| | | ruralmb said "From my understanding the addition of a $1000 cash is to compensate for the lost income from the lending agency. Apparently, for every person who takes out the loan, they get a kick back on the price of the car so they can lower the car by the $1000. Makes me wonder how much kick back they get from a lender. " |
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I assumed as much, but that makes it even stranger. In my opinion, it raises more questions than it answers.
Lots of places are offering low or ultra-low financing rates these days. My brother, for example, just bought a 2016 Grand Caravan for 0%, and I think he could finance it up to 8 years (96 months).
So where does the lending company make their money? Is it in the fees? Is it in the assumption that you will roll the loan, as most people take out car loans these days with terms that exceed what they would normally keep a vehicle for? And because many people will trade in vehicles when they're upside down on the loan prior to term's end (especially on the ultra-long terms), they're banking on making the coin then when they roll that financing into the next purchase?
Assuming the kick-back is $1000, hence the $1000 surcharge, what is in fact the profit margin back to the dealership on financing, even with rates as low as they are?
And why, ultimately, should my method of payment influence the final price? If anything, a cash transaction usually results in a lower price because there's less transaction fees to be absorbed by the vendor. But because you're penalized in this case for paying cash, that suggests to me that the business in the car business isn't the cars, but the financing.
Astounding, isn't it?