One of the most misunderstood concepts about leasing or buying a new car with a loan is how the financing really works.We’ll say it again later, but the key concurso tse concept to understand is that dealers do not finance car leases and loans.Repeat: New-car dealers do not finance cars.However, dealers can affect what you pay for financing.
Dealer always sell for cash
Car dealers are independent business people who have an authorized franchise with one or more car manufacturers.They do not work for the manufacturer.There are no manufacturer-owned car dealerships.In some cases, a large dealership may own multiple dealership stores in various locations.These stores may sell the same brand vehicles, or different brands.Dealers buy cars from the manufacturer, usually with large loans from a bank or finance company.The bank charges dealers interest on these loans.Dealers have to sell cars to pay off these loans and associated interest, as well as cover other expenses of running a business.
Dealers always get cash for their cars, whether it’s directly from the customer, or from a finance company or bank who has loaned a customer the money.A common misconception is that dealers give cash customers a discount.This is not true because dealers generally make more money on financed loans or leases — in the form of commissions or boosted interest rates.
Dealers don’t finance leases and loans
When a dealer leases or sells a car to a customer, he has finance companies or banks that he works with to provide his customers the financing they need.Most dealers use the car manufacturer’s “captive” finance company, such as GMAC, Ford Motor Credit, and American Honda Finance.Dealers arrrange financing on customers’ behalf — as a service.Customers can arrange their own financing if they choose.
Key point: Dealers do not finance leases and loans.Dealers do not approve customers for leases or loans.Dealers do not process leases or loans or take payments on leases or loans.Dealers simply take lease and loan applications and try to arrange financing for customers.
Dealers use independent finance companies or banks on customers’ behalf
A dealer may do a cursory preliminary check of a customer’s credit history using one of the three major credit reporting agencies.This NOT for loan or lease approval, but only to determine if the customer has such serious credit problems that it would not make sense to continue with