I know when buying a car they want the financing because they make $ on the interest. I would think the less one puts down the more interest they make, so they would want buyers to put as little down as possible. Yet, I keep seeing cases where the deal is better if one is willing to put more money down... anyone have an explanation?
well sure they make more interest but your payments are higher and thus your possibility for default is higher. same goes for home loans - the more you put down, the more secure the lender feels, and thus the better deal you can get. that's just a guess though.
my brother being a finance manager at a dealership... he's having a rough month b/c all but 3 or so of his deals have been paid in cash. so that might shed some light on the situation. i would imagine there's somewhat of a balance in there at some point though.
But the dealerships don't make a whole lot on the financing side, right? They're not holding the note. Some bank or finance corporation is and the dealership only makes a small up front dollar amount on the actual sale. 2 months, 12 months or 24 months later, they're aren't seeing a dime for that car unless your brining it back into them for service.
bluto, no offense because everyone has a right to make money, but most finance guys I've dealt with seem to be asshats.
rama, none taken, i couldn't imagine making a living that way and its really taking a toll on him now as well. mac, the way i have heard him talk about is that he only makes money when they do up the financing. ie he 'makes' the dealership 10K on a deal and he sees like 10% of that. i really dont know the ins and outs. it is all pretty gory. needless to say, when i buy a car from a dealership it will be at least 50% cash down and the brother will be sitting by me across from the salesman. a car salesman could really make some money if they just hired themselves out as consultants. ie take a 500-1000 fee up front and do battle for the buyer. seems like it at least.
usually the financing "closer" is the one selling paint protection, ext. warranties, lifetime oil changes, and other complete rip-offs. I never knew they really lost out a ton, jsut 'cause the deal was made in cash, though it makes sense.
Interesting because the last three cars I bought with cash or almost. The rest was through my credit union and I had zero pressure. In 2004 I picked up a Miata and the finance guy asked if he could beat my credit union rate. I told him what it was and he just said thank you and said he couldn;t beat it. Not sure why I got the easy road but I cannot remember ever getting pressured by finance. Maybe because I only buy a car because I want to not because I need to and do homewprk up front in terms of what I will pay.
Let them handle the financing and focus only on getting the lowest purchase price. Pass on all the ******** add-ons. The F&I guy will, of course, screw you over on the interest rate, but you don't care because you are going to turn around and refinance it with your credit union/bank at a more competitive rate.
Instead of getting someone to sit beside you when you negotiate, google Fighting Chance. They'll give you the tools you need, for $35, so that you don't need anyone sitting next to you when you negotiate. In fact, you'll have dealers fighting to get your business. I used it a few months ago and I figure I could have bargained myself to about $1,000 under sticker. I got almost $3k under sticker, $800 under invoice for the exact car I was after. I also didn't step foot inside the dealer I bought it from until the deal was already done and I was in to sign some papers. I ended up being in the dealership for about an hour from beginning to end. I have never used a tool as great as Fighting Chance.
most people will go test drive and then fax offers out. if you feel like you "owe" the dealership, then fax them your spec sheet and let them be a part of the process. if you think you should pay them more for car than someone else, simply because they rode around in a demo model with you, then you're f'ing nuts. i know you aren't explicitly saying that, but that's what you're implying. where you test drive should be about convenience. where you buy should be about price. with service being a tiebreaker in either.
the key with a successful deal is to negotiate the sales price before you even mention money down, financing etc. Maybe you might be able to use your down payment to lower the sales price of the purchased car, but they have more experience than you. Many times will an ignorant person bring a trade-in (another form of a down payment), and the dealership basically gives them nothing for it, especially if they are switching to a lease. The salesman shouldn't even be aware of how you are paying for the car. They probably have to be involved in determining the value of a trade-in. but beyond that, don't even tell them if its a cash, outside financing, or whatever. Discuss that with the F&I guy. It muddies the water with the salesman.
i was assuming that suttree, but it definitely needs pointing out. if it's like my wife's car was, with a broken odometer, definitely trade that **** in.
I actually sell cars for a living (and it's a good one). I'll answer the original question. Yes, I prefer that you put money down for 2 main reasons. If you don't have super preferred credit, having a significant down payment improves your chances of being approved and may get you better terms and more options. The other reason is that if my customer puts down a significant down payment, then they won't be upside down should they decide to trade in 3 years. I only succeed and prosper if I have repeat satisfied customers. As far as "Fighting Chance" type customers, I'd rather not sell them a car at all. We drop the faxes into the round file. If it's going to be a grind for little to no commission every time this person shops, why go through the grief? There's many more customers that are worth my time giving good customer service to both before and after the sale. If you have a problem with your vehicle after the sale that's not covered by warranty and you've just put the dealership and your salesperson through the wringer for a nothing deal, I seriously hope you're not expecting any help from us in the future.
Let me elaborate because I think I may have not been clear. If I have a choice between spending time with a grinder and a typical customer that appreciates good service, I'm always going to choose the latter. In addition to expecting to make a reasonable (not excessive) commission on every deal, I need to get a great survey when my manufacturer calls the customer. In fact, a perfect survey is the goal. I have found that customers that are "all about the best price" are never satisfied with the terms of the sale and think they could have done better. This is reflected in their surveys. These customers bring my score and the dealership's score down and hurt our standing with the manufacturer. Thus, if I have a choice (and I usually do) between dealing with the two types of customers, I'm going to deal with the customer who's looking for a win-win deal for both of us as it's just better business for us. As far as reputation goes, both my dealership and I are among the very highest in the state. That goes both to how we treat our customers (very low-pressure high-value selling and outstanding service before and after the sale) and the customers we choose to sell our cars to. Believe it or not, we have a choice with whom to do business as well.
Yes, most car salesmen are after the screw job... here's a great article from Edmunds.com called "Confessions of a Car Salesman" -The Link Ironically, last night I was just telling my wife how painless our experience was at CarMax. Worked well for used cars. New cars, you have to use something like Fighting Chance.
I can see both sides of this. I know people that feel that the dealership should sell the car for less than the real cost, which is unreasonable. Or that they should be happy making a $100 profit. They're a business and they have to stay in business. I'm cool with them making a profit. Doesn't mean that I think that the profit should be 20% though. I always think the key is being unemotional and informed. Know what you want to spend and being willing to walk away. If you want to fax/phone/walk-in to discuss the price at any dealership, its up to the buyer. All 3 methods can work.
