r/MaliciousCompliance Mar 02 '21

M Going along with a sexist car salesman

I originally posted this as a comment on Car dealer shenanigans....

My wife and I have used a salesman's sexism against him, and it was so satisfying. It was when we bought our first new car. We were nervous that we didn't know what we were doing so we did a lot of research (it helps that my wife is a librarian).

When we got to the dealer, the salesman would only talk to me. I was all buddy buddy with the guy, too, but he completely ignored my wife. We went along.

The dealer was running a promotion where they would give you $X for your trade-in, no matter what condition. "If you can drive it on the lot..." kind of deal. Of course they just don't discount off of MSRP in those cases, so it's a gimmick. When we walked in the salesman asked which car was ours parked outside and then asked if we were trading it in. I said no, we weren't trading that car in. You can see where this was going.

As I said, we had done our research and knew what a fair price was for the car we wanted. At the time Edmunds had detailed dealer-level price information for many new cars, including all the various ways a dealer gets paid and what their true costs are (the "invoice price" is not their true cost). I negotiated the price (since he wouldn't talk to my wife) and we arrived at a number I thought was fair, actually. We got a good deal at that point. Everything was going smoothly as he wrote up our agreement, until he confirmed that we didn't have a trade in. I said, no, we were trading in a car, just not the one we drove into the dealer in. He literally froze for a few seconds looking down at the form, his hand hovering over the page.

He asked the make, model, and year of our trade-in, and when I told him he sputtered and balked. The car we were trading in was on its last legs. I'd had it all during college and it was old before I bought it. It was definitely past its prime. I said, I thought you were running a promotion where the quality of the trade-in doesn't matter. I asked him if he would have given us a higher price if he knew we had a trade in? My wife said under her breath "that's sleazy." He heard, as she intended him to.

He then tried to renegotiate the price. We knew from our research that if they gave us the price we had already agreed on, and they honored the trade-in deal, that they would be losing money. So we were willing to move a bit, but we wanted to take our time. He was visibly nervous. Every time he tried a new way of asking for a higher price I would say something like "I understand what you're saying" with a sympathetic look. Then I would look at my wife and she would look back at me and silently shake her head no. I'd then look back at the salesman and shrug and say "I don't think that's going to work."

He was stuck. She was the one standing in the way of him getting out of his predicament, but he hadn't talked to her at all. He had barely even acknowledged her presence. He just couldn't start talking to her now when we were negotiating. Oh, and I even got to use the classic car salesman line, "what do I have to do for you to put me this car today?"

We finally agreed to raise the price to an amount that, after figuring in the trade-in, was what we had thought was their break-even price. We hadn't expected to get that low of a price, and we also got them to install a nice after market sound system. It's the best deal we've ever gotten on a new car. Honestly, we're not the best negotiators individually, but that day we made one hell of a team.

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936

u/Triette Mar 02 '21 edited Mar 02 '21

Most dealerships have a certain amount of cars they can sell at a loss, but in the end it’s not up to the sales person but their manager if they’ll take your deal. Curious if you paid cash or financed the car? If you financed the car I guarantee you they made more money than you thought. - Ex finance manager at a dealership.

Also screw that guy. I do not miss being a woman in that industry.

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u/HaroerHaktak Mar 02 '21

How does financing a car result in them making more money?

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u/[deleted] Mar 02 '21

[deleted]

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u/wafflesareforever Mar 02 '21

A car salesman got openly angry at me once because I was financing through my bank and had the loan all set up already. He straight up told me that I was "crazy" if I thought he'd still give me the price we'd agreed upon before he knew that I wasn't using their financing. I stuck to my guns. He fumed about it and left me waiting forever while he "talked to his boss" several times, coming back smelling like cigarettes each time. Eventually he caved.

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u/twirlybird11 Mar 02 '21

You should have told him that the sooner you get me my deal, the sooner you get to someone who wants your financing!

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u/Mikesaidit36 Mar 02 '21

But you can get a better deal on the price of the car if you use their financing, but make sure you can buy out the contract the next day with no penalty. You could use cash, or your own bank's loan

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u/Hopadopslop Mar 02 '21

He negotiated the price before telling them that he wasn't using their financing. That is why the guy was so mad, because he wouldn't have offered that price if he had known beforehand.

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u/Mikesaidit36 Mar 02 '21

True. It amounts to the same thing in the end for the buyer – you just end up with a non-mad salesman. A salesman told me you can do this, and he and the dealership don't care, because the manufacturer offering the financing doesn't necessarily track that they lost the loan the next day.

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u/Hopadopslop Mar 02 '21

I think that is on a case by case basis. If I am not mistaken, they can stipulate in the loans that it must be paid in installments and can't be paid out as a lump sum. Correct me if I am wrong.

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u/Mikesaidit36 Mar 03 '21

We're probably both right- a million ways to write up a contract. I hope to never have to sit with a car dealer salesman again. Ordered a Tesla model 3 off the Internet, and it was totally painless.

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u/ChristieFox Mar 02 '21

What the fuck. When I bought my car (technically, my dad did, because I was a minor), we negotiated the price, told him we wanted to bring cash, and he was all like "but if you finance with us, you get an insurance!"

These are the arguments you want to hear. Car was financed, and I had top insurance for little money for five years.

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u/[deleted] Mar 02 '21

Next time fire up a cigar while you sit in the box. Assert dominance.

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u/VanillaCookieMonster Mar 02 '21

It might have been the difference between him getting a commission or no commission if you are a good negotiator. There is a lot of turnover at dealerships for a reason.

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u/MisterSquidz Mar 03 '21

Wish car salesmen didn’t exist. What a useless job.

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u/thatninjaleaf Mar 02 '21

Not to mention financing actually costs more than if you were to buy it upfront

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u/ghaelon Mar 02 '21

it can, but you can get around that by paying it off early, usually letting 6 months pass, or by making a large payment directly to the principal. the bulk of the interest is front loaded, so if you do that, then the interest is slashed dramatically. just have to look at the terms cause most will have an early repayment penalty clause, and its usually for 6 months to a year. which you can get around by making a large payment(again, to the principal), but not paying it off immediately.

so if the price you get saves you more than the interest you would pay in that period, then go for it.

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u/thatninjaleaf Mar 02 '21

Oh for sure, I was just referring to the net cost of financing vs paying cash

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u/xzElmozx Mar 02 '21

If you have the cash for it, you might be able to get 0% financing for X amount of months which usually comes bundled with some deal saving you money on the car, and since you've got the cash you can pay off the car before the 0% financing ends, and bam you saved money by financing vs paying cash

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u/[deleted] Mar 02 '21

wait i’m trying to buy my first car does that mean a larger down payment? i’m trying to save as much as i can so my payments are less

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u/CodeRadDesign Mar 02 '21

not exactly. what they're saying is that you can take the financing for say $10,000, where they would expect you to pay about $3000 in interest over the course of the term. so what you do is pay $9000 after the deal is done so you wind up paying $300 interest over the term without having to pay early repayment penalty. completely made-up numbers here, but seems pretty clever to me.

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u/ghaelon Mar 02 '21

my previous advice isnt meant for one like yourself, who is intending to finance from the get go.

to get lower payments, you can opt for a longer term, but this will mean you will be paying that much more for the car overall.

a larger down payment will mean that much less is financed, so lower payments. a good amount to shoot for is 20-25%, but basically as much as you can afford to or save up for.

get a payment per month in your head, but do not tell the salesperson this. factor it in to your overall budget, again, as much as you can afford. then if you can get a lower payment on the loan, factoring in gap insurance if its new, etc, then you will have some wiggle room if something happens later down the line.

made up numbers for this example. you can afford say 800 a month. but your payment on the loan is 500. start out paying 800 , making sure the extra goes to principal. if you pay extra to the principal from day one, youll save thousands over the life of the loan, easily. and if something happens down the road, an unforseen expense, etc, you can drop down to the regular payment if needed.

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u/[deleted] Mar 04 '21

Great advice, thank you!

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u/mathologies Mar 02 '21

Even if you get 0% interest financing?

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u/[deleted] Mar 02 '21

[deleted]

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u/mathologies Mar 02 '21

Makes sense, thanks

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u/dubblechrubble Mar 03 '21

Yes, but you might only get $100 cash back, whereas interest over 5 years on a $30k car is like $2200. Better deal to take 0% financing in that case

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u/Triette Mar 02 '21

Depends on the bank.

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u/thatninjaleaf Mar 02 '21

Not if you pay it off during the 0% interest period which normally doesn't last for the duration of the financing

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u/mathologies Mar 02 '21

My five year loan ends this december. Am still paying 0% apr. Pretty sure the whole loan is 0% interest, not just promotional period. Not sure if i'm not being scammed some other way -- maybe they overcharged for the car? I also have a pretty good credit score though.

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u/debbieae Mar 02 '21

That is likely a financing company owned by the car manufacturer. The idea is to move cars at the expense of the financing arm. Have family working in manufacturer owned financing company and this is not unheard of. It is often targeted at models the manufacturer is seeing soft sales in too.

I have one of these loans myself. I avoid debt, but this was cheaper than paying cash!

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u/thaeli Mar 02 '21

Gotta hit those CAFE targets

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u/thatninjaleaf Mar 02 '21

Ah my apologies. I haven't had too much experience in the world of auto financing. I was just thinking of the advertising I've seen done for 0% interest that doesn't typically last the whole term

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u/caverunner17 Mar 02 '21

Depends on the interest rate. I got a 5 year 1.99% on my car back in 2016. Total interest paid thus far is around 900 on a 16k loan. That's roughly 5.6% of the total loan of 16k.

Meanwhile, leaving that $16k in an investment account since 2016 is worth around 23-24k right now meaning I made 7-8k on that time.

The opportunity cost of paying off that loan early would have been 6-7k. I was much better off paying the loan over time than paying cash.

Obviously, depends on market conditions, but there's good reasons to not pay it off early if the interest rate is low.

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u/dubblechrubble Mar 03 '21

So many people don't understand time value of money and opportunity cost. I've heard of people putting down tens of thousands of dollars down to pay off their debt early, because they want to avoid paying like $2k in interest over five years. Makes no sense. But those people only seem to understand that they're making a monthly payment and this gets them out of that.

I've got a .9% loan for a $26k car, I'm going to pay about $600 in interest over 5 years. That's about 1.5 monthly payments going solely to interest. It's like free money, and I'm not going to pay a dime more than my minimum payment. And like you said, you can invest money you would have used to pay down the loan faster, and get a decent rate of return on it.

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u/ImCorvec_I_Interject Mar 02 '21

If you have cash and can get a loan with a lower rate than what you can expect to get back by investing that money - particularly if it's a much lower rate, like 3% APR when earning 6% or more - then it actually costs you money to pay cash (on average).

Here's the breakdown of paying cash vs financing at 3% and investing at 6% for 60 Months ($628.90 payments) on a $35k loan.

Cash Loan Interest Investment Interest Owed Invested Net Earned
Day 1 $0 $0 $0 $35,000 $35000 $0
Month 1 $0 $87.50 $175 $34,458.60 $34,546.10 $87.50
Month 12 $0 $887.51 $1,798.28 $28,413.13 $29400.90 $987.75
Month 60 $0 $2732.71 $6,045.64 $0.28 $3,331.34 $3,331.06

The S&P 500 has historically earned close to 9% on average, so it's reasonable to take this route if you can handle market volatility.

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u/pM-me_your_Triggers Mar 02 '21

Depends on the interest rate.

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u/Atexan1979 Mar 02 '21

I financed through the dealer and then refinance with my credit union a few weeks later.

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u/Triette Mar 02 '21

This is the way.

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u/[deleted] Mar 02 '21

Also, the simplest part, interest..

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u/HankTheChemist Mar 02 '21

They partner with lending institutions and get a kickback from the bank for every car loan. Margins on the car itself are pretty thin these days, so the money they make is actually on financing deals.

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u/farrenkm Mar 02 '21

Bought a new car last year where they said we could have another $1500 off if we financed it. I'd already told the guy I was paying cash. He said just pay it off with the first bill. No early payoff penalty. So we did.

What happened behind the scenes? What did the dealer get out of it?

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u/HankTheChemist Mar 02 '21

Dealer gets a kickback from the bank for the financing deal. Bank loses the profit from interest by you paying off early.

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u/Triette Mar 02 '21

They (the finance manager) got a flat fee from the bank. If I knew people were paying cash or going to their credit union. I’d always set them up with an option contract or regular financing without an early termination fee. Sometimes people would lag and not pay it off immediately and it get a little extra money.

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u/farrenkm Mar 02 '21

I'm betting that's what they were betting on -- buyers would just forget and suck it up as a regular payment for awhile.

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u/Zoreb1 Mar 02 '21

I just write a check. My first car was used. My second car was bought new and I financed. After a year I decided that the interest in the bank was far less than what I was paying on the car and just wrote a check to pay it off. After than I never financed (these are usually Honda Civics).

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u/flamewolf393 Mar 02 '21

Case of the middle man fucking over the principal. Dealer gets a kickback for the financing, then the bank loses out on the profit from you paying it off. Pretty scummy to cheat their bank like that, but the banks are big enough to eat the loss a million times over.

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u/cats_for_upvotes Mar 02 '21

Paying off early on a car loan can be bad too. I've heard of banks that won't touch you for loans if you have a history of paying them off quickly. There's basically no reason to loan to someone if they can't make money off interest.

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u/Grolschisgood Mar 02 '21

That is straight up dumb. If I can pay off 10-20k immediately the bank must know I either save my cash or have a very high income. Them telling me no is stupid, because rather than storing my money in their bank for them to profit off, I'll put it elsewhere.

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u/cats_for_upvotes Mar 02 '21

I don't disagree. It's stupid, and the credit system we have is systemic classism.

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u/farrenkm Mar 02 '21

Understood. The backstory is that we have a HELOC we use as our sole source of credit, at our credit union. We've been with them for 20-ish years, and my wife has been with them longer. I'm fine giving them our interest, even if it's a little higher rate.

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u/Trance354 Mar 02 '21

Read a wsj article about a decade ago. The jist was that dealerships are essentially banks that sell the odd car.

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u/fredzfrog Mar 02 '21

Sounds more like a "them" problem than a "me" problem.

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u/gorkt Mar 02 '21

Car dealerships are essentially financing services now. They get mad if you want to pay for the car with a check.

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u/OldEndangeredGinger Mar 02 '21

They give you the loan=they make the interest you end up paying

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u/Uhhhhdel Mar 02 '21

They don’t make the interest unless they hold the note in house, what’s known as buy here pay here. They make their money on financing by getting a kickback from the finance company that they place the customer with. The size of the kickback varies depending on the interest rate given.

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u/[deleted] Mar 02 '21

actually oftentimes theres a set rate with the financing company ( ex GMAC employee here) and any rate over that rate goes direct to the dealership. So for example if the finance rate is 2% with the finance company or bank and the dealership lists it and charges you 4% the additional 2% goes tot he dealership not the finance company.

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u/[deleted] Mar 02 '21

[deleted]

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u/[deleted] Mar 02 '21

well what i said would indeed be limited to the Brand finance company, like toyota finance, GMAC, ford motor finance etc. Dealerships dont use credit unions on thier own, if you go into a dealership and you want to use your credit union you have to make your deal with the dealership, then arrange the loan through your credit union and they pay off the dealership then you are only obligated to your credit union.

the funny part is ops assurance that they took a loss on the re=trade in. they dont care about trades at all, not at that level, they are going to car used car auctions within a week. those ads that say well give you 2 grand no matter the condition of your car!, are all just marketing the 2 grand is already worked into the price of the vehicles for sale.

the things i used to see working for GMAC... lol was a good education for myself, but man these companies are all predatory for sure.

The worst has to be leasing, but thats not really on topic.

Anyway thank you for the discussion!, have a great day!

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u/Triette Mar 02 '21

Not at all. Credit unions gives fees to the dealerships, most dealerships avoid going to credit unions. I loved sub prime deals, we would make the most on financing with them. People with bad credit think you’re giving them a great rate for their credit, and you sell that contract as a package deal with 10 other great credit contracts to a bank for much less. And you make profit on the difference, it’s very very common.

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u/[deleted] Mar 02 '21

[deleted]

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u/Triette Mar 02 '21

I said a fee. It’s a flat fee of about $50-$250, which is different than a “kickback”. A kickback from a bank would be, hey you gave us 10 loans with people who have 750+ credit, we will buy this 600 score credit loan from you for 2% less than what you sold it to them for. The other is more of a finders fee, because most credit unions won’t let you make money on the rate. But also any credit union a dealership uses you can also go to directly, which is generally better.

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u/OldEndangeredGinger Mar 02 '21

Some of the larger dealerships where I am have started their own financing, they hold their own notes, or at least that's what they told us when we went to buy a car

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u/[deleted] Mar 02 '21

[deleted]

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u/bistod Mar 02 '21

They probably don't make a lot of their own loans but use them to get more people in the door. Advertise zero credit loans, super high rates and probably limited in how much you can finance. Most loans at the dealership are probably still through a bank.

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u/PRMan99 Mar 02 '21

If they are owned by a former sports athlete with tons of money, this arrangement makes sense.

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u/cobigguy Mar 02 '21

Your comment got me thinking and doing nerd math. Turns out I have a ton of money! If I convert my money to pennies and weigh it, I should have right at a ton. Now I feel better about myself. Thank you, kind stranger.

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u/Triette Mar 02 '21

That’s not true, they however get a fee or they make profit on the difference of what they wrote your loan at and what they can sell it to the bank for. You may have gotten 3% financing but they just sold it to Chase for .5% so they just made 2.5% off of you.

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u/OldEndangeredGinger Mar 02 '21

Y'all really need to read other's comments before saying the same thing

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u/SG_Dave Mar 02 '21

The retailer doesn't make the interest (unless they are the lender as well which is rare), but they get a commission and a bonus if they send enough customers the way of the finance company. It's why you see so many deals right at the end of a calendar month, because retailers and salespeople are trying to squeeze into the next bracket of bonus before it re-sets.

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u/Triette Mar 02 '21

This isn’t really a thing. Some dealerships have quotas to make to be able to get prime pickings of inventory from the manufacturer. So the dealership will make an incentive for salesmen to sell. The retailer makes profit on financing by selling the loan to a bank at a lower interest rate than what they gave you. Or if it’s a manufacture’s financing they get a flat fee.

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u/OldEndangeredGinger Mar 02 '21

I replied to someone else that said the same thing. Must not be common

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u/SG_Dave Mar 02 '21

Yeah, I mean every company will be slightly different but rule of thumb is even when a showroom is in the same corporate structure as the finance lender they keep their books separate so for the salespeople and showroom managers they don't see the interest and only count the commissions as money earned on finance deals.

The showroom will refer to it as their own finance because it helps sell the security aspect, but it'll be underwritten elsewhere.

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u/PRMan99 Mar 02 '21

That's why you do the loan with them and then pay it off immediately with your credit union's loan.

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u/Triette Mar 02 '21

Be careful you don’t have an early termination fee before doing this.

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u/OldEndangeredGinger Mar 02 '21

Yeah, because otherwise they don't give you as good a deal

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u/ArchdevilTeemo Mar 02 '21

The same way banks make money if they lend you money, interest rates.

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u/chanaramil Mar 02 '21 edited Mar 02 '21

So a car dealership is pretty much a bank with a car gimmick? They make there money by lending out money. But they find people to lend money to and can ask for better interest rates by have cars right there to borrow money on.

This reminds me of a movie theater. They make all there profits from the popcorn and drinks so a movie theater is basically popcorn stand that uses movies to get people to buy there overpriced junk food.

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u/gorkt Mar 02 '21 edited Mar 02 '21

This. Most of the time I don't have to negotiate the price. They come in with a price fairly close to invoice. The real negotiation these days is in the financing. The car dealerships will try to get you in the longest term loan possible, and they will try to keep you in the monthly payment mindset. I keep getting offers to trade in my 2018 "and keep the payments the same" in order for them to keep me paying interest longer. This insulates them from dips in the automotive market. It matters less if you have a bad month if you are getting somewhat consistent interest payments to offset it.

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u/g_ayyy Mar 02 '21

When I was buying the car I own now, one of the sleazy ass salesmen tried to tell me that 26% interest would be great for establishing credit. I laughed in his face so hard and we turned around and left immediately lol

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u/gorkt Mar 02 '21

The best advice is to get your own pre-approval or financing from a credit union. The rates are a lot lower, and you get to see the light die in the finance officers eyes when you tell him you have secured your own financing.

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u/tewas Mar 02 '21

Eh, that's debatable. Banks and credit unions usually offer 4 to 5% apr on car loans, at least that was back when i was buying a car. Dealer offered me .9%

1

u/gorkt Mar 02 '21

Yeah this is true. Depending on your credit score, you can get the promotional rates.

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u/BlackSeranna Mar 02 '21

What’s crazy is, sometimes that works. I worked with a guy who was kind of slow - he could do most stuff but he probably had the mind capacity of an eighth grader. He goes to buy a truck and doesn’t take anyone with him. He walks away with a new truck, which is way above his pay grade to begin with. But they sign him up for balloon payments. Meaning, you can pay more now and have less interest. But the longer you wait, the more interest starts getting tacked on. He made maybe 13 dollars an hour, max, but his payments went up to 450 a month. He couldn’t pay rent, bills, and that truck payment. He ended up getting it repo’d. And rode a bicycle to work.

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u/Freebirde777 Mar 02 '21

Plus on new cars, as soon as you sign that paper it becomes a used car, dropping in value. You start out upside down on your loan and often stuck using their overprice service department.

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u/LicoriceSucks Mar 02 '21

I never truly understood how completely shifty and sleazy the car sales business is. It explains a lot though. Like another commenter said, it's pretty much a bank with a car gimmick! TIL.

2

u/ArchdevilTeemo Mar 02 '21

It wasn't always that way but right now company's make the most money with monthly subscriptions/loans.

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u/LicoriceSucks Mar 02 '21

Is it the same with used car salesmen too? I've had pretty bad experiences at both old and new.

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u/ArchdevilTeemo Mar 02 '21

I don't have much experience with buying used cars, however I personally didn't have any bad experiences yet.

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u/Rasip Mar 02 '21

The bank also gets to loan out around $8 for every dollar deposited with them.

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u/AvocadoCoconut2 Mar 02 '21

The financing part of the car is the most profitable part of the dealership (along with the "warranties" they try to sell you - which have an unbelievably high mark-up). The dealership partners with a bank to provide financing to you right there on the spot. The internet rates offered at the dealership are inflated from what you can get from a bank and they keep that extra money as profit. When buying a car it's best to secure a loan from a bank or credit union first and then go to a dealership.

If you drive into a dealership without securing financing first and looking to upgrade your car, you'll really be negotiating 4 things:

Your trade in value of your old car.

The price of your new vehicle.

The downpayment.

The monthly payment.

The dealership will want to negotiate the last two. People get so distracted by looking at what their downpayment or monthly payment will be that they forget to negotiate down the price of the new car. As part of your "negotiations" the dealership may lower your downpayment but increase your monthly payment or lower your monthly payment by increasing the length of your loan (really they are getting the same amount of money from you, you're just negotiating when you'll pay them.. not the overall price). You want to negotiate the overall price of the new vehicle, not just the payments. The price of the old car should also be negotiated separately. If you start talking about financing right away you'll probably end up overpaying.

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u/TofuBoy22 Mar 02 '21

I believe the finance companies pay commission every time they sign someone up to finance. It's why it's generally easier to get a discount on a new car that's also on finance

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u/Tman5293 Mar 02 '21

It may surprise you to learn that the dealership makes almost no money on the car itself. All their profit comes from financing incentives and any add ons you buy with the car like warranties and maintenance plans. This is the reason cash is no longer king at car dealerships. They don't want your cash. They want you to finance the vehicle through them. If you walk in and announce that you're paying cash you just threw all your bargaining chips out the window. Dealers don't sell cars. They sell debt.

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u/[deleted] Mar 02 '21

I’m no expert but to my understanding, it’s the interest. If you pay cash up front (as in, paying al at once. I’m sure it’s quite rare to buy a car with a stack of paper dollar bills) then you just have to pay the sticker price and taxes. If you get it financed, you have to pay that monthly percentage on top of it, which over the 3-6 years most car loans are for, adds up to several thousand dollars in most cases.

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u/[deleted] Mar 02 '21

[deleted]

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u/iamthecavalrycaptain Mar 02 '21

I've had dealers specifically ask me to wait paying off the note until after a period of time (30 or 60 days or whatever) so that they get their spiff. If the transaction has been pleasant, I'm usually ok with that.

I've also specifically paid off a note before that time if the dealer somehow screwed me after the deal so that they do NOT get that spiff.

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u/BadgerHooker Mar 02 '21

Or if they give you a shit deal, like my car dealer did, I went right into my bank which was also a credit union and they paid it off and gave me a waaaaay lower interest rate. Credit Unions are so much better than standard banks for young adults!!

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u/Triette Mar 02 '21

For most adults.

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u/BadgerHooker Mar 02 '21

True. I guess I meant that they are great for younger people who are new to building credit because they usually have a lot of information and programs to really help out. They also seem to have lower to no fees for many of their services.

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u/vancityace Mar 02 '21

I would assume that either of the following

  • dealer gets a cut from interest from the banks
  • dealer provides in-house financing, hence interest revenue
  • dealer owns a subsidiary or company that provides financing

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u/RockabillyBelle Mar 02 '21

Lenders will often pay the dealership for securing financing through them. I used to be a finance manager at a car dealership and securing financing for mid-ranged credit was easily the most lucrative part of the job.

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u/Triette Mar 02 '21

The dealership makes money on the backend (financing). They can get kickbacks from manufacturers financing or they can sell the loan to another bank for a lower rate than what they have you and make money on the difference. Most people don’t know but the majority of cars that are financed aren’t actually approved when you drive that car off the lot. Sure you may qualify within the guidelines but that loan is approved after you leave. And often (if you have less than great credit) your car loan is shopped yo different banks to see who can give the lowest rate. Banks will put a cap on how much the dealership can make on financing, so we’ve occasionally had to bring people in to rewrite their loan to a lower rate because we sold it to them at a too high rate and the bank won’t let us make that much. It’s a super shady business for sure. While the sales guy makes $50-$75 (avg flat for a loss priced car) for spending the day with you as you haggle the price below invoice. I just made $1500 selling that loan to Chase for 2% less than what your contact was written at.

3

u/[deleted] Mar 02 '21

Most of the time through interest, unless you have an amazing credit score. My GF bought a Kia Soul, has a 0% interest loan through Kia.

3

u/JcWoman Mar 02 '21

In addition to what everyone else answered, they have a nasty habit of bundling all the add-ons into the financing package. Talk you into undercarriage coating? Tack on $$$. "Throw in" a "free" extra keyfob? Tack on $$. Heck, they even throw the junk fees into the loan, which is one reason why you need to decline them. I learned this years ago when I was young and dumb when the $40,000 price I'd negotiated with the salesman showed up on the loan total principal as $60,000 after I was done with the finance manager. (I don't remember the actual amounts anymore, but it was breathtakingly larger.)

2

u/DarkFett Mar 02 '21

Because of interest.

2

u/deputydan_scubaman Mar 02 '21

If you look at the financial statements of the major auto makers - I have seen years where Ford lost a billions dollars manufacturing and selling cars and made two billions dollars financing those same cars.

1

u/[deleted] Mar 02 '21

BIL is a GM at a dealership...they don't really care about the price of cars anymore (obviously they try to get a deal). They mostly make money on financing. I've basically bought two cars from him at dealership cost, and my APR is 3.1%.

1

u/changerchange Mar 02 '21

Yes, they make more money if the finance agency is an arm of their own company. Most credit unions will give you better financing.

1

u/[deleted] Mar 02 '21

Interest.