave from the loan in order to get you to accept terms on the loan and make
Ideally they are going to try to hold 2 to 3 points, meaning if they told you great news they can get you an 8% loan you actually likely qualified for
a 5% loan.
The Bank will now cut the dealer a check for their portion of the interest proceeds up front. That is usually 150% to 500% of the actual profit they
made on the physical sale of the car. So if they made a 1,000.00 on you actually buying the car, they now have made up to another 5,000.00 on you
financing the car through them with one of their affiliated banks.
The Finance Managers who do the title and registration paperwork too, are trained to try to flip you from paying cash into financing with a whole host
of different pitches to convince you it's wise to keep your money in your pocket and to finance the transaction instead.
Leasing allows for even more profit than financing.
If they absolutely know you are going to pay cash, because you took out a credit union or home equity loan already, and that is the source of your
cash, then they absolutely will let you wait and wait, while they attend to every other customer who might finance first.
Because these employees work primarily for the commission they get off of selling the financing contract they literally have no desire to help you,
but simply do, because it's part of 'the job'.