Car sales talk, do you think this is fair?

[vanilla gorilla]

Ok lets say your a car dealership that will sell cars two different ways. One, you will sell them for cash, of course. Two, you would be more than happy to finance with a down payment and no credit check.

Ok say lets say you advertise this: (just a simple add you might see in a paper)

1997 Chevy Lumina, loaded, only $2200 CASH
1994 Cadillac Deville, fully loaded, $4000 CASH
1998 Mercury Sable, nice, $2500 CASH
1997 Ford Escort, gas saver, $2000 CASH
1996 Ford Windstar, great for the family, $2400 CASH
1999 Ford Explorer, Eddie Bauer, $4800 CASH

Ok, notice how CASH should stand out. That means cash money on spot, possibly a few hundred negotiable. Nothing about financing.

Ok lets say the customer comes up and says, "hey I don't quite have $4000 for that cadillac, but you can finance it for me if I give you $2000 down". Ok you have $2800 in this Cadillac, and even though $1200 profit sounds nice, keep in mind it takes big money to run a carlot with all of its overhead and employees. So if you financed that car with 2000 down ,then you have 800 in the street and you might get your lousy 1200 profit back over the course of 6 months if all the customer could pay was 200 a month. Do 50 deals like every month and you will soon go out of business.

So I think it should be right to tell the customer this when they ask you that, "Well sir or mam, that was my best cash price I could offer, and your getting a good deal for this type of car. But I cannot finance this car for you at that price. If you want to finance this vehicle you will have to pay $2000 down w/out credit check and the overall price of the vehicle then would be $5950 plust tax and finance charges."

That is the way a deal should go, even though the vehicle is advertised as cash. There is nothing wrong with charging a different price for finance because it wasn't advertised.

Well I have been told that that is against the regulations in the car business in Georgia. I honeslty don't see anything wrong with that. I am going to attend an updated dealer school class this Saturday, to find out about that. If that has changed then I think its crap. Its not that we are trying to screw over the public, but it takes big money to run and maintain a dealership, even a small one. When you don't even check someones credit and give them a chance that is a huge risk you are taking. Alot of times you have 1200-3000 of your own money out in the street that you have to collect over a couple of months through payments and have no idea of how this customer is going to pay or for that matter treat your car. So if you do get it back, what if its trashed.

I am just giving you folks a perspective of the car business you don't normally see being told. Sure every car salesman has a bad wrap and is considered scum, but istn't that the case in every business? Food, lawyers, gov't, politicians, etc etc, every job out there can have some one name a fault about it.

So tell me what you guys think of what I stated above. Do you think its fair to charge more if they cannot come up with the cash then? If not please read above the paragraph where I said: Ok lets say the customer comes up and says.......
read that very hard before you make a decision.

[TheLil'Missus]

VG, I'm not understanding the problem. You can't charge interest on the money that a buyer is borrowing on the difference between the listed price of the car and the amount they have to put down. Or is the problem that the listed price on the cars is different depending on the type of deal it ends up being (cash outright and the dealer is out of risk or loan and the dealer still has to collect on the borrowed amount)?

[vanilla gorilla]

To more simply explain things it like this:

If the car is listed as CASH, I don't care how they get the money. They have to give me that amount in my hand at that listed CASH price.

If there is financing involved, I do it. Meaning I am the bank, the lender, the lienholder. So therefore I am not going to offer my same CASH deal to that customer if they don't have the full amount of funds to purchase the vechicle at the stipulated cash price.

For instance, lets say you walk into Best Buy. You see a fridge sitting in the corner with a listed price for $1000. Its on special if you buy today for $799. That means no financing. If you want to finance that fridge they should have every right to charge the $1000 plus their finance charges because you could not come up with the SPECIAL amount that it was on sale for for that particular weekend. That may not be the best example to give you, but I hope it kinda makes you see what I am talking about.

When I see CASH that means to be paid in full. Not give me months to make this up to you at that price. If the economy worked like that with everything we would be in bad shape.

This is probably going to be a hard issue for a lot of you to understand, and that is only because your not seeing everything that goes on in this business. It looks so easy to the public, but its far from that.

[vanilla gorilla]

And nothing, and I mean nothing in this world should be financed for free. Anytime you finance someone something you should charge the difference with the interest rate of your choice. I don't care if its 2% or 30%, its totally up to you. People with good credit can go through there banks. People that have never paid anyone that well should be charged a higher rate of interest, because you are taking a risk. I normally charge 25% interest on my vehicles that i dont check credit on. Now if you come into my office with excellant credit, I will normally give you a great deal, usually well below retail and let your bank finance it for you. That way I get my money up front and you then owe the bank what I was asking for the car, plus there interest fees.

[vanilla gorilla]

Lil missus, the problem is the type of deal it winds up being. But the fact is, if that don't have that amount of cash then their not getting that deal. See what I am saying?

[TheLil'Missus]

I completely agree with you. What kind of idiot would loan money and not charge interest? If a deal says CASH then that's the term of the deal, right? Cash. Period. How difficult is it to understand? What I don't understand is ... You can't explain this to buyers in Georgia by law? For most folks trying to explain the reasoning (costs of running a business, etc) is more than they need to hear anyway and telling too much just muddles up the process, IMO. No different than you don't need to hear their tale of woe about having to borrow from Aunt Lucille to come up with the cash. It makes no difference to you. Simply stating this is a CASH deal for this price and if you can't meet the requirements of the CASH part of the deal then the deal is X amount for financing. Which parts not legal?

[vanilla gorilla]

Well someone told me the other day that that wasn't legal anymore to advertise like that. Which I think is total crap. So Saturday I am going to dealer school myself to find out about this. Georgia is pretty easy on us dealers compared to other states, but I think that is a weird law if it does exist. Which I think it may not, but the person that told me that has been around the business along time and knows his stuff. So hopefully I can prove him wrong.

[TheLil'Missus]

If it's not clear already...I completely agree that it is fair to charge more if the buyer can't come up with the cash price and you, as the seller, have to stick your neck out there with financing.

In cars and real estate (more my background) there are 2 different deals. The purchase price negotiation and the finance negotiation. With cars there's the trade (a whole other deal) and with houses there's the resale house, realtor's commission, and some closing costs (at least here in Texas if you're a hard azz).

Yes, every industry has its share of bozos, jerks and idiots. EVERY industry. Priests, teachers, doctors, lawyers, politicians, parents. Although, its a good thing you share your info on cooking or your reputation would be taking a hit about now. :smooch: j/k

[UncleJesse]

VG, I just got my neck out of the car biz and I ran a small store here in Dallas. Here you cannot offer one price for cash and one for financing from what I understand, even with an independant/BHPH lot. What you can do however is sell the car for the cash price advertised and if someone wants you to finance the thing you find out what they can pay per month. If they can go 2k down and 300 a month for 30 months on a 5k car, you are still making a good amount of money over the long run. With the whole BHPH thing you will deliver more cars but your neck will have to stick out a bit further anyway seeing as you have money on the street, as you know. How many cars to you carry on your lot? What price ranges do you sit in, typically? Do you shop at the sale for your better clients with good credit or ready to buy with cash in hand?
If you can get away with charging more for your financed cars while you have the clients sitting at your table and your closing ratios are high, then good for you ( I want the secret if I get in the biz). I know that 80% of the people I have sold to would get pissed off and treat you like a typical car dealer if you jack up the price just because they want to finance. I had success just not negotiating the price (up or down)and simply financing at a 25-30% rate in house...
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[ctgblue]

I have not seen it done that way.
Usually, when the financing comes into play, the full amount the dealer is "in the car" is gotten up front (assuming you are talking about a 'used car' lot that turns it's own paper)
Then the rest is profit. The interest is calculated out to cover the risk and obtain the desired selling price the dealer wants to get.
Now, understanding that the dealer may have to repo the car, this car may be sold 2-4 times this way, that's where the money is made a lot of times. As long as the repo service is good and serious damage is not inflicted to the car or repo personnel.
But, although I was not in the management end of the business, I don't think you could jack the price of the car up that much if it was advertised at a certain price, regardless if that was stated as "cash" or not.

[vanilla gorilla]

I know when it comes to secondary financing, the bank will only finance what it wants to regardless of what the dearler says. Meaning you could make a ton of money that way or lose money, that depends on how cheap you (the dealer) buy the car.

[vanilla gorilla]

Most secondary banks charge 120% retail. That is what I meant by most banks charge what they want.

[UncleJesse]

I know when it comes to secondary financing, the bank will only finance what it wants to regardless of what the dearler says. Meaning you could make a ton of money that way or lose money, that depends on how cheap you (the dealer) buy the car.

Well that is a given!!! Bank suck when you are the dealer. They are a pain in the ass and then they want you to do all their work for them
But with your original question, I think that in all fairness, you should not up the price, just get it out of the interest so you can make your money, eventually. Do you do a lot of cash deals? Or more finance deals? IF finance is where you are at more often than not, just to sell a car, then advertise a good payment on a good car. I am in the belief that is someone is looking for a car, they automaticly have a $250-$300 figure plugged into their head for payments. If you can beat the payment they originally had in mind with a variable interest rate for the first couple years, starting no less than 18%, and going up after 2 years as "they" make more money or pay the car off so you can get either your cash and profit and possibly the car back so you can make more $$$ with the same car again if it isnt too trashed. (Sorry for the long winded sentance) Does this make any sense??? If you set your own deals, can you sell a variable rate?

[UncleJesse]

Most secondary banks charge 120% retail. That is what I meant by most banks charge what they want.

Are you selling mandatory warranties for your financed cars?

[vanilla gorilla]

No everything is sold as is.