Most people think that paying cash at a dealership for a used car will get them a better deal. A cash deal for the customer usually ends up being a better deal, but not everyone can afford paying for a $17,000 used car for sale with cash.
That’s why many shoppers will finance and dealers like this. While the average price of a used car continues to drop, dealerships need to make a profit somewhere and they do that one of three ways.
1. Sale Price
Dealers buy cars and then sell them for more. It is the most basic way dealerships make money. For example, they will buy a car at auction for $11,000 and sell it for $12,500.
2. Vehicle Financing
A dealership might sell a car at cost if the buyer finances it. They’ll do this because the payments over the lifetime of the deal add up to much more than the asking price. A dealer will get a cut of the financing deal from one of their finance partners.
If you have a vehicle to trade-in to the dealership that they can resell, they’ll often be willing to accept that in exchange for a lower sale price. If you have a car that they can resell for $7,000, they might be willing to take $5,000 off your sale price.
Remember, if you’re trading in a vehicle, don’t expect the dealership to pay top dollar if you’re also negotiating the sale price of a vehicle you want to buy. The dealership needs to make a profit somewhere whether it is your trade-in or your purchase.
As you can see, it’s actually better for the dealership if you don’t pay cash and finance instead which is why you won’t be able to negotiate much on the final cash sale price. Certainly you might be able to negotiate a few hundred off the sale price but don’t expect 10 percent or 20 percent off just because you’re paying cash. The dealership probably won’t accept it.
Shopping for a used car and wanted to pay with cash or financing?