Listen, you might give your old jalopy a hard time, but go easy on the poor thing. He’s probably tired because he never takes any brakes. 🥲🚙
If your old reliable wood-paneled station wagon is draggin’, it might be time to hit up the dealership for an upgrade. 🤸 Got plans to finance that bad boy? You might wanna read up on how dealerships make a buck on your bills. 🤑
Here’s Five Fast Facts on car dealers and auto financing:
- 💵 Money Machine - Beyond selling you a new whip, dealerships make money from financing cars, too. In many cases, the lender gives the dealer a lower interest rate, and the dealer marks it up before offering you the loan. About 78% of dealer-arranged auto loans include this kind of interest-rate markup.
- 🚘 Adding Up - Even a tiny increase in your interest rate can cost hundreds of dollars over the life of a loan. On a $30,000 auto loan repaid over five years, raising the interest rate from 6% to 7% adds about $840 in interest. Part of that extra money may go back to the dealership.
- 💡 Ahead of the Game - Wanna swerve around this? Try getting preapproved for an auto loan before visiting a dealership. You can compare the dealer's offer against your own financing and ask the dealer to match or beat your rate. Shopping around first can also help you avoid paying an unnecessary interest-rate markup.
- 🤝 Art of the Deal - On the flip side, financing through a dealership can sometimes help you negotiate a lower purchase price. Dealers earn money in several ways, including financing, warranties, and other add-ons, so they may be more willing to discount the vehicle if they expect to make money elsewhere.
- 🚙 Wiggle Room - A low-interest financing offer isn’t always the same thing as the best overall deal. Promotional 0% APR loans usually leave dealerships with less room to make a buck from financing. That might make them less willing to negotiate on vehicle price or offer additional discounts.
🔥Bottom line: Before signing off on that new ride, compare the total cost of the loan and the total price of the car. A lower monthly payment may feel good in the short run, but you’ll pay more in the long run in interest. Is your refrigerator running…for president? Check out this article about how appliances are getting political!
Do you own or finance your car?
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