Post about "finance"

What to Watch Out For If You Decide to Finance at a Dealership

I am going to make this a simple article to read. I want you to be able to read this whole article and understand it before you make your next vehicle purchase.

Yeah, the economy isn’t the greatest right now. Yeah, nearly all industries are down on sales.

You see commercials on TV all the time talking about how now is the best time to buy a car. It is, BUT…..

You see, the auto industry is struggling. So of course, to get people to come in and purchase a car they need to advertise these “great” deals and show you how you can get their employee pricing! Sounds exciting, eh? Well if you walk in there with cash, maybe you are going to get a great deal. Actually, you probably are assuming you can negotiate a good deal.

But what if you are going in there without cash? Or without your own financing? Are you really going to get such a great deal? Well you may receive your dream car at employee pricing and they may promise you that its the best they can do on price.

Lets take a close look at their financing techniques.

Did you know that dealers really do shop for the best rate for you? Yeah, they do! However, they won’t give you that best rate! They shop for the best rate then give you a higher one. How? They are allowed to mark up your interest rate up to 2% higher than what they were quoted. That means that they are making profit off of the financing too. That can lead to you paying hundred to thousands more for your new car.

So think about this:

The car you are looking at costs $20,000.00 after manufacturer’s rebates. The dealership said they would take off an additional $1000.00 to get you to employee pricing. Sounds good, right? It is good. Now, you go to the financing office, they finance you at an 8% rate when you could have actually had a 6% rate. That will end up making you pay more, a lot more. They could have you paying a couple thousand dollars more in just interest! It makes that $1,000.00 discount look weak, doesn’t it?

The whole point here is to tell you that you need to be cautious when using dealer financing as if you know they aren’t making much from the car due to the incredible deal they gave you, they are going to make it up on the financing end of it.

Always negotiate interest rates. You wouldn’t ever take them up on their first offer on the price of the car would you? Nope. So treat the first offer on the interest rates the same too. A lot of dealers won’t even tell you what the rate is. Be sure to ask.

They have their own special programs through the car manufacturers to make up for lost profit. Don’t let them fool you. It is called dealer hold back. It is tough to negotiate into that.

If you would like to bring your own financing to a dealership, consider these banks from this site. Read their reviews and then choose one.

What Are Some Risks and Issues Around My Company Setting Up a Customer Finance-Leasing Program?

Many firms benefit significantly from either setting up on their own or partnering with a third part to set up a customer financing program for their products. Key benefits are increased sales, cash flow, customer loyalty, etc.But are there also some risks for the company to be aware of also – Of course there are and let’s look at some of those risks.We would also point out that these risks are in fact the same ones taken on by independent leasing firms also.Foremost from a risk perspective is that fact the customer financing program will be viewed by the customers as the one and same as your company. Therefore customer service and financing ability are in fact now part of your firm’s reputation.Companies may also find that the borrowing costs to set up a program are in fact higher than their normal business operating costs. Naturally the method in which the finance division is set up also affects the debt levels of your company. No business wants to fail because it took on higher debt in an effort to in fact help their customers!On a long term basis company lenders might view your firms foray into customer financing as an additional risk factor, which they might try to compensate on by imposing restrictions such as additional covenants, requests for more equity into the firm, etc. The bottom line is simply that setting up a customer financing scenario may in fact affect your own firm’s ability to borrow.If your firm is larger then analysts and firms looking at your firm might in fact be raising issues and perceptions around which business you are actually in, i.e. your products, or the financing of those products. Business owners and financial managers will always want to ensure that ultimately they are sticking to their core business model and philosophies. If your firm becomes too enamored by financing you possibly run the risk of total business failure. There are numerous cases in financial history where firms collapsed because of the shenanigans of the finance division.We have heard the term in business ‘sticking to our knitting’, which of course simply means that management needs unique skills to run a business, and those skills are different in financing. Owners and managers related to the customer financing division must have strong skills in financial sales, structuring, and credit… Naturally we are also inferring that additional skilled personnel ultimately must be hired.No company every wants to look back in hindsight and say that if failed or stumbled because efforts and funds went into financing, as opposed to r&d, marketing, staff, and product growth. Do not let a customer finance program become an obstacle to your ultimate business successBusiness owners should ensure that there is good communications between the main operating company and the customer financing division – clear goals and philosophies should be set out re the function of such a customer finance program.In summary the benefits of offering financing to your customer are very obvious, and proven true by some of the largest and most successful companies in the world – but all you have to do is to do it right! Ensure your firm is aware of the risks and challenges and monitor your customer financing program on an ongoing basis to ensure you are not straying from your core business model.