Why You Should Finance A Car When You Purchase From A Dealership

Something has struck me as very odd over the years. I have mostly lived my life with great disdain for car dealers. As someone who was well taught how to shop for used cars from private parties, I never really considered going to the dealership for an overpriced car as an option.

My husband, on the other hand, loves car dealers. Frankly he doesn’t know any better. I remember him dragging me along to some dealers who treated us like dirt because we wanted to pay cash for a $5,000 car. I wasn’t exactly being lured into their deal at the time, and ended up sticking with a private party purchase.

My wrath for car dealers probably compounded when my husband insisting on trying to se


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13 Responses to Why You Should Finance A Car When You Purchase From A Dealership

  1. dan says:

    lol. I saw the title of this article and was ready to write a scathing reply how this was totally absurd, but you caught me off guard. I wasn’t expecting that.

  2. kenny says:

    Also go when it’s a rainy or super cold day so there is nobody else in the lot. The worse the weather, the better. They are much more willing to deal when they know there aren’t going to be any other customers coming that day.

  3. Jean says:

    lol. Boy this article sure brought back a memory. I was always one who bought a car for cash from a private source. My opinion is a $500 car that will run for 2 years is a better deal than $320 a month. Basic math is $500 or $7680. When we finally financed a new vehicle the salesman was visibly upset about the bells and whistles we were turning down. To us, they were a waste of money on stuff we will not use.

  4. AFinanceBlog says:

    Car dealership salesmen are willing to negotiate a lower price for the car if you pay by financing (especially on slow days) but if you plan to pay the car with cash, a negotiation deal is out of the question.

  5. Erin says:

    When my husband bought his car, we never told him how we were planning to pay until it came time to actually sit down. By then he’d already spent an hour test-driving it, an hour choosing the color and interior (they didn’t have the one he wanted in a stick-shift, so he had to choose another), and an hour negotiating the deal. He also tried and tried to convince us to finance it and we let him go run the numbers, then said no. By then, there was no way he was going to pull out of the deal after the time he’d invested.

  6. Amber Yount says:

    8%??? My god! My husband had HORRIBLE credit and was still able to get a 6% loan on his first vehicle purchase. Also, I heard car debt doesn’t help your score until you pay on it for 12 months? Perhaps it bumped up your score, because you had $5000 less on it.

  7. Teri says:

    Erin – your strategy may work. But I think it is pretty iffy. I have sat in negotiations all day and been turned down when we refused to pay anything other than cash. I am sure by the same token sometimes it works. But it goes both ways. A lot of the time the dealer figures you are the one who has invested that time and would never walk away. IT probably depends on the car, the place, the day!

    Amber – was that a new car? The thing is I did not realized used cars have in general such horrible rates compared to new cars. But I shopped around after the fact and at the time 8% was low as it got for used cars.

    Rates are much lower right now…

    I am not sure on the credit score but it was my experience. I am certainly no FICO expert and there really are a myriad of factors – very case by case. I hesitate to get too much into that, but I found it very interesting since I hadn’t really thought my score would improve as a result, but being so anti-debt overall it did help to take on a consumer loan and pay it off. If I think about it further the affects were rather temporary. But what do I know, I do everything “wrong” when it comes to FICO but have been in the 700s/800s ever since we have had our mortgage. The only thing I do “right” is have a mortgage and pay it on time. LOL. I don’t pay attention to most of the rest of the rules…

  8. Engineer says:

    I didn’t have much trouble buying my last two vehicles from a dealer paying cash. I refused to discuss financing during the negotiation, saying I wanted to establish the price, but gave the impression I might consider their financing. In one case, when I went the close, the paperwork person said that it would be “easier” to finance the vehicle. Huh? Filling out a finance application and writing and mailing a series of checks would be easier than writing just one check? Give me a break!!!!

  9. Philip says:

    Based on an isolated experience, you now not only have a rule about buying cars, but you write an article about it knowing you’ll influence people who don’t know better? That’s crazy.

    My last car purchase was very smooth. I test drove the car and sat down to negotiate. I politely told the salesman “No” when he countered my offer with his. He took three trips to his ‘manager’s office’, and even told me they don’t have that much room on cars because they’re a volume dealer. I wasn’t rude, and he never mentioned financing until we agreed on a price. I told him I had financing in place through my own source, and that was it.

    Not every dealer is rude to their customers (though some are), and not every customer is uneducated and thinks their experience at one dealer means they have to repeat that process for their entire life.

    If you can’t manage to negotiate while paying cash (or having your own financing), you need to either be more assertive or find a more buyer friendly dealer.

  10. anonymous says:

    I’ve never had any problems paying for a car in cash. I call dealers, find out what they have in stock and make a cash offer over the phone.

    More often than not, the salesmen will jump at the opportunity to sell a car with zero effort, and without having to worry that the deal will fall through because a customer won’t qualify for financing.

    This is for new cars (I enjoy new car warranties, and I can afford them) and I never trade-in a car. I educate myself prior to the purchase and make a fair offer that gives the dealer a couple hundred bucks profit for their time.

  11. Eric says:

    I tried to buy an “AD” car last Saturday. I applied through Toyota finacing and did not like the numbers because I could save over 1% with my Credit Union. When I ask to use their internal system to apply with my credit union they said it was STORE POLICY that ad cars had to be purchased by dealer financing. He also declined to give me the time window to get my own financing. We walked away.

    Why bother selling cars at a loss if they will stop you from buying it!

    Wasted hours of our Saturday.

  12. Duane Penaflor says:

    This is a very interesting story. It’s very informative and it shows some ins and outs of automobile purchasing. Thanks to the author.

  13. kerry says:

    @ Kenny

    The bad weather thing is great! Especially if it’s bad weather a couple of days before month (or better – year) end!

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