Why CASH is NOT KING at Car Dealers - Kevin Hunter The Homework Guy

Why cash is no longer king at a car dealership. Hi everyone, Kevin Hunter here, the homework guy. And if you're new to this channel, I want you to know I spent 16 years in the car business. I was a car salesman in a couple different dealerships. I was recruited away from my first dealership by a second dealer who said he wanted somebody like me on his sales staff. It wasn't that he appreciated that I treated my customers with fairness and honesty. It was mostly due to the fact that he heard I was a 30 car a month producer. As a result of my inside experience in dealerships, I came to know exactly how dealers think, how they make money, and most importantly, how they make money off of you. Today, we're going to talk about something that used to be the golden egg at a dealership. It once was the king, and if you had it, you got first class service. I'm talking about having cash, being able to pay with cash for your car. Let's get the amazing Elizabeth in here, and let's get this party started. That's right. Back in the day, bringing a briefcase full of Benjamins or writing a check from your savings account meant that you had power. You had leverage. Having cash to buy a car gave you great control. Thanks, Liz. All right. You were the customer who the dealers fought over. But now, cash buyers are treated like a nuisance or even worse, like they're someone with a disease. So, what happened? Why did the car business shift away from rewarding the person who comes to the table with a bulging bank account and ready to pay in full? Let us show you what changed, when it changed, and what you should do about it in today's car market. We'll break it down in parts. Kevin. All right. Part one, when cash was king. There was a time, and I lived through it, when dealers rolled out the red carpet for cash buyers. No financing paperwork, no lender delays, no rejections. If you brought cash, you were a dealer's dream. You walked in, made a deal, signed a few documents, and drove off the lot. It was the fast and easy way to buy a car. It was the most pleasant way a person could ever purchase a vehicle. This was especially true before the mid200s when dealers made most of their profits off the car itself, meaning on the sale price of the car, right? They focused on volume and inventory turnover. A quick, clean cash deal meant a happy customer and money in the bank, right? No lender, back and forth business, no chargebacks, no credit risk. But then slowly things started to shift. And real quickly, Liz, I wanted to remind you, you remember the family that showed up with a brown paper sack and $34,000 cash in it. Yeah, that was wanted to buy an SUV. Yeah, they stuck out like a sore thumb, didn't they? Yeah. The But the dealer manager said, "Make sure that customer doesn't leave." Right. Yep. They wanted the money. Okay. Part two is the dealer's new profit model. Today, the car business isn't built around the car. It's built around everything but the car. I'm talking about financing, the so-called extended warranties, add-ons, aftermarket products, insurance packages, and more. And guess what? Cash buyers just skip almost all of that. That's because you're much smarter. Thank you very much. Let me break it down for you. When you finance through the dealer, they make what's called a finance reserve. A cut of your interest rate goes to them. That's often worth hundreds or even thousands of dollars on a typical car deal. When you lease, they make money on both the money factor markup and the lease end fees. When you buy extended warranties, prepaid maintenance, or paint protection, that's all profit. And dealers aggressively sell those to people who are financing because it's easier to bury those expensive items in a monthly payment. And when you pay cash, it's simple. You sign and you leave. They can't hide anything on you. They can't squeeze add-ons into a monthly payment or steer you into markedup financing. So, dealers see cash buyers as a threat to their back-end profit machine. And that machine has become the heart of their business. Part three, when this shift happened. This transformation started picking up speed around 2008 2010 during and after the financial crisis. When new car sales dropped, automakers and dealerships got creative. They leaned heavily into finance incentives, lease promotions, and dealer arranged financing. On the heels of this, Obama launched Cash for Clunkers. Yep. Remember that circus, Liz? Oh, it was terrible. It was a federal government program that offered 3500 to 4,500 in rebates to consumers who traded in older, less fuelefficient vehicles for new, more fuelefficient vehicles. Nearly 700,000 used vehicles were scrapped, taken off the market, even if they were still mechanically sound. With fewer used cars on the road, supply dropped, causing prices of the remaining lower-end used cars to skyrocket. The goal was to stimulate the auto industry which had suffered a massive collapse in 2008 and to promote environmental goals by getting gas guzzlers off the road but it failed miserably. Then came the rise of dealer management systems known as DMS. This software that tracks dealership profitability per deal and suddenly salespeople and managers started seeing cash buyers as deal killers. Why? because their gross profit per copy, the number that determined their bonus dropped like a rock when customers paid with cash. Yep. By the time we hit 2015 and beyond, the business model had completely flipped. Dealers went from bad to worse when it came to customer service. It wasn't about selling a car anymore or taking care of the car customer. It was about selling financing. The car was just the thing that got the customer in the door. So, part four, how dealers punish cash buyers now? So, how do you know the business has changed? Just try paying cash today and then watch what happens. First, they ask if you're financing before giving you a price. This isn't to help you. It's to determine how much they can make off of you in the back end. Number two, they tell you cash and finance prices are different. This is called dual pricing, and it's illegal and unethical. Number three, they refuse to negotiate if you tell them that you're paying cash. We've seen countless cases where a $2,000 discount suddenly disappears when the buyer says that they're going to pay cash or write a check as it were. Number four, they load up your deal with bogus fees to make up for it. Cash buyers often get hit with things like VIN etching, nitrogen tires, or processing fees just to recoup the dealer's loss finance revenue. And number five, if you use our trick where you take the loan and just pay it off immediately, some dealers have caught on to this. They falsely claim that the bank requires you to keep your financing for 90 days to get the discount. Now, that's a huge fat lie. It's just so that the dealer can secure their finance reserve. Then, they don't care if you refinance later, but they don't want you to pay off the loan right away cuz they'll get a charge back on their commissions. That's right. Part five. Why they don't want you to know this fact. Dealers are hoping you don't realize how powerful you actually are as a cash buyer. They're banking on two things. That you're unaware of their profit model and that you'll cave and say, "Fine, I'll finance if it saves me some money." Sure, but here's the truth. The only reason financing saves you anything is because they inflate the cash price. It's a shell game. They move the money around to manipulate how the deal looks on paper. Cash buyers are actually the most dangerous customer to a shady dealership because you're immune to their traps. You're not signing up for overpriced GAP, a 7% interest loan, or a $2,000 rust proofing package they rolled into your loan. And that's why they fight you big time. Part six, how to win as a cash buyer. So, what can you do about it? I'm glad you asked. Here are six homework guy strategies to protect yourself if you're buying with cash. Number one, don't tell them you're paying cash until the price is completely locked in and in writing. in writing. Always negotiate the price of the car first, and if you're financing, do that last. Number two, get written out the door price quotes before walking in. This limits their ability to play the cash price versus finance price game. Number three, refuse hidden fees. Ask for the full out the-door price. If they start adding shady fees, walk away. Number four, bring a printed cashier's check or proof of funds. Make it clear you're ready to buy, and if they refuse to sell, it's discrimination or deception. Number five, use pre-approved financing as a decoy. You can say, "I'm already approved at 4.9%, match or beat it, and then decide later whether to pay cash." Number six, you shop multiple dealers. Tell dealer A you're buying today, but you're checking with dealer B and C, too. Make them compete with each other. And number seven, the best one of all, hire a homework guy, car buying coach. We do all of the work for you so you don't have to, including looking at these numbers with you. The goal here isn't just to save you some money. It's to take back your buying power. Cash may not be king at the dealership, but it can still be king in your wallet. Absolutely. So, part seven, a bonus tip. Why dealers hate your credit union of all places. Here's one more reason cash buyers or smart buyers get under dealer skin because of content creators like us. Many people get preapproved at their own credit union or local bank before they go car shopping. That's just like a cash deal to many dealers. Yep. You walk in, sign your paperwork, and you either have a cashier's check or the money is wired, but the dealer loses control. They can't mark up your rate, they can't sell you finance protection plans, they can't talk you into a 72-month loan at 6.9% interest. So, if you've ever been told your credit union will take too long, or our lenders are better, that's just code for we can't take money off you. And that ticks us off. Okay, part eight. Bottom line, the reason cash isn't king anymore isn't because it lost value. It's because the dealerships changed the game. The business model shifted from selling cars to selling finance. And the cash buyer, well, they break that model. But knowledge is still power, friends. And if you are aware of these elements we share today, you can still walk away with a great deal and none of those junk products. And if you want real help finding the best price with no tricks or add-ons, check out the Homework Guys hassle-free car buying service. It's the smartest way to beat the dealer at their own game. And we now have a super convenient red button for you to click on the home screen. It says, "Click here for our car buying service." Again, we do all the work so you don't have to. It's super easy to do. We find you the closest match to the vehicle that you're looking for. And you can either get started with us by visiting the homework.com and finding the hassle-free carbine writeup or you can text me today at 701-441-3399. To all of you long-term viewers and subscribers out there, you guys rock. God bless you all. I'm Kevin Hunter, the homework guy, signing off on behalf of Alex Stevens, our auto expert, the amazing Elizabeth, our master negotiator, and the entire hassle-free homework guide team. Stick with us a moment as we scroll through some of our recent five-star Google reviews. 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