Author Topic: Financing a Car (and earning cc points) or Paying Cash?  (Read 297 times)

gipsygrrl

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Financing a Car (and earning cc points) or Paying Cash?
« on: August 05, 2020, 02:50:51 PM »
We're gearing up (har) to buy a vehicle soon. I've heard conflicting things about whether a dealer will give you a better offer when you finance vs. when you pay cash. I have the cash sitting in my account, so I could save all the headaches and just buy the thing outright... but I'm also considering financing, putting as large of a downpayment as allowed on my credit card for points, and just paying off the car and credit card loan a few days later. Has anyone done this?

I know I'd need to make sure that the loan didn't have prepayment penalties, and I'd also need to find out what finance charges were associated with the loan and how they're figured. But is there anything else I'm not thinking about here or a reason I shouldn't try to work this little credit card points angle (assuming I actually get a lower price for the financed vehicle vs. straight-up cash transaction)?

Catica

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Re: Financing a Car (and earning cc points) or Paying Cash?
« Reply #1 on: August 06, 2020, 01:11:38 AM »
We're gearing up (har) to buy a vehicle soon. I've heard conflicting things about whether a dealer will give you a better offer when you finance vs. when you pay cash. I have the cash sitting in my account, so I could save all the headaches and just buy the thing outright... but I'm also considering financing, putting as large of a downpayment as allowed on my credit card for points, and just paying off the car and credit card loan a few days later. Has anyone done this?

I know I'd need to make sure that the loan didn't have prepayment penalties, and I'd also need to find out what finance charges were associated with the loan and how they're figured. But is there anything else I'm not thinking about here or a reason I shouldn't try to work this little credit card points angle (assuming I actually get a lower price for the financed vehicle vs. straight-up cash transaction)?
Last time I tried to use my credit card for a downpayment the dealer wouldn't accept it.  It was Toyota.  Maybe it depends on the dealer.

Michael in ABQ

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Re: Financing a Car (and earning cc points) or Paying Cash?
« Reply #2 on: August 06, 2020, 02:27:40 AM »
We're gearing up (har) to buy a vehicle soon. I've heard conflicting things about whether a dealer will give you a better offer when you finance vs. when you pay cash. I have the cash sitting in my account, so I could save all the headaches and just buy the thing outright... but I'm also considering financing, putting as large of a downpayment as allowed on my credit card for points, and just paying off the car and credit card loan a few days later. Has anyone done this?

I know I'd need to make sure that the loan didn't have prepayment penalties, and I'd also need to find out what finance charges were associated with the loan and how they're figured. But is there anything else I'm not thinking about here or a reason I shouldn't try to work this little credit card points angle (assuming I actually get a lower price for the financed vehicle vs. straight-up cash transaction)?
Last time I tried to use my credit card for a downpayment the dealer wouldn't accept it.  It was Toyota.  Maybe it depends on the dealer.

I don't think most car dealers would want to pay hundreds of dollars in credit car fees. The merchant processing fees usually have a flat amount - say $0.10 and then some percentage of the total transaction, typically 1-2%. Plus, if it's on a credit card the buyer could try to initiate a chargeback. Much simpler for the dealership to just require cash, check, or bank transfer. The actual profit on a new car sale is minimal, maybe $1,000 on a $30,000 vehicle. So if they have to pay a 1.5% credit card processing fee they've just wiped out almost half their profit for no real benefit. Any buyer who has a $30,000+ credit card limit should be able to get bank or dealership financing for the same amount. And the dealership makes far more from financing than the actual sale of the new car.

ender

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Re: Financing a Car (and earning cc points) or Paying Cash?
« Reply #3 on: August 06, 2020, 05:20:37 AM »
I put $3k down on our last car (which was the maximum the dealership would let).

We wrote a check for the remainder.

KungfuRabbit

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Re: Financing a Car (and earning cc points) or Paying Cash?
« Reply #4 on: August 06, 2020, 06:30:57 AM »
I put $2,500 on my credit card (2% cash back!) when I bought my car, the most they'd let me do. 

The variables that impact final purchase price (like financing vs paying cash) are one of the many reasons that the dealer model needs to just go away.  Tesla is changing the automotive world quite a bit, and I'm hoping one of the things is people finally realize how obscenely stupid the dealer model and price haggling really is - and they have an option if they don't want to deal with it. 

Ranting aside, no one can answer your question, since no one knows how they price cars.  You could try just straight up asking, and then asking if the loan has an early payment penalty.  The salesmen will certainly know you intend to pay off the loan early, but the sad thing is he won't care.  He gets his commission off the sale of the loan, if that loan ends up making $0 in interest (and losing the company money in origination fees) he still gets paid, so if you and him "colluding" gets you a cheaper car and gets him a bigger commission he will certainly work with you. 

PMG

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Re: Financing a Car (and earning cc points) or Paying Cash?
« Reply #5 on: August 06, 2020, 06:47:40 AM »
When we bought last year at CarMax they would not let me put anything on credit card. I was also trying to maximize sweet rewards but it was a no go.

Papa bear

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Re: Financing a Car (and earning cc points) or Paying Cash?
« Reply #6 on: August 06, 2020, 06:57:20 AM »
I put down as much as possible on CC - I think 5k, then financed the rest.  The dealer was offering financing cash back deals that were not available to a cash buyer.  We confirmed with the dealer that we could pay off the vehicle after one payment.  So, we got $500 more cash off on top, made one payment which I calculated was under $100 in interest, then paid off the entirety.  Net $400 in my favor.

Play the game and try to get every penny you can.


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