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Is Cash King at the Dealership?

  • Apr 22
  • 2 min read

Updated: May 3

In a nutshell? Absolutely not. In fact many dealerships or employees within them will actively conspire for you to not pay with cash. A large percentage of NET PROFIT produced at a dealership is due to FINANCING and the sale of INSURANCE products that are usually sold to those financing their purchases.
In a nutshell? Absolutely not. In fact many dealerships or employees within them will actively conspire for you to not pay with cash. A large percentage of NET PROFIT produced at a dealership is due to FINANCING and the sale of INSURANCE products that are usually sold to those financing their purchases.

The Modern Reality


For years, the gold standard of car buying was walking into a dealership with cash.

However, in today’s automotive market, "Cash is King" is a myth that can actually cost you

money during negotiations.


Why Dealers Prefer Financing


Most dealerships today make more profit in the Finance and Insurance (F&I) office than

they do on the actual sale price of the car. When you pay cash, the dealer loses:

Finance Reserve: The kickback the bank pays the dealer for setting up

your loan.

Product Bundling: It is easier to sell warranties and protection plans when

they only add "a few dollars a month" to a loan.


Strategy Tip: If you plan to pay cash, keep that information to yourself until

you have a signed "Out-the-Door" price. Mentioning cash too early often

leads to a higher sales price because the dealer is trying to recoup lost

finance profit.


When to Use Cash


While cash may not get you the best price on the car, it is still the "King" of your personal

finances. It allows you to:

Avoid high interest rates (currently at decade highs).

Simplify the transaction and spend less time in the F&I office.

Maintain full equity in your asset from day one.



The "Hybrid" Strategy


Many savvy buyers take the dealer's financing to get the "Finance Rebates" or a lower

sales price, and then pay the entire loan off within the first 30 days. This gives you the

dealer's discount without the long-term interest costs. This is probably the best way to purchase a car. Keep working on lowering the purchase price while agreeing to higher payments. The dealer will assume they can shovel that payment cash into their pocket when, in the end, only the sales price matters.







 
 
 

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