4 ms·

I helped Mom buy a new car last year. She was ready to buy a newer version of the CUV she had already owned for 7 years, but when we got to asking "What's the

by chiph 6y ago

I helped Mom buy a new car last year. She was ready to buy a newer version of the CUV she had already owned for 7 years, but when we got to asking "What's the best price we can get on it?" they switched vehicles to a lower trim level so we were no longer talking about the same car. They had a solid sale. And screwed it up because they started playing games. She ended up with a competitor. That dealer had a mandatory "package" they applied to every car on their lot (window tint, door edge protector, etc.) which was grossly overpriced. Something I haven't seen the numbers on but I suspect is true, is that they make more profit on the financing rebate than they do on the sale of the vehicle. The pressure to finance with them is so high that some dealers will refuse to accept cash offers. Or they will add on $2500 as an "external finance fee" when a buyer already has financing arranged.

pdonis 6y ago
> The pressure to finance with them is so high that some dealers will refuse to accept cash offers. Or they will add on $2500 as an "external finance fee" when a buyer already has financing arranged. I have actually never had a dealer pull this on me (and if one did, I would simply walk out the door), even though I always have financing already set up with my credit union before I ever start talking to a dealer about a car, so from their standpoint I'm paying cash. However, every dealer but one has tried to either sell me their financing instead, or sell me a lease deal instead of a purchase. (The one that didn't knew there was no point because I was a GM employee buying a GM car at that time so every single aspect of the transaction was already predetermined.) I've never taken them up on it, but the fact that they try so hard supports your hypothesis that they aren't making any real profit on the sale itself, but only on the financing. (When I was working for GM, which was some time ago, I had access to enough numbers to make it clear that GM itself was not making any real profit on the sales of any vehicles except full size trucks and SUVs; all of their profit was from GMAC, the financing arm. I used to say that GM was really a financing company that happened to make vehicles on the side. I suspect the other US automakers are similar. I don't think most non-US automakers are; their incentives are different and they are mostly run by technical people, not financial people.)
- chiph 6y ago
  When I have my own financing, I will always offer to go with them if they can beat my rate. Unless it's a manufacturer-sponsored rate (0%, 0.9%, etc.) they typically can't. But I offer, so they feel a little better. You may have heard TV & Radio ads offering 84 month 0% financing. For certain slow-selling vehicles, 90 month 0% is available. Which is insane - a loan of 7.5 years on a vehicle? You'd probably be under water for almost 4 years. Which has big concerns if it gets wrecked and you don't have gap coverage.

by chiph 6y ago

pdonis 6y ago

> The pressure to finance with them is so high that some dealers will refuse to accept cash offers. Or they will add on $2500 as an "external finance fee" when a buyer already has financing arranged. I have actually never had a dealer pull this on me (and if one did, I would simply walk out the door), even though I always have financing already set up with my credit union before I ever start talking to a dealer about a car, so from their standpoint I'm paying cash. However, every dealer but one has tried to either sell me their financing instead, or sell me a lease deal instead of a purchase. (The one that didn't knew there was no point because I was a GM employee buying a GM car at that time so every single aspect of the transaction was already predetermined.) I've never taken them up on it, but the fact that they try so hard supports your hypothesis that they aren't making any real profit on the sale itself, but only on the financing. (When I was working for GM, which was some time ago, I had access to enough numbers to make it clear that GM itself was not making any real profit on the sales of any vehicles except full size trucks and SUVs; all of their profit was from GMAC, the financing arm. I used to say that GM was really a financing company that happened to make vehicles on the side. I suspect the other US automakers are similar. I don't think most non-US automakers are; their incentives are different and they are mostly run by technical people, not financial people.)

chiph 6y ago
When I have my own financing, I will always offer to go with them if they can beat my rate. Unless it's a manufacturer-sponsored rate (0%, 0.9%, etc.) they typically can't. But I offer, so they feel a little better. You may have heard TV & Radio ads offering 84 month 0% financing. For certain slow-selling vehicles, 90 month 0% is available. Which is insane - a loan of 7.5 years on a vehicle? You'd probably be under water for almost 4 years. Which has big concerns if it gets wrecked and you don't have gap coverage.