How Do Dealers Make Money On Financing?

How Do Dealers Make Money On Financing?

Most dealers don’t make the bulk of their profits on the sale of a new car.

The big profit usually comes through arranging car loans, selling add-ons, and making money on your trade-in.

Dealers can easily make a profit of $3,000 just through the financing alone (see: How Dealers Make Money on Financing).

How do car dealerships make money on 0 financing?

Instead, you have to pay what’s called interest, a fee that you give the bank for lending you its money. For 0 percent loans, you pay no interest. Essentially, 0 percent interest gives you the chance to pay the same amount of money as a cash buyer, even though you’re spreading your payments over a longer term.

Do dealers make money on leases?

Dealer Revenue. Dealers will generally make more money doing a lease than a straight sale. This is not true, of course; they can negotiate price and payments, but most consumers will not do so for a lease, so that is a big difference right there. Next, there are more ways for dealers to make money with leasing.

Why do dealerships want you to finance through them?

Now, in fairness, dealers aren’t in the business of giving away cars or loan money. If you’re financing through the dealer, there’s a chance you can negotiate a lower price for the car because their profit will come from the whole deal, including the interest rate on the loan.

Photo in the article by “Army University Press” https://www.armyupress.army.mil/Journals/NCO-Journal/Archives/2018/February/Funding-Terrorism/