Our eBay guy received an offer today with the above exclamatory phrases in it. It reminded me that it might be informative if I pause for a moment to explain what “Cash Buyer” means to a car dealer.
People seem to naturally assume that a cash sale is a better sale - that the dealer can/will sell for a lower price when it’s a cash sale than he will for a financed sale. Actually, it’s just the opposite.
Understand that a car dealership has three main profit centers: (1). Sales - New & Used, (2). Parts & Service, and (3). Finance.
Parts & Service becomes a source of profit after the sale, but Finance, like Sales, is a source of profit during the sale.
Just as mortgage companies receive origination fees (i.e. commissions) from lenders for creating new loans, dealerships’ Finance Offices receive commissions from lenders for creating new car loans. Dealerships’ Finance Offices also receive commissions from the sale of Extended Warranties, Maintenance Policies, Gap Insurance and other products and services. So naturally a dealer wants you to finance your new purchase and to finance it with him.
Let’s say you have come to your dealer with an offer in writing from a rival store. “Beat this deal,” you say, “and you can have my business.” The offer you hold in your hands might be a real loser for your dealer, but, if you are willing to finance the sale through his Finance Office, at least he has the chance to pick up a couple of points on the finance side. Depending upon the terms, conditions and situation surrounding your loan, it might even make sense for the dealer to lose a little bit of money on the car sale so that he can pick up some profit from the financing.
But if you say “This is a cash sale” you’ve possibly taken away all incentive for the dealer to accept your skinny offer.
So, as a general rule, dealerships are more likely to drop the price on a car in a financed sale than they are in a cash sale. Make sense?
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