Dan explains why 0% dealership financing isn't actually free. Dealerships build the cost into the vehicle price, so you're paying for that cheap rate whether you use it or not. Negotiate the out-the-door price first, then decide how to pay.
Pricesaver offered me was if I financed that vehicle with him. And when I talked about, well, I don't need to finance that vehicle, I go, okay, well, we can't give you this price.
Most of us at some point have seen an offer from a dealership or a manufacturer at 0% interest to buy a vehicle. When you think about that, if you can get that vehicle for zero percent, isn't that a no brainer? Or have you ever wondered, how do they do that? Well, today I'm just going to talk about how they would do something like that. And really, it's a bit of a myth that you're getting that vehicle for zero percent interest. And I'll try to explain why. Hi, my name's Dan and I'm with Ascendant financial. How does a car manufacturer make money? Let's think about that. Well, I think the first thing you think about is, well, they manufacture and sell cars. And that's true. That's a big part of what they do. Right. But if we think about it just a little further, why is it that all of the major manufacturers out there offer you to finance your vehicle for you? You ever thought about why they do that? I'm going to tell you a bit of a story about one of my experiences just to give you some insight to that. I was buying a recreational vehicle, and I'd gone to all the trouble of doing my research, looking for what I wanted and looking around, see who had that particular model and where it was and what the features were and what kind of prices that they had on those vehicles. So when I found the one I wanted, I went to the dealership and started to work on negotiating with the dealer on that vehicle. Now, the reason why I went to this particular dealership was because of the starting price that they had listed for that vehicle. It was better than other locations. So I went there and I looked at the vehicle, and again, I was happy with what the vehicle looked like. Great. My wife was happy. That's even more important. And so we started to talk about price. And one of the things I realized after a while was that pricesaver offered me was if I financed that vehicle with him. And when I talked about, well, I don't need to finance that vehicle, I go, okay, well, we can't give you this price. So I started to look at what it would cost me if I didn't take the financing on. And I quickly realized it was my best interest to finance it. Now, they only required me to finance that for six months. And then after that I could pay that vehicle off. And because I had my own source of financing, and because this made a great deal for me, I went ahead and financed it for those six months. So that just gives you a bit of an insight as to how dealerships depend on the financing revenue to be profitable, to add to their bottom line. It is a key factor for them. And the reality of it is these are big companies, they know what their costs are. They know what they need to make to be profitable. So what they do is they simply factor in the interest cost into the price they're going to set on that vehicle. Now, if you're good at negotiating and you go in there and the way to do that is never tell them upfront that you're going to be paying cash or have a different source of funds that you're going to use to purchase that vehicle and get to a point where you really understand what the bottom line is. And even when they realize that you're not going to be using their deal, there's times where you can actually.
Find out how much they had factored into that vehicle for interest costs. Not all the time. There are some manufacturers that make a choice that that's not going to be disclosed, but there's times you can, and that will become. If you do, it becomes very apparent what the cost of interest was. But the thing that I really wanted you to understand today is that even though a car manufacturer may offer 0% financing, they've had to factor in that cost to carry that amount of money that you have outstanding for the long period of time that you have it outstanding, whether it's like five years or six years or whatever it may be, they've had to factor that cost into the price of that vehicle. And that has to happen for that business to be successful. So they factored it in there. And if you don't believe that, watch your choice. But I think if you understand business, you will realize that that's just a great marketing tool that they use to encourage people to buy vehicles. And if you find that that's the way you like it and that works for you, good. I just wanted you to understand that the cost of interest has been factored into there at some point. It has to. And they're big business, they know what they're doing. So I hope you found this interesting. If you want to really understand how I would go about financing that cash deal that I would work on at a dealership, and I've been really successful doing that, I'm just going to encourage you to take in more of our videos. And those videos are on how you could become your own banker and do your own financing.
