Ex-Car Salesman Reveals Why Dealerships Hate Cash Buyers!

Today I go over paying cash vs financing at a dealership!

Hey everyone it’s ben hardy here and in today’s video we’re going to be talking about financing versus paying cash at a dealership and i did kind of make a video about this a while back but i’m going to kind of bring up some new points that i didn’t bring up before and so just to kind of like compartmentalize today’s video in the first part i’m going to explain why

Dealerships don’t want you to pay cash why they don’t like cash buyers in general and then at the end part of the video i’m going to get into why i just think that financing is the route to go and so the first part will probably be the chunk that you guys really want to see and then the second part some of you will still tag along and let’s just get right into

It now with this first part obviously we’re talking about why dealerships hate cash buyers and i guess that i should kind of clear something up they don’t like truly hate hate cash buyers but it’s not their preference in terms of how things are going to go about with purchasing a car now the first reason why they don’t prefer cash buyers is it’s kind of harder

To negotiate when someone is paying cash now the reason that it is harder to negotiate is if you’re paying cash you’re looking at the bottom line you’re looking at the total amount now if you’re financing some people still look at that number but other people are just purely looking at the payment and when someone is only looking at the payment then it’s a lot

Easier to kind of move things around and there’s nothing shady happening here i just kind of want to make sure that i clarify that because whenever people hear moving things around they think oh car dealership is doing something shady no there’s no shady business happening here it’s just kind of moving things around obviously to make a little bit of a profit which

There’s nothing wrong with that dealerships are in business to make money but that’s kind of like the first reason why they don’t like cash is if someone’s paying cash they’re 100 looking at the bottom line how much it is total and that’s it or if someone’s financing there’s a chance that they might only be looking at the payment and if they’re only looking at the

Payment then the dealership has a pretty good chance that they can make just a little bit more money because they can kind of just shift things around and make it so they’re as profitable as possible the next reason why dealerships don’t like people that pay cash is the fact that they can’t make any money off of the financing itself either via kickback or if they

Do the financing so the first or sorry the second one i mean is if they do the financing that’s what’s called a buy here pay here dealership and you guys already know that i just am not super fond of most of them there’s some that are good but most of them kind of just do some really weird stuff but buy here pay here dealerships obviously if they’re facilitating

The financing then they are usually making money off of the vehicle and then they can make money off of the interest that you pay on the vehicle loan now that’s the first reason why they would want you to not pay cash is obviously they can make way more money if they get interest on top of a profit on the car now the other type and this is more common with

Dealerships nowadays is they outsource the financing to either a credit union a bank or just some sort of outside lender and that lender will give them a kickback is what it’s called and so basically what it is is the dealership will say hey we have this customer that wants to finance this vehicle we’ll send it to you guys and then you give us a little bit of

Money for referring the customer to you and it’s that simple and so that’s another reason why dealerships prefer people to finance is just the simple fact that they can either make money off of the interest of the car if they do the in-house financing or they can get a kickback from the lender and any extra amount of money that the dealership can pick up is always

Going to be a plus now the next big reason why dealerships don’t like it when people pay cash actually has to pertain to warranties on cars so back in the day cars are pretty simple and most people could learn a pretty simple-ish skill set so they can work on their own car it’s not like that anymore there’s so many computers and so many electronics controlling

Everything in the car you’ve got massive touch screens just so much complexity with new cars that it’s really hard to build up the skill set to be able to work on the car and obviously all the tools that you need to work on it’s pretty expensive and so most people nowadays are just having the dealerships work on the cars and on top of that all these new parts are

Really expensive as well and so this is kind of where warranties come in so back in the day they weren’t as important whereas now they’re super important because let’s say that your touchscreen just breaks on your car if you don’t have a warranty to cover that that could be several thousand dollars which is just a lot for someone to have to give out on a vehicle

So most manufacturers do have warranties from the factory from brand new however those obviously typically have limited lifespans and sometimes they have limited coverage and this is where the aftermarket warranties kind of come in play they typically um are purchased for people that are expecting to have the car um as long as the manufacturer warranty ends and

Then some obviously and then sometimes people will purchase them as well in terms of just getting extra coverage on the car that the manufacturer warranty doesn’t cover now obviously this is another thing that dealerships can use to make profit because they can buy the warranty for a certain amount of money and then they can sell it to the customer for more money

Than what they paid for it there’s nothing wrong with this it’s just another way for them to be able to make profit now how this relates to financing versus paying cash if you pay cash for a car then you’re not only less likely to purchase a warranty but you’re more likely to negotiate the price on a warranty and that means the dealership is less likely to be able

To make profit with that so therefore they’re not going to like it as much and if you guys want to kind of like understand why this is a thing let’s say that you’re paying cash and the dealership says hey you’ve got this warranty it’s seven thousand dollars you’re gonna be like oh my goodness no i don’t wanna spend i just spent fifty thousand dollars on this new

Truck whatever it is i don’t wanna spend another seven grand but if you’re financing and the dealership goes hey we’ve got this warranty it’s only gonna increase your payment by 15 bucks a month would you like to do it you’re gonna go well yeah 15 bucks a month and i get all that stuff covered peace of mind it makes it so it’s a lot easier to swallow and so again

It’s kind of relates to the first point where the cash buyer is typically always looking at the bottom line i mean that’s the only thing they do have to look at since they’re not financing whereas someone who’s financing some of them will look at the bottom line but some of them are just worried about the payment and how that relates to their monthly budget and

So if they go hey i can budget for another 15 bucks a month then they’ll do it right and so that’s another reason why dealerships just don’t like people that pay cash is they have less of a chance of selling the warranty and they probably aren’t going to make as much money off the warranty so before we get into the next section i just wanted to thank you all for

Watching that section if you weren’t really interested in the second section of this video and hopefully that kind of cleared things up for you and just really kind of clarified why dealerships don’t prefer people to pay cash obviously they generally can’t make as much money off of the vehicle itself because the person’s gonna be looking at the bottom line rather

Than the payment and then they can’t make money off of the financing and then they generally won’t make as much money off of the warranties service contracts all that kind of stuff and i didn’t really talk too much about service contracts in the video but those in my mind are kind of like bundled into that warranty section because again it’s just something that

You tack onto the vehicle just like accessories where someone’s paying cash is going to look at how much does this accessory cost how much does the service contract cost how much does this warranty cost versus someone who’s financing which is going to go oh cool i can get my truck lifted and it’s only going to be 20 bucks more a month right so it’s just kind of

Like that whole mentality with it and now let’s get into this next section where i’m gonna go over why i recommend financing so there’s kind of been like this stigma built up over the last little bit in terms of financing cars and the biggest reason why people are kind of like so against financing cars is they go oh it’s a depreciating asset so you don’t want

To purchase a depreciating asset something that’s losing value and then pay interest because then you’re losing way more value on top than that’s kind of like the general argument against financing vehicles is the fact that it’s depreciating asset and the fact that interest makes you pay even more money for the car however there’s a lot of benefits to financing

A car now in this first part i’m going to go over the benefits for a business and then i’m going to kind of go over the benefits for someone who is just purchasing a vehicle for personal use and why financing can actually make sense and let’s get into it first off for a business there’s obviously potential for some tax benefits with financing especially if you

Lease a car there’s huge tax write-offs sometimes for leases for businesses so it actually can be pretty beneficial for you as a business owner to finance or more specifically lease a vehicle and then the other thing that’s nice for a business is obviously this makes it so that you can have a little bit more cash flow so let’s say that you’re a i don’t know

Construction business for example and you’ve got to have trucks to do work for your business and the more trucks you have then obviously the more business that you can facilitate let’s just pretend in our example that the more trucks you have means that you can do a little bit more business now if you paid cash for every single truck then you’ve got to wait

Until you build up all of that capital however much the truck costs to be able to purchase another truck and so you’re kind of limited by how much capital you have on that extent and that’s obviously way more money than what it would be to make a payment so just to give you guys an idea let’s say that the trucks are all about forty thousand dollars forty thousand

Dollars for a finance payment is roughly about 700 to 800 a month again depending on credit interest term all that kind of stuff but let’s just say it’s 700 to 800 a month think about what you could do or how many trucks you could purchase if you only had to pay 700 to 800 a month per truck versus having to fork out 50 40 000 for that truck when you were getting the

Truck so obviously it’ll help you basically kind of leverage your money get a lot more bang for your buck in a way you’re still having to pay the full 50 000 just over a longer time but you can get things up and going and then expand your business a lot quicker so there’s definitely huge benefits to financing for business now obviously there are some downsides if

For some reason business just kind of plummets and you’ve got all these payments you don’t own everything outright then it can be pretty difficult to stay in business because you obviously have a month to month overhead but i think that if you’re conservative enough with payments with your business and you kind of really scope out the market of what you’re going

To be doing business in no matter what it is then you can kind of set yourself a little bit of a safety net where even if things do get rough then you can still facilitate business and obviously not go under now obviously this next part is going to be about personal use and how you can actually make money by financing a car believe it or not if you are someone

Who works for someone else you don’t own a business and this actually can pertain to business owners as well and that’s the fact that you can leverage your money if you do take out an auto loan and basically the best example that i can give you guys right now i’ll give you some other examples as well but the main one i want to focus on is the fact that interest

Rates are so low on cars especially right now i mean it’s pretty easy as long as you have good credit to get an interest rate under three percent on an auto loan right now and that’s almost getting the money for free now one of the more simple investments is going to be like an index fund for example and if you do your research on index funds you can see over the

Last few decades on average they perform at a return rate of 8 to 12 percent somewhere in that range and so you guys can already just do the simple math in your head hey i’m taking a loan where i’m paying less than three percent and i’m getting a return on that money that i could have paid cash for the car at a rate of eight to twelve percent so by you not paying

Cash for the car you’re actually making yourself more money because if you had paid cash for the currency of investing that money then you would have given up a potential profit of anywhere from depending on your industry and your car depending on your return six to maybe 10 return and i mean that’s absolutely massive in my opinion so yeah that’s the first thing

That you could do just like as a person to be able to make yourself a little bit of money by leveraging your money and again my same advice kind of applies to what i said in the businesses is you don’t want to over leverage your money to where you could get in a situation where maybe you lose your job or something and you can’t make payments anymore that’s just

Always not the way you want to do so you want to scope things out make sure that you’re making a smart financial decision overall obviously a car you’re always spending money if you didn’t buy the car in the first place then you could invest money and obviously that money would just be making money you’re not taking a car payment but most people need cars and a

Lot of you guys just like to buy cars for fun personal use like what i like to do so that would be my advice in terms of what i’d say is a good reason to actually finance a car even if you don’t own a business and can’t get all the tax incentives and obviously the scaling that comes with a business now that is pretty much going to sum up things for today’s video

Obviously talking about why dealerships don’t like it when people finance and then my take on financing and i do want to be transparent with you guys i do have a bias towards financing and that’s just because it’s very beneficial to the business model i have going on with the channel and that’s just because it allows me to purchase and go through all of these cars

For the channel now i do have the money to be able to pay cash for the cars that i buy that’s just a personal rule of mine i’m not going to buy a car unless i can pay cash for and that’s just because i don’t know how stable youtube income is i don’t know if it could disappear tomorrow and i just want to make sure that i don’t screw myself over financially for

The future but financing still allows me to be in a comfortable state to be able to purchase cars for the channel and expand my channel at a much faster rate than if i had paid cash for the cars because frankly if i was paying cash for the cars then i realistically wouldn’t feel comfortable buying a car that was more than maybe ten to fifteen thousand dollars

Because i’m just not going to go out and fork out seventy thousand dollars for a ford raptor or over 50 000 for a toyota supra and so the fact that i can obviously make payments on it and still have that money be able to invest that money make some money on it is just something that makes it so i can grow this channel a lot faster so i just wanted you guys to be

Able to know that so you can understand the perspective that i’m coming from and the bias that i’m coming from so that you understand why i put forth the information that i put forth because maybe you’re someone that is never going to invest and you work for someone and so going and financing a car isn’t going to make sense because you’re not going to be making

Money on your money and it’s not going to help you expand a business like it’s helping me expand and all that kind of stuff so i get that and yeah that’s pretty much going to sum things up for that and if you’re stopping for the first time please subscribe comment down below what you think and i’ll see all of you in the next video

Transcribed from video
Ex-Car Salesman Reveals Why Dealerships Hate Cash Buyers! By Ben Hardy