Auto financing cheaper than cash???

[rickoshadows 937]

I know someone who is thinking of buying a Ford vehicle. While getting the sales pitch, he was told that if he finances through Ford, he gets a $500 rebate. He wouldn't get this if he pays cash. He was also told that after one payment, he could pay off the balance, therefore saving any interest and keep the $500 rebate.

 

This doesn't make any sense to me. How can anyone sell something financed cheaper than for cash? Does anyone know what the catch might be?

[Guest s******ecan****]

I know someone who is thinking of buying a Ford vehicle. While getting the sales pitch, he was told that if he finances through Ford, he gets a $500 rebate. He wouldn't get this if he pays cash. He was also told that after one payment, he could pay off the balance, therefore saving any interest and keep the $500 rebate.

 

This doesn't make any sense to me. How can anyone sell something financed cheaper than for cash? Does anyone know what the catch might be?

 

Many car dealers were offering rebates on the sale price as an incentive to go with their financing. Even with low interest rates they were making money with the rebate because they had the financing.

 

Most car companies have since gotten out of the financing business. Ford was never in trouble fianancially so I'm not surprised they are still in it.

 

I've heard about this sort of deal before but I would sure want to know the fine print. There may be a "discharge" fee or a payout penalty on the loan balance. I wouldn't trust the salesman, most of them don't even understand these financing contracts. It needs to be read over very carefully.

[Guest S**a*Q]

The rebate may be covered by Ford as a volume incentive or something. The dealership itself isn't losing anything on the financing, as the company covers that 500$. The company looks at it as customer retention tactics, they hope that you stay with the financing.

[Kate von Katz 49953]

Definitely customer retention tactics, and drawing new customers in. As for the contract, yes, read it thoroughly as often salesmen do not really know all the ins and outs of the promotion they are selling. And hey, if it turns out that buying a new car on financing, making one payment and buying outright still gets you ahead, go for it! Most people put everything on credit, so it's likely the CEOs never considered it probable that someone with the money to buy outright would finance.

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[lucas 38 100]

I worked in sales before not in a car dealership but in a similar industry I would think it would be the same tactics. The manufacture will make poeple think they are saving money by offering low financing on cars or new equipment but in reallity the dealer need to add a financing charge on his cost that will buy down the interest rate, so the 500$ rebate you see is in fact added in the cost of the vehicule and the dealer still have to pay for the financing cost so that the manufacture still get the money for his financing. It is a lure to get customer in a new vehicule but when negotiating because you pay cash you will get the 500$ rebate and then some, cash is king in any industry.

Good luck

[Lexy Grace 103696]

Definitely customer retention tactics, and drawing new customers in. As for the contract, yes, read it thoroughly as often salesmen do not really know all the ins and outs of the promotion they are selling. And hey, if it turns out that buying a new car on financing, making one payment and buying outright still gets you ahead, go for it! Most people put everything on credit, so it's likely the CEOs never considered it probable that someone with the money to buy outright would finance.

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I agree "Definitely customer retention tactic". I was lucky enough to go to the dealership where my cousin works and he gave me the inside scoop on what cars are always in the shop and what would be less of maintenance issue in the end as I did get my car on an impluse buy and as a new driver.

[rickoshadows 937]

Thx for the replies. Pretty much the same conclusions as I have come to. The rebate seem to come from Ford Credit and doesn't cost the dealer anything, although I am sure their is a little something in it for the dealer if he signs someone up for a finance plan.

 

As for paying off thr balance after the first payment, it is definately a case of read the fine print. Unfortunately, this person is who is buying is elderly and a long way away. I'm a little concerned the salesman may not have all the details of the financial arrangement and the fine print may be glossed over a little.

[Boomer 33202]

I've always been pretty confuded by the process of buying a new car. It seems the trick is to figure out the price, which seems to go up and down with every new wrinkle i.e. finance, trade in, dealer incentives, employee pricing, time of the year and inventory.

 

So, I find you have to find what you really want, and then go and get competative prices from different dealers.

 

Last comment, the way they get my loalty is the servce they provide. The last couple of trips to the dealer for service, good oar bad, are a lot more fresh in your mind when it's time to buy the next one.

[Alger 1898]

You really have to watch these deals. I had a mortgage once with one of our big banks and they offered a $2000 rebate if I went with them. I got the rebate okay, but when renewal came up, they wouldn't re-negogiate the rate nor wave the renewal fee (which they always did in the past), so in the long run, it was costing me more than the $2K. The only way out of it was to give them the $2K back and leave them, which I did.