Why do car salesmen want money down? (2024)

Why do car salesmen want money down?

Lenders often want you to make a down payment to show your commitment to paying back the loan and to get some compensation for the car upfront.

Why do car dealers want you to put money down?

A down payment helps many lenders remove some of the upfront risk associated with a car loan. So if you decide to buy a car with no money down, realize you may have to pay a higher interest rate throughout your loan. It can also mean you may pay more for your loan over time due to those higher rates.

Why you shouldn't put a downpayment on a car?

Why should you skip a down payment or make a smaller one? Good credit might get you a great loan deal. With stellar credit, you can often get low-interest rates and a short loan term without making much of a down payment at all.

Should I tell car salesman how much down payment?

Pretty much, you do. There may be some constraints, such as if you have a bad credit score. In that case, the bank may want a certain down payment. But usually, you tell the dealer how much you are willing to put down.

Why not tell a car salesman you are paying cash?

Calculate what you expect to pay for that new vehicle. Again, don't tell the salesperson that you plan to pay cash before negotiating. The dealership may boost the car's price by over $1,000 to make up for the lost profit from not selling accessories or the extended warranty and not handling the loan.

Do dealers hate when you pay cash?

Paying cash may hinder your chances of getting the best deal

"When dealers are negotiating the purchase price, they anticipate making money on the back end, via financing," Bill explains. "So if you tell them up front you're paying cash, the dealer knows he has no opportunity to make money off you from financing.

What is a good down payment on a 30k car?

Consider putting at least $6,000 down on a $30,000 car if you're buying it new or at least $3,000 if you're buying it used. This follows the guidelines of a 20% down payment for a new car or a 10% down payment for a used car.

What is considered a high car payment?

According to experts, a car payment is too high if the car payment is more than 30% of your total income. Remember, the car payment isn't your only car expense! Make sure to consider fuel and maintenance expenses. Make sure your car payment does not exceed 15%-20% of your total income.

Is it better to put money down on a car or pay extra principal?

Paying on the principal reduces the loan balance faster, helps you pay off the loan sooner and saves you money. Most auto loans use simple interest, a method that calculates interest monthly based on the principal amount you still owe.

Is $2000 a good down payment on a car?

If you're considering a car that costs $25,000, putting down between $2,000 and $4,000 would be wise. However, the true answer to this question depends on your negotiation strategy. If you can negotiate a lower price or better terms, putting more money down may not save you much interest.

What to avoid telling a car salesman?

Is it smart to put 50% down on a car?

Not only does this show lenders how dedicated and serious you are to pay back the loan, investing some of your own cash into this purchase motivates success. You'll really see changes for the financial better in your car loan when you make a really large down payment, about 50%.

How much can you talk a dealer down on a new car?

The main difference will be how much you can negotiate off the retail price: New cars. It is considered reasonable to start by asking for 5% off the invoice price of a new car and negotiate from there. Depending on how the negotiation goes, you should end up paying between the invoice price and the sticker price.

What are 3 things to never tell a car salesperson?

Do car salesmen really talk to manager?

For decades now, car salespeople have constantly gone to “talk my manager” for permission to negotiate during the sales process.

What not to say at a dealership?

What are the cons of paying cash for a car?

Takes time to save. One of the biggest drawbacks to buying a car with cash is that it takes a lot of time to save up enough money. With rising auto prices, it's no small feat to save enough money to pay for a car in full upfront. Risk of depleting your savings.

Will dealers come down on price if you pay cash?

Paying Cash Can Help Negotiations

Making an attractive cash offer prompts many dealers to provide bigger discounts – especially on cars languishing on their lot. Time your cash offer strategically after negotiating vehicle pricing down.

Do car dealers talk to each other?

It's a tight knit community and the employees (sales, finance, admin, management) typically churn over from one dealership to the next. They talk in day to day business, at car auctions, selling trade-ins to lower end lots, during happy hour, etc.

How much should I spend on a car if I make $300000?

One school of thought holds that all your automotive expenses — gas, insurance, car payments — should not exceed 20% of your pretax monthly income. Other experts say that a vehicle that costs roughly half of your annual take-home pay will be affordable.

What credit score do I need to buy a $30 000 car?

There isn't one specific score that's required to buy a car because lenders have different standards. However, the vast majority of borrowers have scores of 661 or higher.

How much is a $20,000 car loan for 5 years?

A $20,000 loan at 5% for 60 months (5 years) will cost you a total of $22,645.48, whereas the same loan at 3% will cost you $21,562.43. That's a savings of $1,083.05. That same wise shopper will look not only at the interest rate but also the length of the loan.

Is $750 a month for a car good?

If you're buying a car and are looking at an auto loan payment of $750 a month, it doesn't necessarily mean you're purchasing a luxury vehicle. The average monthly payment for new vehicles hit a record high of $730 during the first quarter of 2023, according to Edmunds.

Is $1,000 a month car payment too much?

For large luxury models, $1,000-plus payments are the norm. Even a handful of buyers with subcompact cars have four-figure payments, likely due to having shorter loan terms, poor credit, and still owing money on previous car loans, according to Edmunds analysts.

What is the 20 3 8 rule?

The 20/3/8 rule stand for:

20% down. Finance no longer than 3 years. Total car payment is no more than 8% of gross income.