If you pay for your next car with cash instead of financing, you're going to get a much better deal, right? Not necessarily. Opting to pay cash at the gas pump may save you a few dollars, but you probably won't find the same deal at the car lot, especially if you exercise full disclosure.
Why You Should Think About What You Tell The Salesman
Yes, dealers make money from the sale of the car, but it doesn't stop there. A couple of other factors figure into how much money a dealer can actually make on each deal.
The trade-in: If you own a car now, having a trade-in even if you have bad credit not only reduces your monthly payments, it's good for the dealer too. Even though you'll be given a certain amount for your car when you trade it in, the dealer will turn around and sell the car for more money. This way, the dealer gets to make whatever he/she makes from selling you the new car and at least a small profit from your old car.
The financing: This one is very important because most lenders make the bulk of their profit through financing. One of the ways that they do this is through what is called a "loan markup." This means that, for example, a loan is approved by a dealership's finance partner at 5% interest. The dealership will turn around and offer the customer a price that includes 7% interest. The 2% loan markup then goes straight into the dealer's pocket.
No Financing? No Price Break.
Because there is so much profit potential that comes with financing, a car salesman may be willing to shave some dollars from the sticker price if he/she can anticipate making more money on the loan interest. So, if the dealer knows right up front that there will be absolutely no possibility for financing, they will be much more unlikely to deviate from the vehicle's original asking price. Therefore, if you're planning to pay with cash, you'll need to keep your poker face on.
What to say: In the very beginning, a dealer will probably ask you: "Will you be paying with cash or financing?" The best response is: "I'm considering financing, but I would like to negotiate the price of the car first." And who knows? You may be thinking that you're going to pay with cash, but you could change your mind. Maybe you'll decide that this is a great opportunity to build or re-build your credit through financing and you'll just throw in a large chunk of your cash as a down payment.
If you've decided not to pay cash and you're looking for an auto loan, Auto Credit Express can help you no matter what your credit history looks like. In fact, we believe that auto financing is one of the best ways to start rebuilding ailing credit. Our trusted network of lenders is ready and willing to work with you! Just fill out our quick and secure online application to get started today!