Do car dealers prefer cash or financing and why?

Do car dealers prefer cash or financing and why?

When it comes to purchasing a car, you have a few different options. However, generally speaking, there are two main ones: Financing, meaning that you will essentially take out a loan and pay it back over time. Paying in cash, meaning that you will pay for the entire car out of your own pocket. This

When it comes to purchasing a car, you have a few different options. However, generally speaking, there are two main ones:

  • Financing, meaning that you will essentially take out a loan and pay it back over time.
  • Paying in cash, meaning that you will pay for the entire car out of your own pocket. This usually isn’t done in literal cash, but with a check or wire transfer. 

Logically, you could be forgiven for thinking that a dealer would prefer you to simply hand them a check and give you the keys in response. After all, isn’t that easier and faster for dealers? And don’t realtors vastly prefer clients who pay in cash, since it saves them a ton of hassle and avoids numerous potential roadblocks? Well, yes. But a dealership may ultimately make less money than if you finance.

Here’s the thing: In many cases, car dealerships already have relationships with finance agencies, enabling them to get money from a financing deal very quickly – potentially on the same business day. Furthermore, many car companies have their own credit unions. As such, they are bound to get their money and have built-in relationships with these companies.

Additionally, there may be service fees that dealers get for steering business towards a specific financing agency. Many of these agencies may also offer rebates towards customers if they do business with them, enabling a customer to potentially obtain savings for choosing one bank over another. Last, 0% credit is not unheard of these days, particularly if you have a great credit score and an established relationship with a dealer. That means that you can take the money that you would have paid in interest and invest it in another source, potentially enabling you to save thousands of dollars over the life of a loan. 

That being said, what is best for a dealership may not be best for you. If you have the cash, using it to pay for a car can save you a ton in interest payments and also reduce the amount of time you spend at a dealership. 

At the end of the day, car dealers want to make a sale. Yes, they may have preferences on how the deal is completed, but they will unquestionably take making a sale with a cash deal to not making a sale at all. Furthermore, remember, there may be negotiating opportunities for you, a consumer, if you pay one way or another. However, you’ll have to do your homework about a dealership, and maybe specifically inquire about whether or not discounts are possible if they let you pay one way or another. 

Daniel Hughes
Daniel Hughes
ADMINISTRATOR
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