Outside financing questions

Samy fallo

I'm new into car dealership business. I'm a cash only car dealer so far. I'm considering outside financing to increase my sales. one of my friend told me (he's a car dealer, too) that sometimes these financing companies take part of your sales. I thought the financing companies profit only from the loan they are providing to the customers (interest). is that true. for example. I sold a car for $12,000 and the customer put down $2,000.00 and then the amount to be financed is $10,000. so the financing company give me around $8,500 (instead of $10K) and the rest is going to the financing Co through the customers payment. Can someone explain if that true or my friend doing something different. 

Mark Rask

That is all wrong....

Jay  Sims

Lets see if i can make it simple


You buy a car for $5000. You put $800 to fix it up etc. Your total cost on the unit is $5800 so far. (we are just calculating hard costs. No Flooring Fees, Depreciation etc)


$5800 Cost. 

$6500 Books at kbb wholesale ( you got lucky. you were able to buy cheaper than book!)

Lenders will pay a certain amount. A Percentage. Depending on your customer. The lender will hit you with a "Discount, Bank Fee, Lender Fee, Acquisition fee" they have a few names for it. Anyways. 


Lets say you are selling to car for

$9000 - sell price

$900 Taxes+ Fees (registration, etc)

Total selling Price $9900

Down Payment - $2000

You need to come up with The balance from a lender ($7900)

lender sees the deal and says Samy, you are a bit risky so they hit the dealer with that lender fee. For $900.


The Lender is willing to buy the loan for $9800 BUT they will take their "discount/dealer fee/lender fee" of $900 out. SO now the lender will cut you a check for $8900


Total sale Price $9900

Down Payment -$2000

= $7900

Lender Gives you a total of $8900 for the deal.

$8900 from lender + $2000 Down Payment  = $10900 Gross Profit. 

hope im not losing ya.....


$10900 gross profit. 

-  $5800 total cost of unit

= $5100 Profit AFTER paying off your unit cost

Now it doesnt always work like this obviously. I used large and round numbers to simplify it. But the goal your gross profit with the down payment and whats called the "Net check" from the lender is your gross profit. Your net profit is

Downpayment+Netcheck and then -cost of vehicle 

You want the netcheck to be as HIGH as possible. and when you include your down payment that together brings you to profit. Or atleast it should. Thats why you always hear "I need more down to do this deal"

If you noticed, most used car dealers will no put prices on the cars, or they will put "Cash Purchase price only"  The reason being so if you arent buying cash, they can "Adjust" the price to work the "Discount/lender fee" into the sell price of the car.

When i first started i had not a clue about financing. But most of the subprime companies will help you. They have their own portals to type in customer info and get instant approvals etc. Keep in mind that majority of what i wrote is for sub prime financing.


You get into the better prime and Near prime you get to add more fees and play with Buy Rates (Interest Rates) the bank wants to buy the loan at, and then you can pad the Interest rate as well. 


im typing this at 340am after a long day. so if i missed a step or some crapp forgive me. 

also i hope no one gets mad at me for giving out some details etc. Hope i gave you some ideas. 

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