Where do Car Dealerships Advertise?

Are used OR new car dealerships required to pay a fee to get a low-credit-score borrower financed?

• (If you don't want to read all of this just scroll down to the last couple of paragraphs to make this story shorter.) I was in the process of buying my very first NICE (used) car. I was in the need for financing and had nearly %20 down payment but my credit score was only a 610 due to some pending minor collections. My mortgage is current and always has been, and my debt-to-income was acceptable b/c I only have my mortgage payment to pay as of now. Anyways, since a friend of the family was the used car sales manager at this dealership, I decided to go there in the hopes of him not letting me screwed (too bad). I knew I was in for it when the salesman he sent me to told me this dealership doesn't use KBB or NADA after I inquired that ALL of their cars were at least $3500 ABOVE book values. He told me they "used market value in the area." I then did an Autotrader search for similar cars and found similar CPO year/makes/models/trims with 20k-30k LESS miles than the CPO car he was trying to sell me for anywhere from $1700-$4000 cheaper. I then inquired my findings to the salesman after I got approved for the loan and was attempting to negotiate price. They did not want to drop the price ONE DOLLAR below their initial baseline price, even after I presented more than enough evidence to show the car was not worth what they were charging and even telling them I would pay more than what I thought it was worth b/c I loved this particular car so much. After me refusing to pay their price, the salesman called in his sales manager who is supposed to be a close family friend. He then proceeded to explain to me that he had to put $1100 in the car to get it to CPO- not my fault he bought a car needing that much work. And, even if this is true, there was still plenty of room to lower the price based on trade-in value of the car. And finally, one of the best car sales tricks I have seen came from the sales manager. He said he was going to "tell (me) something (he's) never told anyone else and that (he's) not supposed to tell people" and then asked the salesman to leave the room. The looks on both of their faces made all this hard to "buy." However, he then explained to me that since I have sub-par credit that he has to pay the bank $800 to finance me and that's why he couldn't lower the price (although it would've taken ALOT more than $800 decrease to get me to buy). In the end, I know this was just a sneaky sales tactic (although somewhat clever), but do not know what to think of the sales manger's claims of having to PAY the banks to finance me when I know the banks pay the dealers commission for selling the loans! To make a long story short, does anyone know if dealerships have to pay the banks a fee to get them to finance borrowers with less-than-perfect credit? Or was this dealership just trying to take advantage of someone with sub-par credit whom they thought was naive with the car-purchasing process?

• Answer:

  I didn't read the entire thing, just the first & last part. Lenders charge dealers sub prime customers a per deal fee and often deals are bought at a discount to face value too. Its not uncommon for a $10,000 sub prime loan to only net the dealer $6350-8850. Discounts can range from 10-35% or more and there can be a per car fee of $150 or so. The discount can be explained as a "fee" to simplify it for those who don't know the "discount" lingo. Usually, the dealers don't TELL customers this stuff, they just jack the price of the car up to cover it. You aren't obligated to sign any deal but you cant really blame the dealer or the lender for your bad credit. No dealer is going to sell you a car & lose money on it. And many sub prime customers are so desperate that they will pay any price they are quoted. Simply put, beggars cant be choosers. You aren't just buying a car. You are buying a sub prime loan. That increases the price a great deal. You are free to save up & pay cash, when you pay cash, you can get cars for retail and even much less because you are dealing from a position of strength, not weakness. Still, no dealer is going to sell a car & lose money. That fancy building, & all those employees are paid out of profits. Dealers exist to make money, not lose it. Save up & pay cash,then you can get better prices. Or get your credit score back over 700 and you should be in better shape. You should never, ever finance a car at a dealership. Even good credit customers get ripped off because the entire system is commissioned based. The salesman, sales manager & finance manager all get commissions based on you overpaying. The more they can get you to pay...for anything, the more they make.