fbpx
U

Financing vs. Paying Cash For a Car: Which is the Best Strategy?

January 30, 2023

Transcript

“Is Financing Your New Car the Right Choice?”

Have you ever found yourself in a situation where you have enough cash on hand to pay for a new car in full but the dealership is offering you a much better price if you finance the car? If so, you may be wondering whether there is a catch or other things to consider before making this decision.

According to conventional wisdom, paying cash for a car would enable you to negotiate a better price. However, the world has changed, and dealerships have changed as well. Ten years ago, dealerships would make around $800 on the sale of a car and $500 on the financing. Today, they will make approximately $400 on the sale of a car but close to $1,000 on financing. This shift in profit means that most dealerships have turned from a product sales place to a financing arm of the product they are selling.

So, how can you turn this into a positive for you in the car buying process? Consider negotiating the purchase price first, then the trade-in, and finally, how you will pay for the car. Don’t tell the dealership how you will pay until the very end of the negotiation. If you have cash, the dealership may not give you the same deal as they would if you financed the car. In fact, the dealership may offer you a better deal if you let them finance the car and agree to keep the loan open for a certain period of time. This is because they will make a profit on the financing.

For example, a sales manager may offer to take $1,000 to $1,500 off the purchase price if you let them finance the car, with the understanding that you will pay it off quickly. The sales manager may ask you to keep the loan open for four months and make the minimum payment during that period to keep the loan in good standing. After the four-month period, you can then pay off the loan in full and get a better deal.

In conclusion, financing your new car may be the right choice, especially if you are offered a better deal. Just be sure to negotiate the purchase price, trade-in, and financing in that order and understand the terms and conditions of the financing agreement.

Connect

Subscribe

Most Recent Episodes

What I Learned From Being BROKE!!! (And Why I Wouldn’t Change It)

No one disputes the fact that being broke isn’t great. We want to spread the word that no matter where you came from, you can build wealth. In this episode, Brian and Bo share personal stories about their journey to wealth and lessons they learned along the way....

Top 10 Mind-Blowing Money Stats (2023 Edition)

These 10 money stats will blow your mind! We’ll discuss the unbelievable amount of money Americans save, when most reach millionaire status, and how many Americans carry a credit card balance. Research and resources from this episode: Most Americans don't have enough...

Wealth Multiplier Revealed: The Magic of Compound Interest!

There’s a reason why Albert Einstein called compounding interest the eighth wonder of the world! Do you know exactly how it works and how much your dollars could turn into by retirement? The Money Guy Wealth Multiplier can show anyone just how powerful every dollar...

From $0 to Millionaire in 10 Years (Is it Possible?)

How can you become a millionaire in 10 years or less? We’ll discuss common ways we see millionaires build wealth quickly, including through real estate, entrepreneurship, and the stock market. Discover how real wealth is built and why building wealth quickly may not...

Financial Advisors React to INFURIATING Money Advice on TikTok!

Brian and Bo are BACK to react to some more TERRIBLE financial TikTok advice! Join us as we take a look at some of the worst financial advice on the platform and tell you what to actually focus on in your own financial life. Enjoy the Show? Sign up for the Financial...

Investing Showdown: Dollar Cost Averaging vs. Lump Sum!

It’s a debate as old as time: what’s better, dollar cost averaging or lump sum investing? In this episode, we’ll cover the nuances and pros and cons of both, including in-depth case studies comparing investors at different times. Research and resources from this...

Is Inflation Really Ruining Your Finances? (You Won’t Like the Answer)

Inflation has changed our daily living expenses dramatically over the last few years. While we can’t control all of our expenses, there are many things in your control that can help you become a Financial Mutant and build wealth better than your peers. Enjoy the Show?...

Are $1,000 Car Payments Becoming the New Norm?!

New data shows more Americans than ever have car payments over $1,000. Is this becoming the new normal? How much could having a car payment of $1,000 be costing you for retirement? For more information, check out our Car Buying Checklist!