Good for you! You just got a car for a great price and what you wanted for your trade-in. Do you think it’s over? Not even close. Remember: Selling a car is #4 for profit at a dealership. The first two happen right now! Let’s get started.
- THE FINANCE MANAGER – The Finance Dept at any dealership is the #1 profit center for the dealership. Three Finance Managers can make as much as twelve sales people net profit to the dealership. They make the dealership a dump truck full of cash. But not on you. Not today.
- HOW THE FINANCE DEPT MAKES $ – There are two ways the Finance Dept makes money…Holding Rate and Selling Products. Let me show you how both work…
- HOLDING RATE – This is very simple. They submit your credit application online to a bank. The bank will do one of three things. 1.) Decline it. 2.) Condition it (this means give you some of the money but not all). 3.) Approve it. We’re going to go with # 3 they approve it. So Bank ABC approves you at 4.69% The dealership will turn around and tell you your rate is 6.69%. They then get to keep the 2% bump to you as profit. On a $24,000 total financed deal this could mean $1,600 – $1,800 profit back to the dealership. Almost all banks allow the dealership to hold 2 points of rate on every customer. This is why it’s very important you know the best car rate for 48 and 60 months at your bank and you know the incentivised rate that Honda, Toyota, or Subaru have on the vehicle you’re buying. A lot of times they’ll offer 2.9% X 60 mo’s or even less. Special note: You may have to give up the rebate to get the special rate. Do it…it’s worth it.
SELLING PRODUCTS – Someone may try to sell you paint sealant, interior car protection, undercoating, etc…on your way into the Finance office. Turn it all down. Your car has enough protection from the factory. Here are the main products that you will be offered: Vehicle Service Contract – Or an Extended Warranty. They will offer to turn your factory 3 year/ 36,000 mile warranty into a 6 year / 100,000 mile warranty for around $2,500. It’s up to you but I wouldn’t get it. Your factory warranty is just fine. The reason that Honda, Toyota, and Subaru have such high re-sale value is because they last forever. The Finance Manager will give you 10 reasons why you need a warranty. I say pass.
GAP – or “Guaranteed Asset Protection”. GAP is if your car gets totaled in an accident, the insurance company may say your car is worth $17,000 but you owe $20,000. You are on the hook for the $3,000. GAP will pay you the $3,000. Again, it’s up to you but I would pass. Think of all your family, friends, co-workers, etc…How many of them have completely totaled their cars? One? Zero? The odds are very, very small. I say pass.
OTHER PRODUCTS – They will then offer you other “minor” products they offer such as VIN Etchings, Tire Protection, A Maintenance Plan that covers your oil changes, etc…Pass, pass, pass.
THREE IMPORTANT THINGS TO DO IN THE FINANCE OFFICE AND ONE VERY IMPORTANT THING TO KNOW –
Rate – Make sure you know the vehicles incentivised rate from the factory and the best rate your bank or credit union has before you buy your car. Also have this link in your phone so you can do the math along with the Finance manager.
Products – It’s up to you but I say pass on everything. No matter how relentless the Finance manager is.
Sales Taxes and Fees – Unless you can afford to pay them up front make sure they are all in there. Also make sure the Doc Fee is part of the vehicle price like you negotiated.
VERY IMPORTANT!!! – The minute you sign the Purchase Agreement and the Retail Contract and drive more than one inch away from the dealership – YOU OWN THE CAR. If anything make you uncomfortable about this deal while you are in the Finance Dept – you can walk away. You have not signed the contract so you are good. If something changes after you agree to purchase the car by the time you get into the Finance office don’t sign a thing. You DO NOT have “three days” to bring the car back like so many people think. As soon as you sign the Purchase Agreement and Retail Contract you are an owner.
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