CarTalk.com Best of Deals Car Reviews Repair Shops Cars A-Z Radio Show

Financing issue

I am in the process of buying a new car. My plan is to pay it cash but the car dealer (Hyundai) is offering $500 cash back if I finance it through the dealership. He is saying that I can pay it off in a month or two and we close the deal. Should I do that, or there is a ?trick? behind it. Please advice, thanks.

Read the “fine print”. If you get $500 back, the dealer (or finance guy) is probably getting $1,000 or more. Most truth in lending laws prevent “tricks” and pre-payment penalties, but read the agreement to be sure. They are betting that you will not pay it off in a month or two.

Are you getting a good discount on the price of the car? Do you have a trade-in? There are many ways a dealer can “pad” the deal so he is really giving you some of your money back. Shop several dealers (brick-and-mortar and on-line) to get competitive offers.

Twotone

Thanks, I will ask for a copy of the agreement before I sign it.
I got it for $ 1,500 below TMV (according to Edmunds.com). I got quotes from 2 dealers and still have one more to do.

If you finance with them , then pay it all off quick, do you save any interest dollars ? Most loans these days are NOT set up that way.
That’s the fine print questions we’re speaking of here.

Their way they avoid that is to charge you, right up front, Something like a ‘finince charge’, ‘transaction fee’ or other wording that you DO NOT GET BACK if pay it off early. That alone could completely eat up ( or more ) the supposed 500 dollar ‘‘cash back’’.

Here’s another snag in the '‘cash back’'game they play.
When people do finance for the whole time period and they’ve received some cash in their pocket…they are financing THAT money too ! ( give me a 500 dollar discount and that leaves 500 in my pocket in the first place, duh. )

but no…
If they can afford to give you $500.00, they should be able to just give you another 500 discount…but you can bet they won’t.

It’s most likely a trick to get more paper work for you to go through so they can pad the prices. An honest salesman(military intelligence?) would deal regardless of cash or finance without any kind of “buck-passing”

Make sure you understand all the costs of the loan before you agree. In addition to the up front costs, there could be early payoff costs, too. All costs will be disclosed in the agreement no matter when they occur. You should probably get the estimate of closing costs for a cash sale for comparison too.

Financing is one of the three areas a dealer can look for profit with a car sale. (The three profit centers are sale price, service, and financing).

If the dealer is offering to give you $500 to finance with them, you can be sure they’ll make lots more than $500 after you sign on the dotted line.

If you read the fine print very carefully, you’ll see why they’re so eager to give you $500. Those finance contracts have a reputation for being intentionally vague and misleading - in the dealer’s favor.