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Why does a dealership drop the price of a car if I finance with them?
I want to finance a car for $12,000 through the dealer because they said if I finance with someone else that the price jumps to $16,000. They're prepared to offer me a 60-month, 8.99% loan, as my credit is mediocre. How can dealers justify this price drop only if I finance with them?
Eric Schad · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
“The reason that the dealer drops the price if you finance through them is that they can make it back on interest.
Before agreeing to the dealership’s finance, check what the
Kelley Blue Book value
is. Is it $12,000, $16,000, or somewhere in between? Never buy a car for more than the Kelley Blue Book value. If the dealership’s price is actually lower than the vehicle’s actual cash value, check to see if there’s any
prepayment penalty
. If there isn’t, take the dealer financing. To negate the high interest rate, you can always go to a credit union or bank and refinance the vehicle at a lower interest rate. By doing so, you get a lower price for the car and a better loan rate.
Don’t forget that when you buy a new vehicle, you will need proper coverage. If you haven’t already found insurance, use the free
Jerry
app to help you find the best deal. Jerry compares rates from the top 50 companies in under a minute, delivering the best deals to your phone.”View full answer
- Gregory R.
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Jerry partners with more than 50 insurance companies, but our content is independently researched, written, and fact-checked by our team of editors and agents. We aren’t paid for reviews or other content.
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