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?

Answer
“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.”
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Eric Schad
Answered on Jul 30, 2021
Eric Schad has been a freelance writer for nearly a decade, as well as an SEO specialist and editor for the past five years. Before getting behind the keyboard, he worked in the finance and music industries (the perfect combo). With a wide array of professional and personal experiences, he’s developed a knack for tone and branding across many different verticals. Away from the computer, Schad is a blues guitar shredder, crazed sports fan, and always down for a spontaneous trip anywhere around the globe.
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