Do dealers make money from loans?
Discussion
Quick question all,
In negotiations about a car with a dealer, they are indicating that we may be close on a price as they want to move the car on as new stock is arriving but my offer is a couple of grand off.
How much money does a dealer get for arranging say a 10K loan?
I'm wondering if it may make it more attractive to them to NOT offer the price in cash but make some of the purchase a loan they could arrange and that I would then pay off quickly.
Any thoughts?
In negotiations about a car with a dealer, they are indicating that we may be close on a price as they want to move the car on as new stock is arriving but my offer is a couple of grand off.
How much money does a dealer get for arranging say a 10K loan?
I'm wondering if it may make it more attractive to them to NOT offer the price in cash but make some of the purchase a loan they could arrange and that I would then pay off quickly.
Any thoughts?
holmzy said:
My uncle recently made an interesting deal on a new car on finance. He was going to buy with cash, but the dealer suggested that he take out finance, as they were offering a large deposit contribution when taking out finance. Which he did, and then settled the loan a couple of weeks later, with very little interest or admin fees to pay.
He said it saved him a few thousand doing it this way.
This is the kind of thing I was wondering.He said it saved him a few thousand doing it this way.
My uncle recently made an interesting deal on a new car on finance. He was going to buy with cash, but the dealer suggested that he take out finance, as they were offering a large deposit contribution when taking out finance. Which he did, and then settled the loan a couple of weeks later, with very little interest or admin fees to pay.
He said it saved him a few thousand doing it this way.
He said it saved him a few thousand doing it this way.
Diablos-666 said:
Cash in the bank is always worth more!
Generally, you will be able to get a better deal with a cash offer.
The dealer gets paid by the finance company straight away + a small kickback. Thus it's the exact opposite - theres no risk to them if you default and when spending someone elses money you tend to spend more, thus why dealers love finance.Generally, you will be able to get a better deal with a cash offer.
Diablos-666 said:
Cash in the bank is always worth more!
Generally, you will be able to get a better deal with a cash offer.
They've already taken 3K off the original price, and I'm offerring 2K under that.Generally, you will be able to get a better deal with a cash offer.
So they're squeaking on the deal already. But they have come back to see if I'm still looking so must be considering my offer as being close.
So I'm just wondering if it would make it more attractive to them to do a finance deal as they can get some money from the finance company.
Mind you., the flip side is that obviously I would be paying the money to the finance company so maybe I should just up my offer by the amount finance would cost me anyways? But then a finance deal over a year would be a way of instilling some discipline in me to actually make sure the savings I'd be using get topped up again.
Decisions, decisions
If the dealer is arranging finance then rest assured he is making money by doing so. Finance income can be a greater source of profit than the sale of the car, to the extent that some dealer groups will happily sell the car at a loss to secure your finance business.
Different companies offer different terms but if you are buying from a mid to large sized dealer group you will generally be able to secure funding for less than the high street lenders will offer. You may need to haggle a bit but a good deal is there to be had.
It is worth finding out which company the dealer is using as this can strengthen your bargaining position further. Someone mentioned deposit allowances, these will only be available from the manufacturers finance company i.e. GMAC, Ford credit etc. Dealers have substantial targets to achieve with the franchised lender. These targets will be linked to the cost of the funding lines employed to finance their new car stock. Generally these targets are run over a quarter and so the last month is often where the cheapest rates will be seen.
Likewise non franchise lenders will have volume target commitments if the dealer employs their used car funding lines. A good indicator will be the point of sale material in the sales offices.
Different companies offer different terms but if you are buying from a mid to large sized dealer group you will generally be able to secure funding for less than the high street lenders will offer. You may need to haggle a bit but a good deal is there to be had.
It is worth finding out which company the dealer is using as this can strengthen your bargaining position further. Someone mentioned deposit allowances, these will only be available from the manufacturers finance company i.e. GMAC, Ford credit etc. Dealers have substantial targets to achieve with the franchised lender. These targets will be linked to the cost of the funding lines employed to finance their new car stock. Generally these targets are run over a quarter and so the last month is often where the cheapest rates will be seen.
Likewise non franchise lenders will have volume target commitments if the dealer employs their used car funding lines. A good indicator will be the point of sale material in the sales offices.
The days of making as much money on your finance commision as on the sale of the car are long gone. I make about £200 on a loan of £10k if i'm lucky - online lenders and access to bank loans mean that the interest rate has to be competitive to stand a chance (I'm not Car Craft and therefore can't sell stuff at a gazillion % apr).
My previous finance provider would also claw back most if not all of the commision if the customer defaulted and their car was reposessed, or even if they settled early.
My previous finance provider would also claw back most if not all of the commision if the customer defaulted and their car was reposessed, or even if they settled early.
Diablos-666 said:
Cash in the bank is always worth more!
Generally, you will be able to get a better deal with a cash offer.
Generally, you will be able to get a better deal with a cash offer.
Fane said:
The days of making as much money on your finance commision as on the sale of the car are long gone. I make about £200 on a loan of £10k if i'm lucky - online lenders and access to bank loans mean that the interest rate has to be competitive to stand a chance (I'm not Car Craft and therefore can't sell stuff at a gazillion % apr).
My previous finance provider would also claw back most if not all of the commision if the customer defaulted and their car was reposessed, or even if they settled early.
As a dealer (and any other dealers out there), which do you prefer?My previous finance provider would also claw back most if not all of the commision if the customer defaulted and their car was reposessed, or even if they settled early.
monthefish said:
Diablos-666 said:
Cash in the bank is always worth more!
Generally, you will be able to get a better deal with a cash offer.
Generally, you will be able to get a better deal with a cash offer.
Fane said:
The days of making as much money on your finance commision as on the sale of the car are long gone. I make about £200 on a loan of £10k if i'm lucky - online lenders and access to bank loans mean that the interest rate has to be competitive to stand a chance (I'm not Car Craft and therefore can't sell stuff at a gazillion % apr).
My previous finance provider would also claw back most if not all of the commision if the customer defaulted and their car was reposessed, or even if they settled early.
As a dealer (and any other dealers out there), which do you prefer?My previous finance provider would also claw back most if not all of the commision if the customer defaulted and their car was reposessed, or even if they settled early.
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