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I am planning to buy a new car. I went to a dealership and when talking to a sales person I said I can pay cash. He knocked down the price quite a bit.

Since the dealership did not have any low APR promotions, I knew I had to get pre-approved. Now if I go back and tell him that I would like to do the finance and I am pre-approved, will that be a problem? Can he retract the offer price?

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    If he made you a low offer because you had cash, and then you go back and say "I don't have cash" what do you think he's going to say? – DJClayworth Jul 19 '12 at 18:34
  • i dont think "pay cash" is any different than financing. At the end of the day, dealer will get his money. To me, it is more like a negotiating trick. – Asdfg Jul 19 '12 at 18:59
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    Re: "At the end of the day..." There's the rub! With financing, you're not giving them money at the end of the day, but much, much later (over some years!) .. hence, financing ain't the same as cash. Google for "time value of money". – Chris W. Rea Jul 19 '12 at 19:47
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    If financing is arranged through the dealer, it is almost certain the dealer is getting a cut of the profits that his pet bank makes on the financing. It is often the case that the "price" for cash is a little higher than the "price" for dealer-arranged financing, and the dealer gets "his" money including a finder's fee from the bank right away. The bank then collects loan payments from the buyer (and is at risk if the buyer defaults). – Dilip Sarwate Jul 19 '12 at 21:14
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    In case this is confusing, there are two very different situations being talked about here. One is where you get your financing through the dealer as part of the purchasing deal. That is NOT the same as paying cash. The other is where you go somewhere else and arrange a loan, and hand over the price of the car to the dealer. That IS the same as a cash deal. The dealer won't care where the money came from. Could you add something explaining which situation you are in? – DJClayworth Jul 20 '12 at 13:35
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There is no rule that says the dealer has to honor that deal, nor is there any that says he/she won't.

However, if you are thinking of financing through though the dealership they are likely to honor the deal. They PREFER you finance it. If you finance it through the dealer the salesman just got TWO sales (a car and a loan) and probably gets a commission on both.

If you finance it through a third party it makes no difference to the dealer, it is still a cash deal to them because even though you pay off the car loan over years, the bank pays them immediately in full.

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  • This is what i was trying to get. Like i said in the question, dealership doesnt have low APR deals and i am pre-approved, it shouldnt matter to them as they will get paid in full by the bank. – Asdfg Jul 20 '12 at 8:34
  • What I am thinking is that sales guy wants his commission sooner. Maybe he is offering the enticement to get you to close the deal today instead of going back to the back (and maybe shopping around in the meantime) – JohnFx♦ Jul 20 '12 at 13:57
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    @Asdfg If you come back to the dealer with the vehicle price in cash (or bank draft or whatever) the dealer will consider that a 'cash deal' however you got it. He will probably honour the 'cash' price he quoted you. He doesn't have to technically, unless he offered it in writing, but if he was prepared to take that deal a few days ago he will probably still be prepared to take it. – DJClayworth Jul 20 '12 at 16:30
  • Typically the salesman does not get commissions on the car loan, only the finance manager. What a high paying job? Become a finance manager at a car dealership; however, it requires no conscious. – Pete B. Aug 5 '14 at 14:51
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Yes, he can retract the offer - it was a cash-only offer, and if you're financing, it's no longer "cash".

Unless, of course, you get the financing through your local bank / credit union, and they hand you a check (like on a personal loan).

Then it's still cash.

However, the salesman can still retract the offer unless it's in writing because you haven't signed anything yet.

The price of financing will always be higher because the dealer doesn't get all their money today.

Also, if you finance, you are not paying just the cost of the vehicle, you are paying interest, so your final cost will be higher (unless you were one of the lucky souls who got 0% financing atop employee pricing, and therefore are actually saving money by having a payment).

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    I think you are wrong about the price being higher because the dealer doesn't get the money today. The dealer gets more money in the long run if you finance because they get the price of the car plus the interest on the loan. They generally PREFER that you finance it (with them). – JohnFx♦ Jul 20 '12 at 3:17
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    Not sure what you are talking about. Every time I have financed a car with outside financing, the bank gave me a check made out to the dealer for the price of the car. It was pretty much a cash deal to the dealer either way. – JohnFx♦ Jul 20 '12 at 14:49
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    @warren - except shady Buy Here Pay Here car lots, I don't think most dealerships do in-house financing, there is always a bank or credit union doing the deal. Dealerships just take commissions on those loans. They want to do paperwork to finance a car. – MrChrister Jul 20 '12 at 17:05
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    @warren - every time I have been to a new car dealer they give me a high pressure sales pitch to finance through them, even when I tell them I have cash. I doubt they would do that if there wasn't an upside for them. That upside is that they get kickbacks from the financing company. – JohnFx♦ Jul 20 '12 at 18:25
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    @DJClayworth: Read "He knocked down the price quite a bit", had he told he would do a finance thro them Possibly "He knocked down the price MORE THAN quite a bit" ... there is always a normal discount for any mode of payment. Now when you negotiate hard, the sales man tries to figure out how much more he want to give, for cash a litte bit more discount, for dealer arranged finance, little bit more ...:) – Dheer Jul 20 '12 at 19:19
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I am a carsalesman. Lets get one thing straight, we are not allowed to give people a better deal just because they pay cash, regardless of what some people say. That can be seen a discrimination as not all people are fortunate enough to have cash available. if anything, finance is better for the dealership, as we get finance commission and the finance company DOES pay us the total amount immidiatly

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    This doesn't seem right. There isn't any discrimination because neither wealth nor luck are protected classes in the United States. (Your company's pricing policy notwithstanding of course.) – MrChrister Oct 8 '13 at 22:24
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So there are a few angles to this. The previous answers are correct in saying that cash is different than financing and, therefore, the dealer can rescind the offer. As for financing, the bank or finance company can give the dealership a "kickback" or charge a "fee" based on the customer's credit score.

So everyone saying that the dealers want you to finance....well yes, so long as you have good credit. The dealership will make the most money off of someone with good credit. The bank charges a fee to the dealership for the loan to a customer with bad credit.

Use that tactic with good credit...no problem. Use that tactic with bad credit.....problem.

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as a used dealer in subprime sales, finance has to be higher than cash because every finance deal has a lender that takes a percentage "discount" on every deal financed. if you notice a dealer is hesitant to give a price before knowing if cash or finance, because every bit of a cash deal's profit will be taken by a finance company in order to finance the deal and then there's no deal. you might be approved but if you're not willing to pay more for a finance deal, the deal isn't happening if I have $5000 in a car, you want to buy it for $6000 and the finance lender wants to take $1200 as a "buy-fee" leaving me $4800 in the end.

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