How do lenders make money on 0% financing?

[masscredit]

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@gdale6 wrote:

As one who has used finance companies to finance customer purchases if needed I can tell you that as the seller of the item we had to give the finance company a buy down on the total price of 10% so they made money right up front. The buy down percentage of course is negotiable depending on the amount you agree to send them on a yearly basis. We paid the highest as we would only use them as a last resort.

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I believe something like this goes on when it comes to financing a car. A person can get 0% financing or something like $3500 cash back. From what I've heard (I could be wrong), to get some of those cash back offers the customer has to finance through their bank.  I've heard people in the finance dept tell cutomers it would be better for them to finance the vehicle for 3 months then pay it off. This is if they wanted to pay cash. 

[jamie123]

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@masscredit wrote:

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@gdale6 wrote:

As one who has used finance companies to finance customer purchases if needed I can tell you that as the seller of the item we had to give the finance company a buy down on the total price of 10% so they made money right up front. The buy down percentage of course is negotiable depending on the amount you agree to send them on a yearly basis. We paid the highest as we would only use them as a last resort.

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I believe something like this goes on when it comes to financing a car. A person can get 0% financing or something like $3500 cash back. From what I've heard (I could be wrong), to get some of those cash back offers the customer has to finance through their bank.  I've heard people in the finance dept tell cutomers it would be better for them to finance the vehicle for 3 months then pay it off. This is if they wanted to pay cash. 

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Car dealers are crooks! I know, I used to sell cars in a past life. I've witnessed them lie to customers about their pulled scores to jack up their profit on a sale many times. (Inflate the interest rate that the customer qualified for.)

Word to the wise: Never shop for a new or used auto unless you have financing already lined up and approved from a Credit Union or Bank BEFORE you start shopping for a car. It is then okay to allow the dealer to run the numbers to see if they can beat the CU or Bank. Dealers should almost always be able to beat the CU or Bank but make sure to read the fine print!

[DaveInAZ]

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@jamie123 wrote:

Car dealers are crooks! I know, I used to sell cars in a past life. I've witnessed them lie to customers about their pulled scores to jack up their profit on a sale many times. (Inflate the interest rate that the customer qualified for.)

Word to the wise: Never shop for a new or used auto unless you have financing already lined up and approved from a Credit Union or Bank BEFORE you start shopping for a car. It is then okay to allow the dealer to run the numbers to see if they can beat the CU or Bank. Dealers should almost always be able to beat the CU or Bank but make sure to read the fine print!

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Well, I'll just say that there all too many car dealers who are far less than honest or ethical.

@Anonymous yes, lining up your own financing before you start shopping.is excellent advice. I bought a 2016 Mazda CX-3 on 9/1 from a Honda dealer in Tucson on 9/1. I walked in with a pre-approval for up to $15k @3.45% from a small local CU I had financed my previous car through. It took 45 minutes to get the price I wanted & I then showed the salesman my pre-approval. He came back saying they insisted on running my credit, and after they promised it would be 1 single pull I agreed. They found a loan from a Tucson CU where I also had accounts for the full $15,300 I needed at 3.25%. I took it. Am extra pull from the 1st CU, but I then knew I was getting the best loan terms. And I see the single pull from the Honda dealer on my reports as they promised, the Tucson CU used their pull..

[jamie123]

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@DaveInAZ wrote:

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@jamie123 wrote:

Car dealers are crooks! I know, I used to sell cars in a past life. I've witnessed them lie to customers about their pulled scores to jack up their profit on a sale many times. (Inflate the interest rate that the customer qualified for.)

Word to the wise: Never shop for a new or used auto unless you have financing already lined up and approved from a Credit Union or Bank BEFORE you start shopping for a car. It is then okay to allow the dealer to run the numbers to see if they can beat the CU or Bank. Dealers should almost always be able to beat the CU or Bank but make sure to read the fine print!

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Well, I'll just say that there all too many car dealers who are far less than honest or ethical.

@Anonymous yes, lining up your own financing before you start shopping.is excellent advice. I bought a 2016 Mazda CX-3 on 9/1 from a Honda dealer in Tucson on 9/1. I walked in with a pre-approval for up to $15k @3.45% from a small local CU I had financed my previous car through. It took 45 minutes to get the price I wanted & I then showed the salesman my pre-approval. He came back saying they insisted on running my credit, and after they promised it would be 1 single pull I agreed. They found a loan from a Tucson CU where I also had accounts for the full $15,300 I needed at 3.25%. I took it. Am extra pull from the 1st CU, but I then knew I was getting the best loan terms. And I see the single pull from the Honda dealer on my reports as they promised, the Tucson CU used their pull..

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You are a smart man! You just gave a perfect example of how buying a car should be done. Good job!

If you walked into the dealership without knowing the interest rate that you qualified for, the dealership could tell you anything they wanted and you would never know the difference. You kept them honest.

And just an FYI: I sold Hondas at the dealership that I witnessed the shady goings on. The brand of the car makes no difference, they are all crooks.

[masscredit]

I always secure financing before I go car shopping. The last time I called my credit union (DCU), told them what kind of car I was interested in and how much I wanted the loan for. I was approved a few minutes later then went to the dealer to do a test drive and see if they could do the deal for the price that I wanted (I researched that too).  I was in and out in less than 2 hours. That included my test drive without the salesman. I requested he stay behind.