Current Events > Buying a car: Dealer says I have to finance with them. True?

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Negotiated $10,125 off MSRP of $33,575 (so price of $23,450) with two dealers. The out the door price difference of both dealers is about $100. Now trying to pick between them (color of stock available, extra dealer features they provide (free state inspection stickers for life, etc.).

Both dealers said the price is valid if, and only if, I sign up with their 5.9% 60 month auto loan, and pay no down-payment. Both dealers said after I sign up, I can pay off the loan in full or refinance after 90 days.

So...... is this true, or is it another tactic? Why 90 days? Why can't I bring my own financing?
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Short answer: No. You can pay outright or finance elsewhere (MUCH better idea overall - never finance at a dealership).

Long answer: Yes, in order to get a 'deal' or a better price. They do not have to honour any price negotiated if they state they are only valid for a loan through them. 90 days could be a clause, as this guarantees a few months of interest for them (dealerships make a TON more on loans and interest than actual vehicle sales).
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It's just their terms. Majority of dealers are financers first and car deals second.

They may have to hit certain numbers for their own company policies and maybe one of those is retaining x amount of customers for y amount of time. Heck half of the time they sell the loan off to another company, which might also be what they want.

They'll sell the loan to another company, get that kickback, and now it's their problem.

If it's all in writing, just wait the 90 days and refinance. My credit union actually gives you a better rate if you switch to them for a loan than if you get pre-approved
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If this is the deal for the Volkswagen for $13k after rebates, the deal requires financing with with Volkswagen credit but can be paid off without any penalty immediately. They say 90 days, but others have confirmed it's not required.
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MaverickXeo posted...

90 days could be a clause, as this guarantees a few months of interest for them (dealerships make a TON more on loans and interest than actual vehicle sales).

It'll be under $400 in interest over 3 months; I wonder if 90 days is actually written in a contract somewhere (like a prepayment penalty). If they push hard on "you have to finance through us", I could, then immediately get refinancing within a month or so...
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LockeMonster posted...

If this is the deal for the Volkswagen for $13k after rebates, the deal requires financing with with Volkswagen credit but can be paid off without any penalty immediately. They say 90 days, but others have confirmed it's not required.

Oh snap... Yes, this is the Volkswagen Egolf.
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IdiotMachine posted...

LockeMonster posted...

If this is the deal for the Volkswagen for $13k after rebates, the deal requires financing with with Volkswagen credit but can be paid off without any penalty immediately. They say 90 days, but others have confirmed it's not required.

Oh snap... Yes, this is the Volkswagen Egolf.

Nice. Let us know how the car turns out and the real world mpg. My friend has been really interested so I've been helping him and there's a big thread over on SD with tons of people getting it. There's an FAQ and that's where it says you can pay immediately despite the 90 days.
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100% false. They will upcharge you at the dealership because of the convenience of getting everything done there.

Find a loan through your bank or an outside source like LightStream (mine).
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Shelhamer92 posted...

100% false. They will upcharge you at the dealership because of the convenience of getting everything done there.

Find a loan through your bank or an outside source like LightStream (mine).

Incorrect since with this particular deal, there's no penalty for buying on Sunday and paying off with a refinance on Tuesday.

The only thing is the double hard pull. I personally value each pull at about at least $500 in benefits, but this deal is a steal with the federal rebates.
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Usually if it's within the same month, you'll just get one hard pull for similar loan types.

At least I know it's true when you're mortgage shopping

Edit: it's 14-45 days

https://www.equifax.com/personal/education/credit/report/understanding-hard-inquiries-on-your-credit-report/
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Obviously you can but they're trying to negotiate a deal that favors them. If you dont want to then you always have walk away power.

This is why I never finance cars. You have a lot more negotiation leverage when you're buying it outright. And car salesmen are the worst people to try and negotiate with.
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Yeah, credit pulls for multiple loan applications around the same time time should be counting as just one pull.

I've never done financing outside of a dealer yet, mainly because the interest has been reasonably low enough. If it's a specific offer, yeah like said you're likely going to be held to using their financing by policy, or because dealerships are like that.

tbh VW is a bunch of crooks though. Cars tend to fall apart sooner than later and a lot of the driver base is...something else.
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Like others have said, financing thru the dealership to get a special price and then paying it off with your own funds or a local bank refinance is usually a good move. Take into account that your credit score will likely be affected by what is essentially two separate loans. But as with any major purchase, you gotta weight the benefits of financing vs. the effect on your credit score.
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Finance manager at a major car dealer here. Dealers make money in flat rates or rate participation from banks, often based on amount financed. So in order to give you so and so discount, they make it up elsewhere.
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What's a rate participation?
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Unsugarized_Foo posted...

What's a rate participation?

Lets say I get your credit and a bank will finance you at 4.5%. I can then mark it up, show you 6.5%, and keep the difference as a percentage of amount financed.
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Oh wow, I shouldn't be surprised by that but I am
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No... You can buy the car in full outright if you have the cash on hand. Financing isnt needed. Theyre lying just to get their part of the extra comission.

DoomtheGrav posted...

Finance manager at a major car dealer here. Dealers make money in flat rates or rate participation from banks, often based on amount financed. So in order to give you so and so discount, they make it up elsewhere.

Whats it like being a professional leech?
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