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I was under the impression that the whole point of auto-financing was to get even even more money out of the consumer. When I bought my last car, I just bought

I was under the impression that the whole point of auto-financing was to get even even more money out of the consumer. When I bought my last car, I just bought it outright (because it wasn't particularly expensive) which appeared to baffle the dealership. I was actually a little concerned that the dealership told me it was the largest check they'd ever seen (for ~$14k). Getting people to sign off on a contract they don't really understand is a great way to get more money out of the consumer than they'd otherwise spend.

endianswap 9y ago
That seems insane that it'd be the biggest check they've seen. I've bought an 80k BMW and an 80k Jaguar outright, and they both shrugged at me paying by check. BMW let me use a personal check, Jaguar wanted a bank check (easy enough). Edit: A normal down payment for a luxury car of any brand can easily be 20k up front.
- leeoniya 9y ago
  did you get the impression that the parent purchased a new luxury car at a dealership in Beverly Hills? :/
- GuiA 9y ago
  You went to a BMW/Jaguar dealership, whereas OP most probably went to a smaller dealership aimed at a less affluent population.
- shados 9y ago
  That heavily depends on where you go and the area. Not the same as a car, but when I went to get the check for the down payment on my home (which was 6 figures), I went to my bank which happened to be in a pretty upscale neighborhood were houses were significantly more expensive on average than what I was buying. So when I asked the teller to give me a multi-hundred-thousand dollar check, they didn't even blink. "Please enter your pin number sir. There you go sir, have a nice day". I assume this is very similar. A place selling BMWs is probably used to seeing newly minted millionaires on a daily basis.
  - brianwawok 9y ago
    It's weird getting big checks if you aren't used to it. I had some money coming out from a home sale and got a cashier's check for 50k or something. They asked for ID and checked it very slowly, but nothing past that.
- jacquesm 9y ago
  > Jaguar wanted a bank check In case it wouldn't start the next morning ;)
- deleted 9y ago
  [deleted]
- rjsw 9y ago
  I paid for my current car with my debit card. I asked my bank beforehand whether they needed to authorize that size of transaction but was told that they can tell which accounts are for car dealers.
  - HeyLaughingBoy 9y ago
    I wondered about that when I bought our last car. Near the end of the transaction I suddenly realized that I would need to pay a down payment and all I had was my bank card (ran out of paper checks years ago). They took it and ran it as a Visa card, no problem. Guess they get a break on the fees.
nostromo 9y ago
I used to buy cars with cash. But right now car loans are so cheap, if you have good credit, it may make more sense to take the loan and keep the cash invested. I think my current rate is 2% or so... an unthinkable rate not so many years ago.
- charlesdm 9y ago
  If cost of debt < investment returns -> borrow money / finance
  - fegu 9y ago
    There is a lot more to this than a simple equation. Otherwise we would all borrow as much as we could (about 2% and somewhat predictable) and put it all in the stock market (avg 7,5 % but volatile).
    - taeric 9y ago
      To be fair, I think the equation doesn't get that much more complicated, typically. Add in fees and you go a long way to showing why this won't work. Add in a floor function for operating expenses money you need on hand, and you show most of the rest.
    - alexbeloi 9y ago
      >Otherwise we would all borrow as much as we could (about 2% and somewhat predictable) and put it all in the stock market (avg 7,5 % but volatile). The 2% rate is that low precisely becomes it comes with collateral (the car). Interest rates on personal loans with no collateral are closer to 10%, which is the reason people can't do what you're suggesting.
    - charlesdm 9y ago
      Anyone willing to give me a loan for $10m at 2% -- I'm game. 2% is a good interest rate for a collateralized loan, and frankly, often it's not worth putting up the money yourself if you can borrow it (at 2%). Then again, a car isn't (really) an asset with a positive RoI..
icantdrive55 9y ago
I've been looking for a new car for a relative. This guy comes over. I said, o.k., I'll be polite, and give him a chance. Within 30 minutes: "No one pays cash anymore." "No one work on their vechicles anymore. It's right to the dealership for Maintence." "My prices are spot on with Blue Book for 100 miles." He saw I had a Blue Book, and he has the nerve to tell me he's competive. All his prices were at least 5 grand higher than a one year old BB. His boss owned all the dealerships in Petaluma, or most. His manager came over, and said how's he doing. I just said, "Oh, he's great. Really honest guy." I walked out, thinking anyone who lets a customer with 18 grand walk off a used car lot, should be fired. On the severance check, "Work on Closing" Or, the market is so hot, he's getting over BB for his used cars? (I see so many new cars lately. I don't know how peopke pull it off. Plus--maybe it's just me, but these used cars (2013-2016) just look like a sensor away from being stuck in the side of the road, and they all look alike.)
dpeck 9y ago
had a similar thing happen a few years ago when buying out my car at the end of a lease (normally a bad idea, but worked out due to specific circumstance). The person I was dealing with was baffled, kept wanting to have me fill out a loan app. He either didn't want to or couldn't understand what was going on. At the end of it I told them I had the certified check as previously agreed for the full amount due on the vehicle, handed it to him and told them I was walking out the door in 10 minutes and they could call the police and report it stolen if they wanted to. It was unexpectedly difficult to close up a seemingly simple transaction with pre-agreed upon terms.
- deleted 9y ago
  [deleted]
- lithos 9y ago
  They get a second commission if you're on the right loan.
  - dpeck 9y ago
    Definitely a case of the cliched bit about hard for someone to understand something, when their salary depends on not understanding it
Spooky23 9y ago
My wife did that before we were married, except with cash. The GM asked where she stripped.
- bitexploder 9y ago
  We get it, your wife is attractive. Seriously though, nothing makes a car salesman's heart drop more than when you negotiate hard, set a tough price, and then write a check for the while thing, when they were hoping you would finance to get some more upside.
benevol 9y ago
It's feature, not a bug. Remember the sub-prime mortgage crisis? People were made to buy homes they couldn't actually afford. It's the American way of doing capitalism, and people should have gotten used to it by now.
- pc86 9y ago
  Nobody was made to buy a home they couldn't afford. They wanted it, and someone was willing to sell it to them at near-predatory rates. Nobody had a gun held to their head to sign a contract.
  - benevol 9y ago
    You're right. I rather meant to say "people were manipulated into buying...". It's always the same, people don't understand because they lack education and some rich guy will take advantage of that. The movie "The Big Short" [0] sums it all up very well. [0] http://www.imdb.com/title/tt1596363 http://www.imdb.com/title/tt1596363
    - valuearb 9y ago
      No one was manipulated. Everyone was greedy. They read the news, they knew what the houses down the street sold for a few years before. They all thought they'd get rich flipping houses. Loan officers just facilitated what their customers already wanted.
      - johnminter 9y ago
        You have missed an important point. Those loan officers were paid a fee for the service and their institution sold off the loans that were derivatized. The patsy was down the line. They all got paid... Go back and review the news that came out. "The Big Short" is a decent summary. The trading manager at Bear Stearns who bought the derivatives got to walk out and keep his big bonuses. The share holders ate it. The rating institutions were complicit too - they knew the products were crap but knew the customers (lending institutions) would go to another one and so wrote the bogus ratings. See the players in the game got paid. The snooks got screwed. Bill Black, who prosecuted the Savings and Loan Crisis, and sent many fraudsters to jail reviewed the 2008 crash and was incensed at the lack of prosecution. The consumers saw what they wanted to see. Very few consumers perfomed due diligence. The old proverb tends to be true: "If something seens to be too good to be true... It probably is." Fraudsters have taken advantage of the gullible throughout human history. Our generation has no excuse: we have unparalleled access to information and most are too lazy to put the effort in to check these things out our to hire competent counsel who work for us not the seller. How many parents and students understand the debt they take on for college and the expected ROI???
tyfon 9y ago
Same thing here in Norway. When I bought my last car, I negotiated the price down quite a bit and got upgrades/winter tires etc for the same price. When all was said and done and he asked how I wanted to finance it, I pulled out my direct debit and he went pale. I had to argue for another half an hour to keep all the negotiated stuff while paying for it outright, it was silly.
- skookumchuck 9y ago
  I doubt it was silly. He likely offered you a deal that would have lost money if not for the financing.
  - eugeniub 9y ago
    That's exactly why it was silly.
  - losteric 9y ago
    Call me old fashion, but I think car salesmen ought to make their money off of selling cars instead of exploiting consumer's ignorance of financial tools and more complex math. This is so much more nefarious.
    - skookumchuck 9y ago
      When I've bought mortgages, I was required by law to sign a document that says "I have read and understood these loan documents." I've seen many people in the newspaper complaining that they neither read nor understood the terms. At what point do you expect legally competent adults to pay attention to and take responsibility for what they're doing?
      - cmurf 9y ago
        No non-lawyer is competent to understand all real estate transaction documents. But they might be competent enough to acquiesce to the grand stupidity of our culture [1] and hire a real estate attorney. Mine reviewed all the relevant documents and come to the closing, for a flat fee that I thought was rather reasonable, in particular compared to the hand cramp I got from all the ridiculous paper work I had to hand sign. [1] Consider: the banks, the title company, the county, all want hand signed documents. But we accept computerized voting machines to manage elections.
kemiller2002 9y ago
Almost no one pays cash for a car anymore and the industry knows this. Many dealerships make more money (or at least they did, but I'm sure they still do) from getting people to get a loan from one of their "partners" (auto-loan companies which accept their paper). It's been years since I worked for an auto-finance company (my soul still feels a little dirty), but I know it wasn't uncommon for dealerships to get an additional 1-2% from the loan. This gets complicated as far as how much they earn per car, because there were also penalties for loans they sold that defaulted before a certain point etc. In the end it worked out in their favor though hence why they kept using certain loan places. This is why you hear people tell you always negotiate the price of the car before you tell them you have your own financing (either cash or through your bank), because they'll drop the price a little more knowing they will make it back. Don't ever think they're working to get you the best deal possible either, they'll either give you the first response they get back, or the one that nets them the most money if multiple ones come back at the same time. The faster they get you to sign, the faster they get paid. (I also really hate to say this, but if you're female and don't like confrontation, bring a male friend and act like he's the one buying the car. It's a male dominated industry that is very sexist. If you're a strong person and can handle it by all means go for it, but expect them to be pushy and talk down to you. I'm a white male, and I hate dealing with a lot of them. I can't imagine, although I've heard the stories, of what it's like not being in the privileged class.) The real truth is that to the dealership, this additional money doesn't really matter in the big picture. They make almost no money from selling cars. You ever notice how all the dealerships have a service department? That's not by coincidence. It used to be (and probably is still close) that 90% of all revenue from a dealership is on service. Getting money from warranties; getting money from people who only trust where they bought it etc. They want to sell the car, so they can get the maintenance. They won't sell for a loss, and they'll take you for what they can, but really they're in it for you as the long term support. Also, the car salesperson has no real influence over the price you get. That comes from the general manager behind the desk. (A long time ago this didn't used to be true, but dealerships wised up that you don't trust people on commission making decisions. It's quite possible the sales people don't actually know the true cost of the car to the dealership.) You want to hear about people signing things they don't understand? I really wanted to scream at people after I heard this story. There was a hispanic couple looking to buy a car and they didn't really understand English. The car salesman told them if they signed the contract, they could drive the car as much as they wanted. He neglected to mention to they actually had to pay for the car, and so they took the deal. You can guess how that worked out. Course the salesman didn't care; he got his commission. I'm not saying they're all like this, but some of them are complete trash.
branchless 9y ago
Had the same thing in the UK. They were desperate for me not to pay up front so they could try and sell me some other finance product that would cost me more / enable me to spend more without understanding the true cost. This kind of credit for cars / housing / uni / whatever is just not helping people afford things they would otherwise defer buying. It's predatory. It's pushing up the price of items. It has no place in our society. It should be tightly controlled. Finance is pulling forward demand to get tomorrow's bonuses today and to hell with the consequences tomorrow. If we want a better world we have to regulate debt issuance. Yes some kids from poor backgrounds can't buy a nice car even though they are doing a law degree at Harvard and will be able to cover it no problem in 3 years time. The flip side of the coin is far more damaging. We should stamp out these cockroaches.
- onion2k 9y ago
  Yes some kids from poor backgrounds can't buy a nice car even though they are doing a law degree at Harvard and will be able to cover it no problem in 3 years time. I think you're underestimating how poor most people are. 60% of Americans wouldn't be able to cover an unexpected bill of $500[1]. Most people just don't have any money saved, or money left at the end of the month to save any. This isn't about young people buying nice cars; it's about the majority of people buying any car. Clearly cheap credit adds to the problem, but if the ability to borrow disappeared overnight a lot of people would have tremendous difficulties. [1] http://money.cnn.com/2017/01/12/pf/americans-lack-of-savings/index.html http://money.cnn.com/2017/01/12/pf/americans-lack-of-savings...
  - branchless 9y ago
    You've completely missed my point. The ability to borrow sets the price. This is how prices on goods are set, not by how much it costs plus a "fair profit".
ilyagr 9y ago
I tried to buy a Mazda car outright. I was told that it would be 2000 dollars more expensive unless I finance. I then asked if I can get the loan and immediately pay it off, and the dealership became sad. Apparently, Mazda financing gives them the 2000 dollars, but if the customer pays off the loan in less than 6 months, the dealership losses the money (on other states, they'd probably have an early repayment fee on the loan, but that's illegal in California). So, I took the loan, paid off all but a thousand dollars, and now feel silly paying off the remainder over 6 months.
gozur88 9y ago
Getting even more money out of the consumer doesn't need to be a shady thing. Lots of people simply don't have the money to buy a car outright. Or enough to purchase on traditional loan terms.
pmorici 9y ago
That's absolutely true. There are three main ways the dealer can make money on a deal. They are; New car price, Trade in value, and Financing terms. As a consumer you should always negotiate each of those items separately. What dealers like to do is move their profit between the three to make it look like they are negotiating when all they are doing is moving the bottom line costs from one line item to another. So for example they might quote you a price on the car that they know is below average asking price from dealers in the area and give you a typical good interest rate on the loan but then way low ball you on your trade-in. To avoid getting a bad deal I always do the following before setting foot on the dealers lot. 1. Go to CarMax or similar place ahead of time and get a quote for how much they would buy your car for. 2. Be ready to pay for the car in cash or have a loan pre-approval lined up from a secondary source for financing outside of the dealership. 3. Know what the car you are looking at sells for in your area. 4. If you are buying a new car, shop towards the end of the month. Manufacturers offer incentives to dealers based on the number of cars they sell per month. So say a dealer needs to sell 50 cars a month to get the incentives which are $500 bucks per car. If they are at 48 cars sold with two days left to go in the month they are a lot more likely to sell you a car at a lower price and get to 50 so they don't lose out on the incentive payments for the 48 cars they have already sold. Once you are at the dealer make sure you negotiate each of the 3 parts of the deal separately. First agree on the price of the car. Then entertain their offer of a loan and for your trade-in if they are as good as or better than the alternatives take them other wise turn them down.
- hammock 9y ago
  This sounds like the old four-square sales strategy that actually works AGAINST the buyer.
  - pmorici 9y ago
    Yes, what I describe above is how you counter that strategy.
astrostl 9y ago
Similar experience. With a recent car purchase, the dealer's management was ready to let me walk at the end, even though the price was posted on the internet and verbally reconfirmed. This was simply because I "revealed" that I would not be financing it. Worse came to worse, and with the tacit consent of the salesperson himself I ended up financing it - maxing out the amount I could put on an AmEx in order to bank reward points, and paying off both the AmEx and the entire loan balance as soon as I received my first payment notice. As it turns out, they receive a kickback from their financing partners if the loan is held >= 90 days. So, in the end, I got the car I wanted at the price I wanted, plus some cash back from AmEx, and minus a whole bunch of wasted time by everyone involved.
soylentcola 9y ago
I recently did the same (albeit for $10k). Even after agreeing on everything, they kept asking "are you sure you don't want to finance just part of it? We can give you a really good rate!" All I could do was patiently ask them "why would I do this? Is it not still more of a cost to me, even if a small one?" They acted really confused and upset but I understood that this was simply a sales tactic to make me feel as if I was making some sort of mistake by not paying some small amount of interest in addition to the cost of the car. I eventually got a bit irritated as it was making things take a lot longer than they needed to. I just told them, "look, we already negotiated a price and I have the check written out right here. I have no need to finance a $10k car right now and I would like to just finish the sale." They weren't quite as friendly after that but hey...it's an adversarial relationship and I'd been perfectly cordial up until that point. I was already paying $10k for a car they likely got for half as much as a trade-in anyway.

endianswap 9y ago

That seems insane that it'd be the biggest check they've seen. I've bought an 80k BMW and an 80k Jaguar outright, and they both shrugged at me paying by check. BMW let me use a personal check, Jaguar wanted a bank check (easy enough). Edit: A normal down payment for a luxury car of any brand can easily be 20k up front.

leeoniya 9y ago
did you get the impression that the parent purchased a new luxury car at a dealership in Beverly Hills? :/
GuiA 9y ago
You went to a BMW/Jaguar dealership, whereas OP most probably went to a smaller dealership aimed at a less affluent population.
shados 9y ago
That heavily depends on where you go and the area. Not the same as a car, but when I went to get the check for the down payment on my home (which was 6 figures), I went to my bank which happened to be in a pretty upscale neighborhood were houses were significantly more expensive on average than what I was buying. So when I asked the teller to give me a multi-hundred-thousand dollar check, they didn't even blink. "Please enter your pin number sir. There you go sir, have a nice day". I assume this is very similar. A place selling BMWs is probably used to seeing newly minted millionaires on a daily basis.
- brianwawok 9y ago
  It's weird getting big checks if you aren't used to it. I had some money coming out from a home sale and got a cashier's check for 50k or something. They asked for ID and checked it very slowly, but nothing past that.
jacquesm 9y ago
> Jaguar wanted a bank check In case it wouldn't start the next morning ;)
deleted 9y ago
[deleted]
rjsw 9y ago
I paid for my current car with my debit card. I asked my bank beforehand whether they needed to authorize that size of transaction but was told that they can tell which accounts are for car dealers.
- HeyLaughingBoy 9y ago
  I wondered about that when I bought our last car. Near the end of the transaction I suddenly realized that I would need to pay a down payment and all I had was my bank card (ran out of paper checks years ago). They took it and ran it as a Visa card, no problem. Guess they get a break on the fees.

nostromo 9y ago

I used to buy cars with cash. But right now car loans are so cheap, if you have good credit, it may make more sense to take the loan and keep the cash invested. I think my current rate is 2% or so... an unthinkable rate not so many years ago.

charlesdm 9y ago
If cost of debt < investment returns -> borrow money / finance
- fegu 9y ago
  There is a lot more to this than a simple equation. Otherwise we would all borrow as much as we could (about 2% and somewhat predictable) and put it all in the stock market (avg 7,5 % but volatile).
  - taeric 9y ago
    To be fair, I think the equation doesn't get that much more complicated, typically. Add in fees and you go a long way to showing why this won't work. Add in a floor function for operating expenses money you need on hand, and you show most of the rest.
  - alexbeloi 9y ago
    >Otherwise we would all borrow as much as we could (about 2% and somewhat predictable) and put it all in the stock market (avg 7,5 % but volatile). The 2% rate is that low precisely becomes it comes with collateral (the car). Interest rates on personal loans with no collateral are closer to 10%, which is the reason people can't do what you're suggesting.
  - charlesdm 9y ago
    Anyone willing to give me a loan for $10m at 2% -- I'm game. 2% is a good interest rate for a collateralized loan, and frankly, often it's not worth putting up the money yourself if you can borrow it (at 2%). Then again, a car isn't (really) an asset with a positive RoI..

icantdrive55 9y ago

I've been looking for a new car for a relative. This guy comes over. I said, o.k., I'll be polite, and give him a chance. Within 30 minutes: "No one pays cash anymore." "No one work on their vechicles anymore. It's right to the dealership for Maintence." "My prices are spot on with Blue Book for 100 miles." He saw I had a Blue Book, and he has the nerve to tell me he's competive. All his prices were at least 5 grand higher than a one year old BB. His boss owned all the dealerships in Petaluma, or most. His manager came over, and said how's he doing. I just said, "Oh, he's great. Really honest guy." I walked out, thinking anyone who lets a customer with 18 grand walk off a used car lot, should be fired. On the severance check, "Work on Closing" Or, the market is so hot, he's getting over BB for his used cars? (I see so many new cars lately. I don't know how peopke pull it off. Plus--maybe it's just me, but these used cars (2013-2016) just look like a sensor away from being stuck in the side of the road, and they all look alike.)

dpeck 9y ago

had a similar thing happen a few years ago when buying out my car at the end of a lease (normally a bad idea, but worked out due to specific circumstance). The person I was dealing with was baffled, kept wanting to have me fill out a loan app. He either didn't want to or couldn't understand what was going on. At the end of it I told them I had the certified check as previously agreed for the full amount due on the vehicle, handed it to him and told them I was walking out the door in 10 minutes and they could call the police and report it stolen if they wanted to. It was unexpectedly difficult to close up a seemingly simple transaction with pre-agreed upon terms.

deleted 9y ago
[deleted]
lithos 9y ago
They get a second commission if you're on the right loan.
- dpeck 9y ago
  Definitely a case of the cliched bit about hard for someone to understand something, when their salary depends on not understanding it

Spooky23 9y ago

My wife did that before we were married, except with cash. The GM asked where she stripped.

bitexploder 9y ago
We get it, your wife is attractive. Seriously though, nothing makes a car salesman's heart drop more than when you negotiate hard, set a tough price, and then write a check for the while thing, when they were hoping you would finance to get some more upside.

benevol 9y ago

It's feature, not a bug. Remember the sub-prime mortgage crisis? People were made to buy homes they couldn't actually afford. It's the American way of doing capitalism, and people should have gotten used to it by now.

pc86 9y ago
Nobody was made to buy a home they couldn't afford. They wanted it, and someone was willing to sell it to them at near-predatory rates. Nobody had a gun held to their head to sign a contract.
- benevol 9y ago
  You're right. I rather meant to say "people were manipulated into buying...". It's always the same, people don't understand because they lack education and some rich guy will take advantage of that. The movie "The Big Short" [0] sums it all up very well. [0] http://www.imdb.com/title/tt1596363 http://www.imdb.com/title/tt1596363
  - valuearb 9y ago
    No one was manipulated. Everyone was greedy. They read the news, they knew what the houses down the street sold for a few years before. They all thought they'd get rich flipping houses. Loan officers just facilitated what their customers already wanted.
    - johnminter 9y ago
      You have missed an important point. Those loan officers were paid a fee for the service and their institution sold off the loans that were derivatized. The patsy was down the line. They all got paid... Go back and review the news that came out. "The Big Short" is a decent summary. The trading manager at Bear Stearns who bought the derivatives got to walk out and keep his big bonuses. The share holders ate it. The rating institutions were complicit too - they knew the products were crap but knew the customers (lending institutions) would go to another one and so wrote the bogus ratings. See the players in the game got paid. The snooks got screwed. Bill Black, who prosecuted the Savings and Loan Crisis, and sent many fraudsters to jail reviewed the 2008 crash and was incensed at the lack of prosecution. The consumers saw what they wanted to see. Very few consumers perfomed due diligence. The old proverb tends to be true: "If something seens to be too good to be true... It probably is." Fraudsters have taken advantage of the gullible throughout human history. Our generation has no excuse: we have unparalleled access to information and most are too lazy to put the effort in to check these things out our to hire competent counsel who work for us not the seller. How many parents and students understand the debt they take on for college and the expected ROI???

tyfon 9y ago

Same thing here in Norway. When I bought my last car, I negotiated the price down quite a bit and got upgrades/winter tires etc for the same price. When all was said and done and he asked how I wanted to finance it, I pulled out my direct debit and he went pale. I had to argue for another half an hour to keep all the negotiated stuff while paying for it outright, it was silly.

skookumchuck 9y ago
I doubt it was silly. He likely offered you a deal that would have lost money if not for the financing.
- eugeniub 9y ago
  That's exactly why it was silly.
- losteric 9y ago
  Call me old fashion, but I think car salesmen ought to make their money off of selling cars instead of exploiting consumer's ignorance of financial tools and more complex math. This is so much more nefarious.
  - skookumchuck 9y ago
    When I've bought mortgages, I was required by law to sign a document that says "I have read and understood these loan documents." I've seen many people in the newspaper complaining that they neither read nor understood the terms. At what point do you expect legally competent adults to pay attention to and take responsibility for what they're doing?
    - cmurf 9y ago
      No non-lawyer is competent to understand all real estate transaction documents. But they might be competent enough to acquiesce to the grand stupidity of our culture [1] and hire a real estate attorney. Mine reviewed all the relevant documents and come to the closing, for a flat fee that I thought was rather reasonable, in particular compared to the hand cramp I got from all the ridiculous paper work I had to hand sign. [1] Consider: the banks, the title company, the county, all want hand signed documents. But we accept computerized voting machines to manage elections.

kemiller2002 9y ago

Almost no one pays cash for a car anymore and the industry knows this. Many dealerships make more money (or at least they did, but I'm sure they still do) from getting people to get a loan from one of their "partners" (auto-loan companies which accept their paper). It's been years since I worked for an auto-finance company (my soul still feels a little dirty), but I know it wasn't uncommon for dealerships to get an additional 1-2% from the loan. This gets complicated as far as how much they earn per car, because there were also penalties for loans they sold that defaulted before a certain point etc. In the end it worked out in their favor though hence why they kept using certain loan places. This is why you hear people tell you always negotiate the price of the car before you tell them you have your own financing (either cash or through your bank), because they'll drop the price a little more knowing they will make it back. Don't ever think they're working to get you the best deal possible either, they'll either give you the first response they get back, or the one that nets them the most money if multiple ones come back at the same time. The faster they get you to sign, the faster they get paid. (I also really hate to say this, but if you're female and don't like confrontation, bring a male friend and act like he's the one buying the car. It's a male dominated industry that is very sexist. If you're a strong person and can handle it by all means go for it, but expect them to be pushy and talk down to you. I'm a white male, and I hate dealing with a lot of them. I can't imagine, although I've heard the stories, of what it's like not being in the privileged class.) The real truth is that to the dealership, this additional money doesn't really matter in the big picture. They make almost no money from selling cars. You ever notice how all the dealerships have a service department? That's not by coincidence. It used to be (and probably is still close) that 90% of all revenue from a dealership is on service. Getting money from warranties; getting money from people who only trust where they bought it etc. They want to sell the car, so they can get the maintenance. They won't sell for a loss, and they'll take you for what they can, but really they're in it for you as the long term support. Also, the car salesperson has no real influence over the price you get. That comes from the general manager behind the desk. (A long time ago this didn't used to be true, but dealerships wised up that you don't trust people on commission making decisions. It's quite possible the sales people don't actually know the true cost of the car to the dealership.) You want to hear about people signing things they don't understand? I really wanted to scream at people after I heard this story. There was a hispanic couple looking to buy a car and they didn't really understand English. The car salesman told them if they signed the contract, they could drive the car as much as they wanted. He neglected to mention to they actually had to pay for the car, and so they took the deal. You can guess how that worked out. Course the salesman didn't care; he got his commission. I'm not saying they're all like this, but some of them are complete trash.

branchless 9y ago

Had the same thing in the UK. They were desperate for me not to pay up front so they could try and sell me some other finance product that would cost me more / enable me to spend more without understanding the true cost. This kind of credit for cars / housing / uni / whatever is just not helping people afford things they would otherwise defer buying. It's predatory. It's pushing up the price of items. It has no place in our society. It should be tightly controlled. Finance is pulling forward demand to get tomorrow's bonuses today and to hell with the consequences tomorrow. If we want a better world we have to regulate debt issuance. Yes some kids from poor backgrounds can't buy a nice car even though they are doing a law degree at Harvard and will be able to cover it no problem in 3 years time. The flip side of the coin is far more damaging. We should stamp out these cockroaches.

onion2k 9y ago
Yes some kids from poor backgrounds can't buy a nice car even though they are doing a law degree at Harvard and will be able to cover it no problem in 3 years time. I think you're underestimating how poor most people are. 60% of Americans wouldn't be able to cover an unexpected bill of $500[1]. Most people just don't have any money saved, or money left at the end of the month to save any. This isn't about young people buying nice cars; it's about the majority of people buying any car. Clearly cheap credit adds to the problem, but if the ability to borrow disappeared overnight a lot of people would have tremendous difficulties. [1] http://money.cnn.com/2017/01/12/pf/americans-lack-of-savings/index.html http://money.cnn.com/2017/01/12/pf/americans-lack-of-savings...
- branchless 9y ago
  You've completely missed my point. The ability to borrow sets the price. This is how prices on goods are set, not by how much it costs plus a "fair profit".

ilyagr 9y ago

I tried to buy a Mazda car outright. I was told that it would be 2000 dollars more expensive unless I finance. I then asked if I can get the loan and immediately pay it off, and the dealership became sad. Apparently, Mazda financing gives them the 2000 dollars, but if the customer pays off the loan in less than 6 months, the dealership losses the money (on other states, they'd probably have an early repayment fee on the loan, but that's illegal in California). So, I took the loan, paid off all but a thousand dollars, and now feel silly paying off the remainder over 6 months.

gozur88 9y ago

Getting even more money out of the consumer doesn't need to be a shady thing. Lots of people simply don't have the money to buy a car outright. Or enough to purchase on traditional loan terms.

pmorici 9y ago

That's absolutely true. There are three main ways the dealer can make money on a deal. They are; New car price, Trade in value, and Financing terms. As a consumer you should always negotiate each of those items separately. What dealers like to do is move their profit between the three to make it look like they are negotiating when all they are doing is moving the bottom line costs from one line item to another. So for example they might quote you a price on the car that they know is below average asking price from dealers in the area and give you a typical good interest rate on the loan but then way low ball you on your trade-in. To avoid getting a bad deal I always do the following before setting foot on the dealers lot. 1. Go to CarMax or similar place ahead of time and get a quote for how much they would buy your car for. 2. Be ready to pay for the car in cash or have a loan pre-approval lined up from a secondary source for financing outside of the dealership. 3. Know what the car you are looking at sells for in your area. 4. If you are buying a new car, shop towards the end of the month. Manufacturers offer incentives to dealers based on the number of cars they sell per month. So say a dealer needs to sell 50 cars a month to get the incentives which are $500 bucks per car. If they are at 48 cars sold with two days left to go in the month they are a lot more likely to sell you a car at a lower price and get to 50 so they don't lose out on the incentive payments for the 48 cars they have already sold. Once you are at the dealer make sure you negotiate each of the 3 parts of the deal separately. First agree on the price of the car. Then entertain their offer of a loan and for your trade-in if they are as good as or better than the alternatives take them other wise turn them down.

hammock 9y ago
This sounds like the old four-square sales strategy that actually works AGAINST the buyer.
- pmorici 9y ago
  Yes, what I describe above is how you counter that strategy.

astrostl 9y ago

Similar experience. With a recent car purchase, the dealer's management was ready to let me walk at the end, even though the price was posted on the internet and verbally reconfirmed. This was simply because I "revealed" that I would not be financing it. Worse came to worse, and with the tacit consent of the salesperson himself I ended up financing it - maxing out the amount I could put on an AmEx in order to bank reward points, and paying off both the AmEx and the entire loan balance as soon as I received my first payment notice. As it turns out, they receive a kickback from their financing partners if the loan is held >= 90 days. So, in the end, I got the car I wanted at the price I wanted, plus some cash back from AmEx, and minus a whole bunch of wasted time by everyone involved.

soylentcola 9y ago

I recently did the same (albeit for $10k). Even after agreeing on everything, they kept asking "are you sure you don't want to finance just part of it? We can give you a really good rate!" All I could do was patiently ask them "why would I do this? Is it not still more of a cost to me, even if a small one?" They acted really confused and upset but I understood that this was simply a sales tactic to make me feel as if I was making some sort of mistake by not paying some small amount of interest in addition to the cost of the car. I eventually got a bit irritated as it was making things take a lot longer than they needed to. I just told them, "look, we already negotiated a price and I have the check written out right here. I have no need to finance a $10k car right now and I would like to just finish the sale." They weren't quite as friendly after that but hey...it's an adversarial relationship and I'd been perfectly cordial up until that point. I was already paying $10k for a car they likely got for half as much as a trade-in anyway.