After 20 years working as a finance manager for several large car dealerships, I thought I would let the cat out of the bag.
When you are shopping on the car lot, it is the salesman's job to get you excited about a vehicle. Normally he will lead you to the car that will get him the biggest paycheck. Profits on new vehicles is normally around $1500-$2000 and used cars $2500-$5000. The salesman gets about 25% of the profit made on the vehicle. You can figure the profit the dealer is making on a used vehicle by using the Kelley Blue Book trade-in value. Compare the trade-in value to the selling price. Believe me now. The dealer will not pay more than the trade-in value for the used car
The sales manager's main job is to be the closer and try to bump the price up. Any offer you make on a car; it is the sales manager's duty to counter with a higher price. My advice is to offer a price close the the Kelley Blue Book trade-in value, and make the sales manager really work for your business. Don't be afraid to make him mad. Sales managers are very thick skinned.
So now the deal is done. Now you get to visit me, the fiance manager. After fighting with salesmen and sales managers, you come into my office with no fight left in you. I run a credit report, tell you what your interest rate is, and shove papers in front of you to sign. You don't even bother reading everything. You just sign away. I just made $300 commission with less than 40 minutes of work. I didn't have to try to sell you anything or make you do something you did't want to do. I love my easy money job. If the interest rate I just gave you is 8%, I most likely have a deal with the bank for 5%. On a $15,000 car, I just made $1,260 profit for the dealership.
If your credit is not perfect, I can really make the money. If your FICO score is 640, and the bank gives a good rate for those with a 620 score, I can make the company another grand. I might charge you 10% interest, when I still get 5% from the bank. Ching Chang!
My advice would be to clean up your credit report (see pappacredit.com) so you can get a good rate. Try to pay with cash, or get a loan from the bank yourself. Credit unions normally have a lower rate. Just remember this; the deal isn't done until you leave the finance managers office.
Source: http://www.ArticlePros.com/author.php?Jeff Roads
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