The days of discounts for cash are gone. Have you ever wondered why the salesperson always tries to convince you to finance your car and discourages you from paying cash? When you ask for a discount your sales rep asks you, "If I get you that price, you're going to finance with us, right?" It's because the dealership makes money from arranging your loan with the bank. In fact, the profit from financing in most cases exceeds the profit from the sale of the vehicle.
Banks offer dealerships financing at their lowest rate which is called the "Buy Rate." Any markup over that rate is extra profit. In some cases all of it goes to the dealership. Some banks split the extra money with the dealer. This applies to Manufacturer supplied financing as well. The only exception is the special low or 0% APR rates known as Incentive Financing. That's why there are so many restrictions attached to those offers. If you demand the incentive rates you'll probably pay a higher price for the car. If you negotiate too good of a price for the automobile you may be denied the special rates, or told that your credit isn't good enough to qualify for them. If you have very bad credit you may have no choice but to accept the terms that the dealer offers. That doesn't mean that they won't have some flexibility. You'll just have to push harder to get rate concessions. If you have really good credit you'll need to plan a strategy for beating the dealer at his own game.
Always say that you will accept the dealership's financing when you are negotiating the price. Be careful. Don't ask about the special financing rates until the day you're picking up the car. My smartest clients have already arranged a loan before coming in for delivery. Banks will now pre-approve you and send you a blank check which is valid for up to the approved amount. The entire process can be accomplished via the Internet, so you can do it all at home. Try the banks below. They offer convenience and great rates.
When you arrive at the store on the day of delivery, listen carefully to the terms that are being offered. Ask for the special APR financing if applicable. Is the loan you've arranged at a better rate than they're offering? Just whip out your pre-approved loan check and announce that you are paying cash. At this point you may need to use your poker playing skills. Be prepared to get up and walk out if they try to renegotiate the price of the car. In most cases they won't let you leave without trying to work things out. The firmer your stand the more concessions you'll get unless you are completely unreasonable or the car you want is in great demand. Even if you decide to trade a higher APR for a lower price, you can always refinance the loan at a lower rate next month. Check out, "My auto loan interest rate is too high. What can I do?"
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