Car financing question

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plazma

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I am buying a 2005 model car which costs about R130k, rounded off.
A bank has approved the finance for me, and does not require a deposit.

The thing is, I actually have a ten percent cash deposit, but the salesman is advising me not to pay a deposit. Why on earth would he do that? What's in it for him?

I am guessing that if I pay a deposit, he is paid less by the bank, and thus makes less profit on the car?

Can someone in the car or finance biz please give some free advice here?
Are these people conning me?

Thanks
 
No idea why the car salesman is saying that! :eek: :confused: Unless he receives a referral commission.

Pay the deposit - it's in your best interest...
 
Pay that deposit, you can pay up to R1500 and up on the deposit amount in interest every year if you take it on finance.
 
I doubt he's paid commission on the financed amount - he works for the car dealership, not the bank. More likely he's suggesting you keep the deposit and use it elsewhere (it could make sense to pay off high-interest debts like credit card instead of saving on the lower-interest debt for the car).
 
Claymore said:
I doubt he's paid commission on the financed amount - he works for the car dealership, not the bank. More likely he's suggesting you keep the deposit and use it elsewhere (it could make sense to pay off high-interest debts like credit card instead of saving on the lower-interest debt for the car).
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You sure they don't work on a referral commission scheme? So he might receive commission twice - one for the sale (full value) and a percentage of the financed amount for the referral...
 
Nedbank told me other banks including Absa give kickbacks to dealerships, when the dealership says "I'll search for the best rate", that rate is his commission
 
Of course they do.... they all want the business.. and such.. this is why i NEVER let the dealership do the finance application.
 
Or at least I let them do the ground work and get me some rates to take around to other banks to get them to fight with each other over....

My favourite one so far has been Wesbank offering me prime+2... Me going to the other banks, saying they'll give me prime -1.5... and then the dealer who did the ground work getting pissed off with me because I'd got a better deal elsewhere... told the dealer where to get off as well at the end of the day.
 
I think they get kickbacks, but more so when the dealership has in-house financing.
Such as BMW or some of the other big brands out there.
 
To my knowledge banks have agreements with stealerships for financing, the more they finance the bigger the kickback hence the more profit for the stealership resulting in the bigger commission for the salesman.

I'd say pay the 10%, it'll reduce your monthly bill plus you will on interest that needs to be pays and it makes it easier to pay the car off quicker.
 
Shake&Bake said:
I think they get kickbacks, but more so when the dealership has in-house financing.
Such as BMW or some of the other big brands out there.
Click to expand...

Inhouse financing is underwritten by the banks though. Eg. Toyota Finance is Wesbank, etc.
 
the in-house credit financing is often a a company where the bank and the car company are shareholders.
 
Dude, it is in YOUR best interest to pay as much of a deposit as possible. If you have the 10% deposit, then PAY it! You will benefit in the long run.

That salesman is a CHEAT and an IDIOT to suggest otherwise.
 
UtterNutter said:
Dude, it is in YOUR best interest to pay as much of a deposit as possible. If you have the 10% deposit, then PAY it! You will benefit in the long run.

That salesman is a CHEAT and an IDIOT to suggest otherwise.
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Agreed.
If I don't pay a deposit, the financed amount goes up, and so does the commission paid to the sales dork. I mean person.
 
plazma said:
Agreed.
If I don't pay a deposit, the financed amount goes up, and so does the commission paid to the sales dork. I mean person.
Click to expand...

and the bigger the finance amount equals more interest to the bank and better kickbacks to the car dealership ... banks and car dealerships just love residual deals ...
 
Most car loans allow you to pay in extra at any time. Just pay the 10% in after the loan has been initiated.
 
JayM said:
Most car loans allow you to pay in extra at any time. Just pay the 10% in after the loan has been initiated.
Click to expand...

It won't save though; with car finance, the interest amount is calculated up front, and added to the pricipal, and that's divided by the number of months in the term. Because of that, putting money in really only means your last x months are paid in advance. You don't reduce the amount you pay nor the interest you're paying.
 
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