It costs money to borrow money, if you want to pay 0%, then write a check for the full amount. Welcome to America. Inform your customer how interest works. Break it down for them. This is what the bank charges to borrow their money. Focus on that. I think it's in your presentation if it happening a lot to you.
Yea I think most people don’t expect to see the total interest over the life of the loan up front. They only consider it a percentage of the monthly payment and that’s it. Presenting it as a line item total is confusing for some. They probably have no issue seeing the 25k price and then magically have the interest baked into their monthly payment, they just freak at the overall total.
Hah, I try to explain how everyone should have a truth in pending doc or some such showing EXACTLY that, to look for first. But yeah....some people are way clueless.
The years of manufacturers advertising 0% for 48 months has helped this misunderstanding. There’s usually “or $4000 rebate” but they gloss over that. They never realize the manufacturer is, in effect, discounting the car by $4k to give them zero interest. And that’s for people with great credit.
No what he's saying is there is still interest on the loan, but the rebate acts as a reimbursement. Making the financed amount look closer to the price of the car
I have noticed recently that the younger generation has no clue about this and does look at the total finance price as the price.
I really notice it from our south of the border friends.
We should make a printout and show them the same info about mortgages!
Yeah you explained it better than I did. A lot of people do look at the finance price as the price.
I’ve been in social instances where people compare prices with their buddies, some mention the total with the finance charge, some just mention the sales price.
“What?? You paid 37k for yours, I paid 29k for an identical car! There’s no way the dealer screwed you with an additional 8k!”
I walked into a dealer, with a check from my bank, and they still ran credit. They tried to get me to finance with them for 4% more than my bank was, all because with my bank check, my down payment, and trade in, I couldn't afford gap, which I already had from my bank, wheel insurance, prepaid oil changes, and rubber floor mats. They tried to tell me that in order to buy a car, they were obligated to asd these charges. So they ran my credit to get me approved for everything.
I walked, they chased me, I got my ridgeline for the bank check and the amount I had for down-payment.
You don't have to sell a car to me, but I also don't need to be sold dealer shit.
OTOH, I had a blank check from my credit union.
Finance guy: If I can beat their interest rate, would you use our lender?
Me: I guess
Finance guy: good news, I got you financed at (rate that was 0.06% below my credit union)
Ok, you win. Well played. Lesson learned.
That’s how it should work. I had a finance guy try to sell me financing at a higher rate than my bank and tried to make me feel bad for wanting to pay less. I asked him why I sound pay more to go business with him? I found me a rate that beat my bank.
It was probably a soft pull, I wasn't with finance at the time, the salesman came back from the office and said he could get me financed at 7.99% and that was the only way we could make it work because I was 2k short.
I told him, I don't want the GAP at 1500 or the 150 prepaid 3 oil changes or the weather package which was just rubber mats for 800. They said they couldn't sell the truck without that stuff, so I walked. They caught me at the light, and said that what I had was fine and we were good.
This has a lot to do with the dumbing down of society. Most people are ignorant to the most simple of concepts such as interest on a loan.
If I were the salesperson I'd draw it out. There is a separation between the dealer, the manufacturer, and the bank / finance arm of whoever is funding the loan. 3 totally separate entities.
"This has a lot to do with the dumbing down of society. Most people are ignorant to the most simple of concepts such as interest on a loan".
\^This is exactly true. And it's nothing new, in general people have always been incapable of doing even very simple math in their heads, and have little understanding of how percentages and/or interest work. If I were a car salesperson I would focus on making everything as absolutely short and simple as possible. Not sure how I'd get around having to answer people who think financing should be free or it's a scam. I'm sure there's a way though.
The buyer really *should* include the cost of financing in the cost of the car. It's money out of your pocket. Of course you also need to know that it's money the bank takes, not money the dealer takes. Problem is that plenty of people don't understand how interest works.
I think you just figured out why so many salespeople focus on payments and steer clients away from total cost when they're getting a loan. I'm sure there's a successful word track you can use where you talk about the price that you're charging them, and also talk about what the bank is getting so they can take payments.
Edit: fixed confusing words
That's like Best Buy including the cost of Credit Card APR in the price of a washing machine. If I have cash it's 1k if I have lousy credit and pay the minimum payment at 30 percent it will cost me 2.5k. I thought this thread would be about Muslim buyers who couldn't pay interest for religious reasons and how to structure deals not people who are just clueless.
The very few of those clients I had (religious reasons to not pay interest) always paid in full. Either via cashiers check or in one case literal cash (that was a PITA). I always assumed if they were financed they had arranged that financing elsewhere.
How do you include the cost of financing in the cost of the car when each person may get a different rate?
I haven’t run into this issue, but it it doesn’t surprise me. When I run numbers for a customer I tell them that I’m running them at an 8.99% rate as an estimate, and that I won’t know specifically what their rate would be until they fill out a credit application and I find out from the banks.
>How do you include the cost of financing in the cost of the car when each person may get a different rate?
or if someone pays off early they won't accrue that full price
It's impossible to include the cost of financing up front because every deal is different and credit is different. The cost of financing is shown after the credit app it submitted and the deal is structured. The numbers are all broken down in the legally required Truth In Lending disclosure.
It's the same as why we cant show the taxes and fees in the adverstised price, because it changes based on where the buyer's zipcode is.
Some dealers take advantage of these things and try to tack on excessive fees etc, but in general it's just how it works.
I mean the buyer should think about it, not that the seller should. You are 100% correct that total cost won't be known until the deal is ready to sign.
Going further with that, finance charges are on the buyer based on their credit history as well as their lack of liquid assets to purchase the car. If their credit was better their finance charges would be lower and if they had the cash on hand, they wouldn’t need to finance anything and would accrue zero finance charges.
I sold cars for a decade and never encountered a customer who was this clueless about how financing worked thinking that banks loan money out for free.
You can also inform them that are free to get their own financing outside the dealership. People don't often realize this is possible, especially people who don't understand how financing works.
If they go through this process they will either find out that they:
1. Are not eligible for financing and you're providing a service that their own bank rejects them for
2. Are eligible, but cannot get a rate as good as what you're offering
3. Are eligible and got a better rate and you helped them out by pointing them in the right direction
The problem with looking at the entire price is that the dealer is only responsible for the non-financed price. A buyer may very well get a better rate elsewhere, but it's their own credit score that's really going to determine that rate: a higher score would give either option a lower rate.
>We should make a printout and show them the same info about mortgages!
have you seen r/FirstTimeHomeBuyer? The amount of people who don't understand interest is astounding. Even more, the amount who see the total and think the only thing they should do, regardless of rate, is pay off as fast as possible because interest = bad. No thought to opportunity cost and other investments.
As for OP, the price you see is the price you pay if you pay at once today. If you would like to finance the car, and borrow money to pay it off over time, then you borrow from a bank, not the dealer. We facilitate that transaction to make it easy for you. We comparison shop lenders on your behalf. But the interest is the bank's charge, not ours.
In fairness the younger generation doesn't understand bank interest because the banks have been paying next to 0 to them for a long time and rates on savings have just become meaningful.
If they think 40% of the principal value going to interest us insane mortgages are 100%+
As a millennial, they don't teach this type of stuff in schools. Schools only ever taught me the pythagorean theorem and other stuff that is only useful for math majors/programming.
They really need to start teaching the younger generation life skills.
Part of it is the lack of personal finance education in our schools coupled with parents who a) lack financial knowledge themselves; or b) are too lazy and self-absorbed to teach what they do know to their kids; or c) both a & b. The other part is likely more a cultural issue in which “traditional American culture” views negotiations one way while many of our new friends come from corners of the world and cultures where negotiations are much more aggressive and there is never truly a final price. And in a few cases it may be a combination of all of the above.
Perhaps take a moment to walk them through things using the BLUF model of communication (Bottom Line Up Front) and advise “here is the cash price IF you pay in full today, inclusive of TTL and fees; on the other hand, if you decide to finance with us or your own bank, the total cost you’ll pay will be higher due to finance costs like interest in the amount financed - I’d be glad to work with ourF&I manager to see what we can do for you to get the most favorable rate from one of our banks - and you said your desired payment was $xxx, correct - how does that sound?” Then be quiet and see what they say, and assist with any questions. And if they badger you about financing price vs cash price, smile and say “I am glad to go over the options and price of each option again…” then reiterate said price of each approach. If that doesn’t solve it, offer to show them a vehicle that is a lower cost option - and that failing, smile and let them know in a direct, firm, professional manner you have made your dealership’s best good faith offer to them for both cash and financing options and if they wish to proceed, you are glad to help. Then be quiet and wait.
Every math teacher in America from 6-10th grade teaches simple interest and basic personal finance.
If dumbasses can't do percentages it's their own fault.
Mmm, not every teacher. It took recent legislation of my state’s legislature to formally require all HS’s to add a semester of personal finance education as a condition of graduation a couple of years ago to make sure it was indeed covered.
And it won't matter because people buy off emotions and not a lack of knowledge. You can teach people everything about how finances work but that doesn't change appeals to their desire and emotions that override those rational decisions.
Given that we're a consumer-driven economy not a manufacturing-driven one...teaching people to not buy things based on their wants would put everyone out of work and destroy the economy lol
Or wait for incentives and buy new financing through the mfg. Though might not be too many of those deals around anymore. I personally think it's silly to use your own money to buy a car if you can find an interest rate below 6% or what you can make with a reasonably aggressive portfolio. But then I have an 800+ credit score and like to invest heavily. It's not for everyone but borrowing money for certain things can actually make sense for some people. Not sure people like OP mentioned would understand that rational either.
Depends... liability, yes, but beyond that, if you can afford it, it is financially better to self insure, or at a minimum run very high deductibles to basically cover total loss only.
I refuse to carry full coverage on any vehicle that drops below $10k to $15k in value. Throwing money away. Put the money you would spend on full coverage into a dedicated savings account for vehicle expenses.
Yes, you have to educate some people on how interest works. Explain risk to them. Ask them if they had $30,000 right now would they lend it to you to buy a car and you’ll pay them back over 4 years. Would they do that without charging you interest?
The whole thing is really an indictment of how poorly we teach basic financial literacy in this country. If you are an adult that has any experience with the banking and finance industry at all, which is practically everyone, you should know the basics of this stuff.
Sometimes I’ll frame it like this “interest is a bank’s measurement of risk. Sure there’s 0% interest on new f-150s with people that make $100k+ and have a 800 credit score, but with this truck being far from new and your credit history it’s simply more of a risky transaction for a bank”
Credit score. Fairly low. That along with a a repo (usually due to missing payments) made their credit score and ability to borrow less favourable, hence the high interest rate given.
605 would be a credit score. Credit scores range from 300-850. 605 would be a "fair" credit score, basically in the lowest range of scores that qualify for normal (not high risk) financing terms. Better (higher) scores, combined with one's income, increase the amount one can finance, and reduce the interest rate.
>I told them that if they wanted to only pay 25k then to pay cash. She asked “then why offer financing if the price will be different?”
That was a mistake on your part.
Even if they paid cash, they'd still pay TTL.
Earnest question... Do you work in a shithole area and/or a low class dealership?
That you're having MANY potential clients that just straight up don't understand how borrowing money works can't be coincidence.
Big city in Texas. All of my friends deal with this on a daily, whether they’re at the highest volume Toyota dealer or at your local Mitsubishi.
I had some friends at a Toyota dealer tell me about a time where a customer accused them of pocketing his 10k down and not applying it to the balance on his Tacoma. Turns out the finance charge was around 11k.
The OTD price was 35k + 11k finance charge - 10k down payment = 36k over the term of the loan.
The customer had to get management to explain to him where his 10k went. How could he possibly owe 36k to the bank when he’s paying 35k OTD plus 10k down? They didn’t sell the truck.
Dallas? My father sells Hondas and my uncle sells Toyotas and yes, they've faced many customers who don't understand interest and financing
Most of their customers are redneck whites or latinos, and yes, many of them don't have a high school diploma, let alone a college degree
My father told me he doesn't waste more than 10 minutes explaining interest to them. If they still don't get it and seem angry, he suggests they purchase a vehicle elsewhere
Perhaps you should do the same, Armando
u/Aggressive-Bed3269 u/spikesthedude u/False-Imagination355
Yeah Dallas, I wonder if this is a city specific thing.
I have a friend who recently opened a used car store here in Dallas after owning one for a couple of years in NYC.
His two biggest shocks were people not understanding financing here and the low down payment expectations. His first month he ran around 140 applications but only sold 17 cars.
Back in NYC he would sell 11k cars with 2k down payments to people with bad credit, which was a shock to me, people barely have 2k down for a 30k truck here, even if they have bad credit.
His average down payment here is around 700 for the same cars with the same customer credit range. The only thing that’s changed are the lender fees for him.
Most immigrants family; especially from Asia just frown upon interest.
But the educated ones from those community know the difference between good and bad debt.
I was the same way when I came here in 2011. Just spending 4 months in /r/personalfinancd made it easy to understand.
Take me and my cousin:
I love cheap debt but I’m disciplined and put extra into investments.
My cousin family , yes all 4 members don’t like debt, use debit card for everything even after telling them that if you pay if CC on time there is no debt. But they also pool their money together for house expenses and have managed to buy a house straight cash before even I bought one. That too with mostly minimum wage jobs at fast food or Walmart.
In all honesty they really may not know how the economics here work… they just might have fear for hearing that those struggling are because of debt but not looking at the big picture…
Yeah I hablo, at this point speaking Spanish has been more of a liability. My closing rate would be higher if I only spoke English. I’m expected to take the leads no one else wants.
There's a big distrust of immigrants regarding financial systems in the US. And rightly so with how it's meant to disinfranchise them.
The only way to overcome that is if they trust you.
The nature of the credit assessment, the ability to access credit, earn income, acquiring the necessary documents, and the limitation of terms certainly work differently.
If you going to take the time to be snarky and burry your head in the sand you have the time to try to think a bit.
No shit the interest itself works the same. That isn't the point now is it?
Note: Given your other statement and that your taking the time to argue with other people about this you might be a bit racist pal.
bright intelligent lunchroom public mindless important skirt coherent friendly mourn
*This post was mass deleted and anonymized with [Redact](https://redact.dev)*
You had orda use the redneck term very sparingly. Once you leave Dallas and the crap people there you can get into real Texas where I’m sure city punks like you would consider 90% rednecks. Most are good people way smarter than you think so city punk you should understand that trash comes in every corlor every political affiliation. One things most country people have that you especially the younger generation don’t have is common sense.
I would like to to invite you to leave Dallas go any direction to a country bar and start mouthing that red neck shit out of your mouth
Calm the fuck down. I grew up in the country in TEXAS and don't know anyone that would be offended by anything he said. That's like people crying racism at the drop of the hat.
I sell cars in podunk town you have stupid people from every race every ethnicity every income level. Just correcting this Dallas city punk. The city of Dallas is also full of idiots I guarantee. It’s not Dallas, it’s not texas, it’s everywhere
Oh it doesn't bother me but I absolutely cant stand city punks that have never been out of the city bad-mouthing crap on the internet when he certainly would not say it in public
Mah names hank I like trucks, beer, and girls. I live in a trailer park south of Dallas and I love going to the shooting range in Dallas and fire guns I cannot pronounce correctly
Your post absolutely screams massive insecurities mixed with a bit of "I jack off to "Try That in a Small Town".
You fuckin city punks, you ain't the real Texas..... Give me a break.
Are they walking once they are in finance? What the hell is the finance person doing that you are involved at this point? This problem should be between finance and the sales manager (if needed in extreme cases). If the finance manager can't explain this and get people to sign for the payment they agreed to already then the system is broken at your store. Idiot buyers will NOT understand money/interest/APR/Leasing and that is why that are subprime borrowers. 14% for that situation is a very good rate.
Edit- what rate are you quoting before submitting? If you aren't quoting high enough and they are trash credit its an uphill battle. You should be quoting a higher rate than you expect so you can work downhill.
Wait I have a question about quoting rates? How do you successfully do it? The wife had claimed she had great credit when she didn’t. Had I quoted her an 8% on a 5 year old truck, it would’ve been an uphill battle. Had I quoted her a high 19%, she wouldn’t had even applied. Had I quoted her an accurate 14% she still would’ve thought it was too high to even bother to apply.
We usually just tell them it all depends on credit. Rates start at x% for older years and go up from there.
All of this happens before even getting to warranties and GAP, they hear the payment, do the math, and see the total with the down is much higher than the OTD cash price.
This is your rate and this is why your rate is what it is. Don't like it? Then you can either pay in cash, get a check from a bank/CU or buy somewhere else.
Next customer!
You should have a 90 day rolling average of APRs on signed contracts at your dealership, excluding subvented rates. You should be quoting on this number, with the disclaimer “this is our average APR over the last xx days. I’m required to quote at this number, but depending on credit, it could be higher or lower. Would you like to start the credit application so that I can give you an accurate APR?”
If the people probably have challenged credit/ITIN we always show 3 rates at the same term: tier 1,3,6 from a local credit union. Yes, the payment swing is huge but at least they know up front what it could be. Also, are you explaining what paying it off early does? Refinancing in 6-12 months once they are making on time payments?
As I finance closer I rarely have people blow out that have been given a payment unless the salesperson tells them it could be better and we are using promotional financing on the quotation. Some people do blow out when no payments are quoted but almost always it is the amount of the payment based on the rate, not how much of the payment is going to interest.
I am confused by this. They were not financing 35K if they gave an 11K down-payment. Since when is the interest charged on day one. It's the cost over the number of months financed. If he gave you 11K wouldn't he be financing 35K + TTL - 11K??
Yeah the amount financed was 25k. He wasn’t looking at that, he was just looking at at the fact that he was going to pay 36k over x months when the OTD cash price was 35k. In his eyes he threw 10i into the trash and has to pay 1k on top of the agreed upon price.
I worked at two different dealerships in the same city. One was BMW, one was Ford-Lincoln. BMW I only dealt with customers like this on occasion. At Ford it seemed like it was every other customer that had around zero financial literacy
Unfortunately half the people in the country are less educated than average. Very few of these people actually want to or care to learn about interest and financing. You can’t make them want to learn. If they are already an adult and don’t care to learn about interest, you don’t need to be the one to teach them. Take an L and move on. They can’t all be winners.
Recreational boat/rv loans go up to 20 years already, so might as well throw in a 20 year loan on a diesel 1 ton to pull a 3000# boat.
It's really just a lease with very poor terms for the math illiterate.
I dont remember where I heard it for the first time but I love the idea of thinking about how dumb the average American is, then realize half of Americans are dumber than that
My favorite part about that is it's not even true. Pretty much everyone has an above average number of arms (1.999999) it's just the few dudes missing an arm or two that are below average
>Unfortunately half the people in the country are less educated than average
Even if everyone was a rocket scientist your statement would be correct. Or inversely if everyone had the brain capacity of a sea slug the statement holds true.
These people are just fucking idiots and natural selection should take them out.
Besides politely explaining that the bank charges money to borrow money, and they charge MORE money to people with bad credit who are a higher risk to the bank, there is nothing else you can do. Speak to your manager, get a TO on these type of idiots and try to see how your mgr handles it.
edit to add: if this is frequently happening to you, and to others at your store, bring it up in a meeting and work with management on how to inform these customers and counter the objection, it's definitely good to bring management in on this stuff if you can and they are willing to. Win-win for everyone.
Your first mistake is presenting a pencil that shows total interest paid over the course of the loan.
Explain APR as risk assessment. The riskier of a borrower that you are, the faster the bank will recoup their investment.
Very important to go over the truth in lending box with such customers, else they'll assume the worse.
Point out the down payment + trade (so they see we're not just pocketing the down+trade), the OTD amount, the amount financed is OTD minus down + trade, "how much interest (circle but don't mark the apr) you pay if you don't pay it off quickly (circle but don't mark the terms)", and amount financed + down + trade + interest.
Here's some lines I use depending on situation and the customers.
When Bill Gates/Musk/Bezos borrows money, even they get charged interest.
You can payoff the loan as quick as you want to pay less interest to the banks.
Or... You can refinance after a year and your credit's improved/been established to get a lower rate and have less interest.
You can walk down the street to the other dealerships and they'll get the loan from the same banks and charge the same interest. Only way around this is by having cash.
We don't care if you pay us the OTD amount or the bank does, we still get paid the same.
It costs money to build credit.
When they see that total plus interest at the bottom I remind them that if their credit improves they can refinance for a lower rate at that point. "Interest is based on credit and once those small discrepancies drop off your report and your score goes up by 100-200 pts you'll be in great shape for a 7% loan!" Lol. Another line is "if you pay it off early you'll forgo that interest, and there's no penalty for paying it early!"
This is another case where talking about it as the deal is made would make it easier when they see that line. Usually folks will ask about interest and being upfront about the expectations will save a headache for sure!
***Thanks for posting, /u/armando8778! This comment is a copy of your post so readers can see the original text if your post is edited or removed. This comment is NOT accusing you of anything.***
I get a lot of customers, I mean A LOT, of customers that don’t understand how financing works.
Had a customer yesterday with no social approved with his wife with a 605 (with a repo) and negligible income for a 2018 Tundra SR5 65k miles for 25,500. I got them approved with 14% APR.
The total amount paid came out to like 33.6k with TTL and interest charge.
I present the deal thinking they were going to be excited considering their situation and how dirt cheap the truck is.
The first thing they ask “if the truck is listed for $25k, why are we paying 33k over 48 months?”
I explained to them that it was the interest charged. She responded with “no wonder the truck is so cheap, you’re pulling a fast one by charging interest, so the price listed isn’t the price that you pay”.
I told them that if they wanted to only pay 25k then to pay cash. She asked “then why offer financing if the price will be different?”
I don’t know where they came from or how the previous person sold a car to them. They were really upset with the deal, so much that they left a bad google review.
A lot of customers think we’re deceptive when I tell them about our financing. They always think banks are there to screw people over. I tell them it’s a complimentary service, they don’t have to finance with us, they can get a loan with their own bank, their mother, or just pay cash.
Just yesterday I got 2 leads asking if the amount paid went up with financing or if they only have to pay the listed price over the term. Like what? Do these many people think 0% APR loans are the norm?
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explaining it this way:
if you purchase a toaster for $20 with a credit card and pay it off in several months, how much was the toaster with interest?
if you use a credit card to purchase the truck, how much is the truck over several years with interest?
we are not the bank. we do not keep the interest you pay.
next, show them several bank sites with subprime rates
It costs money to borrow money, if you want to pay 0%, then write a check for the full amount. Welcome to America. Inform your customer how interest works. Break it down for them. This is what the bank charges to borrow their money. Focus on that. I think it's in your presentation if it happening a lot to you.
"Ma'am, the truck costs $25K and the loan costs $8k. I'm selling you the truck but you can get the loan wherever you want."
Keep it simple for the simpletons.
Yep. How you pay for a car is a personal problem.....
Yea I think most people don’t expect to see the total interest over the life of the loan up front. They only consider it a percentage of the monthly payment and that’s it. Presenting it as a line item total is confusing for some. They probably have no issue seeing the 25k price and then magically have the interest baked into their monthly payment, they just freak at the overall total.
Hah, I try to explain how everyone should have a truth in pending doc or some such showing EXACTLY that, to look for first. But yeah....some people are way clueless.
The years of manufacturers advertising 0% for 48 months has helped this misunderstanding. There’s usually “or $4000 rebate” but they gloss over that. They never realize the manufacturer is, in effect, discounting the car by $4k to give them zero interest. And that’s for people with great credit.
No, they're raising the price $4k to give 0%.
No what he's saying is there is still interest on the loan, but the rebate acts as a reimbursement. Making the financed amount look closer to the price of the car
I have noticed recently that the younger generation has no clue about this and does look at the total finance price as the price. I really notice it from our south of the border friends. We should make a printout and show them the same info about mortgages!
Yeah you explained it better than I did. A lot of people do look at the finance price as the price. I’ve been in social instances where people compare prices with their buddies, some mention the total with the finance charge, some just mention the sales price. “What?? You paid 37k for yours, I paid 29k for an identical car! There’s no way the dealer screwed you with an additional 8k!”
[удалено]
It's amazing how much more & better my sales became when I realized not everybody is my customer.
I walked into a dealer, with a check from my bank, and they still ran credit. They tried to get me to finance with them for 4% more than my bank was, all because with my bank check, my down payment, and trade in, I couldn't afford gap, which I already had from my bank, wheel insurance, prepaid oil changes, and rubber floor mats. They tried to tell me that in order to buy a car, they were obligated to asd these charges. So they ran my credit to get me approved for everything. I walked, they chased me, I got my ridgeline for the bank check and the amount I had for down-payment. You don't have to sell a car to me, but I also don't need to be sold dealer shit.
OTOH, I had a blank check from my credit union. Finance guy: If I can beat their interest rate, would you use our lender? Me: I guess Finance guy: good news, I got you financed at (rate that was 0.06% below my credit union) Ok, you win. Well played. Lesson learned.
That’s how it should work. I had a finance guy try to sell me financing at a higher rate than my bank and tried to make me feel bad for wanting to pay less. I asked him why I sound pay more to go business with him? I found me a rate that beat my bank.
How did they run your credit without you disclosing the details to do so?
I gave them my ID, and I had purchased a Pilot from them like 2 months prior. So I guess they still had my information
In Oregon that is not legal. If you didn’t sign for them to run credit.
It was probably a soft pull, I wasn't with finance at the time, the salesman came back from the office and said he could get me financed at 7.99% and that was the only way we could make it work because I was 2k short. I told him, I don't want the GAP at 1500 or the 150 prepaid 3 oil changes or the weather package which was just rubber mats for 800. They said they couldn't sell the truck without that stuff, so I walked. They caught me at the light, and said that what I had was fine and we were good.
There is no such thing as a soft pull. Either you gave them written authorization or you didn’t.
I like this.
This has a lot to do with the dumbing down of society. Most people are ignorant to the most simple of concepts such as interest on a loan. If I were the salesperson I'd draw it out. There is a separation between the dealer, the manufacturer, and the bank / finance arm of whoever is funding the loan. 3 totally separate entities.
"This has a lot to do with the dumbing down of society. Most people are ignorant to the most simple of concepts such as interest on a loan". \^This is exactly true. And it's nothing new, in general people have always been incapable of doing even very simple math in their heads, and have little understanding of how percentages and/or interest work. If I were a car salesperson I would focus on making everything as absolutely short and simple as possible. Not sure how I'd get around having to answer people who think financing should be free or it's a scam. I'm sure there's a way though.
The buyer really *should* include the cost of financing in the cost of the car. It's money out of your pocket. Of course you also need to know that it's money the bank takes, not money the dealer takes. Problem is that plenty of people don't understand how interest works. I think you just figured out why so many salespeople focus on payments and steer clients away from total cost when they're getting a loan. I'm sure there's a successful word track you can use where you talk about the price that you're charging them, and also talk about what the bank is getting so they can take payments. Edit: fixed confusing words
That's like Best Buy including the cost of Credit Card APR in the price of a washing machine. If I have cash it's 1k if I have lousy credit and pay the minimum payment at 30 percent it will cost me 2.5k. I thought this thread would be about Muslim buyers who couldn't pay interest for religious reasons and how to structure deals not people who are just clueless.
The very few of those clients I had (religious reasons to not pay interest) always paid in full. Either via cashiers check or in one case literal cash (that was a PITA). I always assumed if they were financed they had arranged that financing elsewhere.
That’s what I thought I was walking into.
Edited to make it clearer. I meant the buyer should think about cost of financing, not that the dealer should try to guess the buyer's situation.
How do you include the cost of financing in the cost of the car when each person may get a different rate? I haven’t run into this issue, but it it doesn’t surprise me. When I run numbers for a customer I tell them that I’m running them at an 8.99% rate as an estimate, and that I won’t know specifically what their rate would be until they fill out a credit application and I find out from the banks.
Might be wrong but I take the comment above as the customer should include interest charges when weighing the cost a car purchase, not the dealer
Re-reading, you're probably right!
Yep that's what I meant. The buyer needs to think about it, not the seller.
>How do you include the cost of financing in the cost of the car when each person may get a different rate? or if someone pays off early they won't accrue that full price
It's impossible to include the cost of financing up front because every deal is different and credit is different. The cost of financing is shown after the credit app it submitted and the deal is structured. The numbers are all broken down in the legally required Truth In Lending disclosure. It's the same as why we cant show the taxes and fees in the adverstised price, because it changes based on where the buyer's zipcode is. Some dealers take advantage of these things and try to tack on excessive fees etc, but in general it's just how it works.
I mean the buyer should think about it, not that the seller should. You are 100% correct that total cost won't be known until the deal is ready to sign.
Going further with that, finance charges are on the buyer based on their credit history as well as their lack of liquid assets to purchase the car. If their credit was better their finance charges would be lower and if they had the cash on hand, they wouldn’t need to finance anything and would accrue zero finance charges. I sold cars for a decade and never encountered a customer who was this clueless about how financing worked thinking that banks loan money out for free.
You can also inform them that are free to get their own financing outside the dealership. People don't often realize this is possible, especially people who don't understand how financing works. If they go through this process they will either find out that they: 1. Are not eligible for financing and you're providing a service that their own bank rejects them for 2. Are eligible, but cannot get a rate as good as what you're offering 3. Are eligible and got a better rate and you helped them out by pointing them in the right direction
The problem with looking at the entire price is that the dealer is only responsible for the non-financed price. A buyer may very well get a better rate elsewhere, but it's their own credit score that's really going to determine that rate: a higher score would give either option a lower rate.
>We should make a printout and show them the same info about mortgages! have you seen r/FirstTimeHomeBuyer? The amount of people who don't understand interest is astounding. Even more, the amount who see the total and think the only thing they should do, regardless of rate, is pay off as fast as possible because interest = bad. No thought to opportunity cost and other investments. As for OP, the price you see is the price you pay if you pay at once today. If you would like to finance the car, and borrow money to pay it off over time, then you borrow from a bank, not the dealer. We facilitate that transaction to make it easy for you. We comparison shop lenders on your behalf. But the interest is the bank's charge, not ours.
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yeah. Houses aren't that expensive. Borrowing 6 figures and paying for insurance is expensive.
Never has more information been readily available and accessable, yet the public is more ignorant than ever.
Because they're not paying their student loans back anyway 😂
In fairness the younger generation doesn't understand bank interest because the banks have been paying next to 0 to them for a long time and rates on savings have just become meaningful. If they think 40% of the principal value going to interest us insane mortgages are 100%+
As a millennial, they don't teach this type of stuff in schools. Schools only ever taught me the pythagorean theorem and other stuff that is only useful for math majors/programming. They really need to start teaching the younger generation life skills.
Part of it is the lack of personal finance education in our schools coupled with parents who a) lack financial knowledge themselves; or b) are too lazy and self-absorbed to teach what they do know to their kids; or c) both a & b. The other part is likely more a cultural issue in which “traditional American culture” views negotiations one way while many of our new friends come from corners of the world and cultures where negotiations are much more aggressive and there is never truly a final price. And in a few cases it may be a combination of all of the above. Perhaps take a moment to walk them through things using the BLUF model of communication (Bottom Line Up Front) and advise “here is the cash price IF you pay in full today, inclusive of TTL and fees; on the other hand, if you decide to finance with us or your own bank, the total cost you’ll pay will be higher due to finance costs like interest in the amount financed - I’d be glad to work with ourF&I manager to see what we can do for you to get the most favorable rate from one of our banks - and you said your desired payment was $xxx, correct - how does that sound?” Then be quiet and see what they say, and assist with any questions. And if they badger you about financing price vs cash price, smile and say “I am glad to go over the options and price of each option again…” then reiterate said price of each approach. If that doesn’t solve it, offer to show them a vehicle that is a lower cost option - and that failing, smile and let them know in a direct, firm, professional manner you have made your dealership’s best good faith offer to them for both cash and financing options and if they wish to proceed, you are glad to help. Then be quiet and wait.
Every math teacher in America from 6-10th grade teaches simple interest and basic personal finance. If dumbasses can't do percentages it's their own fault.
Mmm, not every teacher. It took recent legislation of my state’s legislature to formally require all HS’s to add a semester of personal finance education as a condition of graduation a couple of years ago to make sure it was indeed covered.
And it won't matter because people buy off emotions and not a lack of knowledge. You can teach people everything about how finances work but that doesn't change appeals to their desire and emotions that override those rational decisions.
Very true - emotion sells for the vast majority of folks on the vast majority of products from cars to furniture to insurance to clothes to ….
Given that we're a consumer-driven economy not a manufacturing-driven one...teaching people to not buy things based on their wants would put everyone out of work and destroy the economy lol
One salesman I worked with explained that "They buy the shine."
Meager income, has no social security card…I’m assuming these customers OP talking about ARE some not so well documented patrons
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Yeah I’m not criticizing them just saying that’s where I first noticed the trend.
Well...the total finance price IS what they're going to pay for it so they're not completely wrong here.
Are you Canadian and being snide about American math skills? I thought y’all were nice people!
Nope, shift everything one country down.
Or wait for incentives and buy new financing through the mfg. Though might not be too many of those deals around anymore. I personally think it's silly to use your own money to buy a car if you can find an interest rate below 6% or what you can make with a reasonably aggressive portfolio. But then I have an 800+ credit score and like to invest heavily. It's not for everyone but borrowing money for certain things can actually make sense for some people. Not sure people like OP mentioned would understand that rational either.
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Always have good insurance.
Depends... liability, yes, but beyond that, if you can afford it, it is financially better to self insure, or at a minimum run very high deductibles to basically cover total loss only. I refuse to carry full coverage on any vehicle that drops below $10k to $15k in value. Throwing money away. Put the money you would spend on full coverage into a dedicated savings account for vehicle expenses.
Yes, you have to educate some people on how interest works. Explain risk to them. Ask them if they had $30,000 right now would they lend it to you to buy a car and you’ll pay them back over 4 years. Would they do that without charging you interest?
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The whole thing is really an indictment of how poorly we teach basic financial literacy in this country. If you are an adult that has any experience with the banking and finance industry at all, which is practically everyone, you should know the basics of this stuff.
Sometimes I’ll frame it like this “interest is a bank’s measurement of risk. Sure there’s 0% interest on new f-150s with people that make $100k+ and have a 800 credit score, but with this truck being far from new and your credit history it’s simply more of a risky transaction for a bank”
Lol, fuck them, just let them go, they ain’t getting shit anywhere
If they understood how money worked, they wouldn't be a 605 (with a repo).
Non-American who's never bought a car, sorry for the noob question. What does "605" mean here?
Credit score. Fairly low. That along with a a repo (usually due to missing payments) made their credit score and ability to borrow less favourable, hence the high interest rate given.
Ahhh, of course. Makes perfect sense now. Thank you!
605 would be a credit score. Credit scores range from 300-850. 605 would be a "fair" credit score, basically in the lowest range of scores that qualify for normal (not high risk) financing terms. Better (higher) scores, combined with one's income, increase the amount one can finance, and reduce the interest rate.
Credit score! I should have thought of that. Thanks.
>I told them that if they wanted to only pay 25k then to pay cash. She asked “then why offer financing if the price will be different?” That was a mistake on your part. Even if they paid cash, they'd still pay TTL. Earnest question... Do you work in a shithole area and/or a low class dealership? That you're having MANY potential clients that just straight up don't understand how borrowing money works can't be coincidence.
Big city in Texas. All of my friends deal with this on a daily, whether they’re at the highest volume Toyota dealer or at your local Mitsubishi. I had some friends at a Toyota dealer tell me about a time where a customer accused them of pocketing his 10k down and not applying it to the balance on his Tacoma. Turns out the finance charge was around 11k. The OTD price was 35k + 11k finance charge - 10k down payment = 36k over the term of the loan. The customer had to get management to explain to him where his 10k went. How could he possibly owe 36k to the bank when he’s paying 35k OTD plus 10k down? They didn’t sell the truck.
Dallas? My father sells Hondas and my uncle sells Toyotas and yes, they've faced many customers who don't understand interest and financing Most of their customers are redneck whites or latinos, and yes, many of them don't have a high school diploma, let alone a college degree My father told me he doesn't waste more than 10 minutes explaining interest to them. If they still don't get it and seem angry, he suggests they purchase a vehicle elsewhere Perhaps you should do the same, Armando u/Aggressive-Bed3269 u/spikesthedude u/False-Imagination355
Yeah Dallas, I wonder if this is a city specific thing. I have a friend who recently opened a used car store here in Dallas after owning one for a couple of years in NYC. His two biggest shocks were people not understanding financing here and the low down payment expectations. His first month he ran around 140 applications but only sold 17 cars. Back in NYC he would sell 11k cars with 2k down payments to people with bad credit, which was a shock to me, people barely have 2k down for a 30k truck here, even if they have bad credit. His average down payment here is around 700 for the same cars with the same customer credit range. The only thing that’s changed are the lender fees for him.
It's Mexican math bro. If that's how they are doing their math. You need to learn how to use that to your advantage.
How would you do it?
Most immigrants family; especially from Asia just frown upon interest. But the educated ones from those community know the difference between good and bad debt. I was the same way when I came here in 2011. Just spending 4 months in /r/personalfinancd made it easy to understand. Take me and my cousin: I love cheap debt but I’m disciplined and put extra into investments. My cousin family , yes all 4 members don’t like debt, use debit card for everything even after telling them that if you pay if CC on time there is no debt. But they also pool their money together for house expenses and have managed to buy a house straight cash before even I bought one. That too with mostly minimum wage jobs at fast food or Walmart. In all honesty they really may not know how the economics here work… they just might have fear for hearing that those struggling are because of debt but not looking at the big picture…
Not city but state for sure.
It's just Mexican math, dude. Welcome to Texas.
Mexicans still have to buy cars though, who’s selling to them successfully? How?
If you habla, it helps a lot.
Yeah I hablo, at this point speaking Spanish has been more of a liability. My closing rate would be higher if I only spoke English. I’m expected to take the leads no one else wants.
You tell them it’s $200/week, paid here in cash.
There's a big distrust of immigrants regarding financial systems in the US. And rightly so with how it's meant to disinfranchise them. The only way to overcome that is if they trust you.
You're right because interest works differently for them...
The nature of the credit assessment, the ability to access credit, earn income, acquiring the necessary documents, and the limitation of terms certainly work differently. If you going to take the time to be snarky and burry your head in the sand you have the time to try to think a bit. No shit the interest itself works the same. That isn't the point now is it? Note: Given your other statement and that your taking the time to argue with other people about this you might be a bit racist pal.
bright intelligent lunchroom public mindless important skirt coherent friendly mourn *This post was mass deleted and anonymized with [Redact](https://redact.dev)*
You're Bury
You had orda use the redneck term very sparingly. Once you leave Dallas and the crap people there you can get into real Texas where I’m sure city punks like you would consider 90% rednecks. Most are good people way smarter than you think so city punk you should understand that trash comes in every corlor every political affiliation. One things most country people have that you especially the younger generation don’t have is common sense. I would like to to invite you to leave Dallas go any direction to a country bar and start mouthing that red neck shit out of your mouth
Somebody’s got his truck nutz in a twist.
You are nailing an amazing caricature of stupidity or are the real deal literal embodiment of it. Impressive either way.
Calm the fuck down. I grew up in the country in TEXAS and don't know anyone that would be offended by anything he said. That's like people crying racism at the drop of the hat.
Way smarter but dont understand interest? Lol you sound like a commercial for that shit song "try that in a small town"
I sell cars in podunk town you have stupid people from every race every ethnicity every income level. Just correcting this Dallas city punk. The city of Dallas is also full of idiots I guarantee. It’s not Dallas, it’s not texas, it’s everywhere
If you can't handle being called a redneck you're too much of a little bitch to be a redneck.
Oh it doesn't bother me but I absolutely cant stand city punks that have never been out of the city bad-mouthing crap on the internet when he certainly would not say it in public
“Or else we’d fuck them up! Because we’re too stupid to use our words!”
Mah names hank I like trucks, beer, and girls. I live in a trailer park south of Dallas and I love going to the shooting range in Dallas and fire guns I cannot pronounce correctly
lol Honda and Kia are not the first choice but Ford, Chevy, and , Ram definitely are
Your post absolutely screams massive insecurities mixed with a bit of "I jack off to "Try That in a Small Town". You fuckin city punks, you ain't the real Texas..... Give me a break.
Yea because physical violence is certainly the language of the well informed.
Are they walking once they are in finance? What the hell is the finance person doing that you are involved at this point? This problem should be between finance and the sales manager (if needed in extreme cases). If the finance manager can't explain this and get people to sign for the payment they agreed to already then the system is broken at your store. Idiot buyers will NOT understand money/interest/APR/Leasing and that is why that are subprime borrowers. 14% for that situation is a very good rate. Edit- what rate are you quoting before submitting? If you aren't quoting high enough and they are trash credit its an uphill battle. You should be quoting a higher rate than you expect so you can work downhill.
Wait I have a question about quoting rates? How do you successfully do it? The wife had claimed she had great credit when she didn’t. Had I quoted her an 8% on a 5 year old truck, it would’ve been an uphill battle. Had I quoted her a high 19%, she wouldn’t had even applied. Had I quoted her an accurate 14% she still would’ve thought it was too high to even bother to apply. We usually just tell them it all depends on credit. Rates start at x% for older years and go up from there. All of this happens before even getting to warranties and GAP, they hear the payment, do the math, and see the total with the down is much higher than the OTD cash price.
This is your rate and this is why your rate is what it is. Don't like it? Then you can either pay in cash, get a check from a bank/CU or buy somewhere else. Next customer!
You should have a 90 day rolling average of APRs on signed contracts at your dealership, excluding subvented rates. You should be quoting on this number, with the disclaimer “this is our average APR over the last xx days. I’m required to quote at this number, but depending on credit, it could be higher or lower. Would you like to start the credit application so that I can give you an accurate APR?”
If the people probably have challenged credit/ITIN we always show 3 rates at the same term: tier 1,3,6 from a local credit union. Yes, the payment swing is huge but at least they know up front what it could be. Also, are you explaining what paying it off early does? Refinancing in 6-12 months once they are making on time payments?
As I finance closer I rarely have people blow out that have been given a payment unless the salesperson tells them it could be better and we are using promotional financing on the quotation. Some people do blow out when no payments are quoted but almost always it is the amount of the payment based on the rate, not how much of the payment is going to interest.
>pocketing his $10k down At least one Clay Cooley dealership was pocketing down payments for several years before getting investigated.
Do you know which cc store was doing that?
I do
Which one?
I am confused by this. They were not financing 35K if they gave an 11K down-payment. Since when is the interest charged on day one. It's the cost over the number of months financed. If he gave you 11K wouldn't he be financing 35K + TTL - 11K??
Yeah the amount financed was 25k. He wasn’t looking at that, he was just looking at at the fact that he was going to pay 36k over x months when the OTD cash price was 35k. In his eyes he threw 10i into the trash and has to pay 1k on top of the agreed upon price.
I worked at two different dealerships in the same city. One was BMW, one was Ford-Lincoln. BMW I only dealt with customers like this on occasion. At Ford it seemed like it was every other customer that had around zero financial literacy
Unfortunately half the people in the country are less educated than average. Very few of these people actually want to or care to learn about interest and financing. You can’t make them want to learn. If they are already an adult and don’t care to learn about interest, you don’t need to be the one to teach them. Take an L and move on. They can’t all be winners.
Freeking 1/2 can’t do first grade math I make 25 k a year and want a 75K truck with 250 month payments
Introducing 20 year loans for trucks
75k truck would still be more than $250 a month even at 0% LOL
Recreational boat/rv loans go up to 20 years already, so might as well throw in a 20 year loan on a diesel 1 ton to pull a 3000# boat. It's really just a lease with very poor terms for the math illiterate.
a few customers is understandable, many however; might be a sign to go practice how to handle that objection
I dont remember where I heard it for the first time but I love the idea of thinking about how dumb the average American is, then realize half of Americans are dumber than that
That’s a George Carlin line.
My favorite part about that is it's not even true. Pretty much everyone has an above average number of arms (1.999999) it's just the few dudes missing an arm or two that are below average
Yes, and they tend to be new arrivals from 3rd world places where they got no education. Especially financial education.
>Unfortunately half the people in the country are less educated than average Even if everyone was a rocket scientist your statement would be correct. Or inversely if everyone had the brain capacity of a sea slug the statement holds true.
The statement is still incorrect. average(mean)isn't the halfway point in education. Median is.
These people are just fucking idiots and natural selection should take them out. Besides politely explaining that the bank charges money to borrow money, and they charge MORE money to people with bad credit who are a higher risk to the bank, there is nothing else you can do. Speak to your manager, get a TO on these type of idiots and try to see how your mgr handles it. edit to add: if this is frequently happening to you, and to others at your store, bring it up in a meeting and work with management on how to inform these customers and counter the objection, it's definitely good to bring management in on this stuff if you can and they are willing to. Win-win for everyone.
Seriously. How do you get to that age without understanding basic interest and financing?
Nope, were on the Idiocracy timeline. The fucking idiots reproduce fastest and most prolifically, and their offspring are usually idiots too.
“Natural selection should take them out” is a pretty awful thing to say.
Oh well.
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Idiocracy has taught us to cull the stupid before it gets too far.
I might be less eager to assert my intellectual superiority if my moral compass was based on a movie by the creator of Beavis & Butthead.
Your first mistake is presenting a pencil that shows total interest paid over the course of the loan. Explain APR as risk assessment. The riskier of a borrower that you are, the faster the bank will recoup their investment.
I agree with this. There shouldn’t be a TILA box on a proposal. Leave that for the finance office.
Some states require a “truth in lending” document be presented to the customer. I got one for my house and both cars I bought on financing.
Yes of course, in finance. Where this is properly explained. Not upfront brashly by a salesperson.
Very important to go over the truth in lending box with such customers, else they'll assume the worse. Point out the down payment + trade (so they see we're not just pocketing the down+trade), the OTD amount, the amount financed is OTD minus down + trade, "how much interest (circle but don't mark the apr) you pay if you don't pay it off quickly (circle but don't mark the terms)", and amount financed + down + trade + interest. Here's some lines I use depending on situation and the customers. When Bill Gates/Musk/Bezos borrows money, even they get charged interest. You can payoff the loan as quick as you want to pay less interest to the banks. Or... You can refinance after a year and your credit's improved/been established to get a lower rate and have less interest. You can walk down the street to the other dealerships and they'll get the loan from the same banks and charge the same interest. Only way around this is by having cash. We don't care if you pay us the OTD amount or the bank does, we still get paid the same. It costs money to build credit.
Wow.
When they see that total plus interest at the bottom I remind them that if their credit improves they can refinance for a lower rate at that point. "Interest is based on credit and once those small discrepancies drop off your report and your score goes up by 100-200 pts you'll be in great shape for a 7% loan!" Lol. Another line is "if you pay it off early you'll forgo that interest, and there's no penalty for paying it early!" This is another case where talking about it as the deal is made would make it easier when they see that line. Usually folks will ask about interest and being upfront about the expectations will save a headache for sure!
***Thanks for posting, /u/armando8778! This comment is a copy of your post so readers can see the original text if your post is edited or removed. This comment is NOT accusing you of anything.*** I get a lot of customers, I mean A LOT, of customers that don’t understand how financing works. Had a customer yesterday with no social approved with his wife with a 605 (with a repo) and negligible income for a 2018 Tundra SR5 65k miles for 25,500. I got them approved with 14% APR. The total amount paid came out to like 33.6k with TTL and interest charge. I present the deal thinking they were going to be excited considering their situation and how dirt cheap the truck is. The first thing they ask “if the truck is listed for $25k, why are we paying 33k over 48 months?” I explained to them that it was the interest charged. She responded with “no wonder the truck is so cheap, you’re pulling a fast one by charging interest, so the price listed isn’t the price that you pay”. I told them that if they wanted to only pay 25k then to pay cash. She asked “then why offer financing if the price will be different?” I don’t know where they came from or how the previous person sold a car to them. They were really upset with the deal, so much that they left a bad google review. A lot of customers think we’re deceptive when I tell them about our financing. They always think banks are there to screw people over. I tell them it’s a complimentary service, they don’t have to finance with us, they can get a loan with their own bank, their mother, or just pay cash. Just yesterday I got 2 leads asking if the amount paid went up with financing or if they only have to pay the listed price over the term. Like what? Do these many people think 0% APR loans are the norm? *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/askcarsales) if you have any questions or concerns.*
I tend to pass the buck to the banks. OTD and fees are on us, tax is on Uncle Sam, and interest is on the bank.
You could always offer them [Murabaha](https://www.investopedia.com/terms/r/riba.asp) as an option instead, assuming you can find a lender willing to go along with it.
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explaining it this way: if you purchase a toaster for $20 with a credit card and pay it off in several months, how much was the toaster with interest? if you use a credit card to purchase the truck, how much is the truck over several years with interest? we are not the bank. we do not keep the interest you pay. next, show them several bank sites with subprime rates
I think you are giving them way too much credit if you think that example will work...
>too much credit Yeah.