New-car dealers who offer 0.9% financing are losing money: clearly they could earn at least a few percent interest if they parked their capital in bonds instead of lending it to car buyers for such a paltry rate.
Presumably they are padding the car’s base price to account for the fact that just about everyone who finances will be using their ultra-cheap financing. Is it possible to get a lower price on the car if you offer to pay cash (or if you obtain your own financing through an independent bank)?
The dealers aren’t doing the financing. They get a cut for selling each car and a fee for delivering the buyer as a customer to one of the financing outfits.
Perhaps, but probably not a huge price break. Again, the dealers aren’t doing the financing. A cash payer eliminates some paperwork buts costs them a commission.
Used cars are a completely different business model.
Ultimately a car costs what you pay for it. A car for $X with 0% interest is basically a car at market interest rates with a lower price tag… Just like those “we pay the tax” sales some stores have.
If the finance arm is GMAC, or example, the GMAC may be willing to take a bath on the interest to beef up the sales for the manufacturing arm. (Are they still a subsidiary or were they sold - an independent company now?)
As you say below-market financing rates are costing someone at the dealer/manufacturer/financing company money.
If you look at the fine print on some of the advertised offers you can get either the low rate or a rebate so yes, at least sometimes you can lower the price by paying cash. However, when I bought my car in 2009 I had the ability to pay cash but I was offered 0% financing for 3 years and the salesman wasn’t willing to lower the price for a cash deal. I was a little surprised but I took the 0% since the price of the car was the same either way.
New car financing is really complicated. Money flows back and forth from the dealership to the manufacturer and it is fairly difficult to determine exactly what the dealership is paying for an individual vehicle. The dealers and the manufacturers are on the same team but they are usually still semi-independent entities. That means that the dealers only have limited control over the financing programs the manufacturer is offering and it may not be beneficial for you or the dealer to come up with a novel scheme for a customer that wants to come up with their own deal.
I bought a new Toyota 18 months ago when they were offering 0% financing. I offered to pay cash but it didn’t change the sales price and the dealership told me it wouldn’t be in anyone’s best interest to do that so just park the money and make something off of it while making the normal payments on time. Toyota itself set that program up to win back consumers after some high-profile crashes and they wanted the dealers and consumers to use it.
The advertised rate is to get people in the door. Most consumers don’t qualify for no-interest financing (hence the “well qualified buyers only” disclaimers).
I didn’t decide how I was going to pay until the final price of the vehicle was negotiated so I don’t see why they would have any motive to mislead on that one. They acted against what would have been in Toyota’s best interest all things considered. I offered to pay cash and they they just said don’t bother because it wouldn’t be of any benefit to me.
Using a financing incentive instead of a straight cash rebate is somewhat better for resale values, although they both still impact them. If you straight up lowered the price on a slow moving model, the resale values of previous model years also suffer proportionally, whereas if instead you offer a financing incentive, you place an incentive on the customer to keep that unit off the used market because if he turns around and sells it before the financing term is up, he loses the benefit of the 0% interest rate, and in any case he will be most likely upside down on his loan and have difficulty selling to to another private party. The only thing he can do is trade it in, where the dealer can then give him a lowball wholesale value on his trade, and roll the difference into financing on a new car. I think there’s a fair bit of behavioral economics that goes into this.
