Greetings, dear readers! If you have ever purchased a car from a dealership, you must have noticed that the salesperson always tries to convince you to finance through them. Have you ever wondered why they do that? In this article, we will explore the various reasons behind this tactic.
Reason 1: Profit
The primary reason why car dealers want you to finance through them is profit. When you finance through a dealership, they act as the middleman between you and the lender. They receive a commission from the lender for bringing in new business. This commission is called the "dealer reserve" and can add up to thousands of dollars in profit for the dealership.
Furthermore, dealerships may mark up the interest rate on the loan, which means that you end up paying more interest than you would if you had gone directly to the lender. This markup is another source of profit for the dealership.
Reason 2: Convenience
Another reason why car dealers want you to finance through them is convenience. If you finance through a dealership, you can complete the entire car-buying process in one place. You don't have to go to a separate bank or credit union to get a loan. This can save you time and effort.
Also, if you have less-than-perfect credit, it may be easier to get approved for a loan through a dealership than through a traditional lender. Dealerships have relationships with multiple lenders and can shop around to find the best loan for your situation.
Reason 3: Customer Loyalty
When you finance through a dealership, you are more likely to return to that dealership for future car purchases and maintenance. This is because you have a relationship with the dealership and have already completed a transaction with them. Dealerships know this and want to build customer loyalty.
Additionally, when you finance through a dealership, you may be more likely to purchase add-ons like extended warranties or maintenance plans. These add-ons can also generate more profit for the dealership.
Reason 4: Control
Finally, dealerships want you to finance through them because it gives them more control over the transaction. If you finance through a separate lender, the dealership has to wait for the lender to approve the loan and send the funds. This can add time and uncertainty to the process.
When you finance through a dealership, they can take care of the entire transaction in-house. They can also offer you incentives like rebates or discounts for financing through them. This gives them even more control over the transaction and can make it more profitable for them.
FAQ
| It depends on your individual situation. If you have good credit and can get a low interest rate from a bank, it may be better to finance through them. However, if you have less-than-perfect credit or want to complete the entire transaction in one place, financing through a dealership may be a better option. | |
| Yes, you can negotiate the interest rate when financing through a dealership. However, be aware that they may try to mark up the interest rate to make a profit. Make sure to do your research and know what interest rate you qualify for before negotiating. | |
| Yes, you can pay off a dealership loan early. However, be aware that there may be prepayment penalties or fees associated with doing so. Make sure to read the loan agreement carefully before signing. |
Conclusion
Now that you know why car dealers want you to finance through them, you can make an informed decision about whether it is the right choice for you. Remember to shop around and compare interest rates from multiple lenders before making a decision.
Thank you for reading, and happy car shopping!
