How do used vehicle exchange programs at car dealerships work?
"You are correct to be wary. Car dealerships make money selling cars, and use many tactics and advertisements to entice you to come into their showroom. ""We are in desperate need of [insert your make, model, year and color]! We have several people who want that exact car you have! Come in and sell it to us and buy a new car at a great price! We'll give you so much money on your trade in!"" In reality, they play a shell game and have you focus on your monthly payment. By extending the loan to 4 or 5 years (or longer), they can make your monthly payment lower, sure, but the total amount paid is much higher. You're right: it's not in your best interest. Buy a car and drive it into the ground. Being free of car payments is a luxury!" "Yikes! Not always is this the case... For example, you purchased a new car with an interest rate of 5-6%or even higher... Why pay that much interest throughout the loan. Sometimes trading in the vehicle at a lower rate will get you a lower or sometimes the same payment even with an upgraded (newer/safer technology) design. The trade off? When going from New to New, the car may depreciate faster than what you would save from the interest savings on a new loan. Sometimes the tactics used to get you back to the dealership could be a little harsh, but if you do your research long before you inquire, you may come out on the winning end. Look at what you're paying in interest and consider it a ""re-finance"" of your car but taking advantage of the manufacturer's low apr special to off-set the costs."
If the discount is only for financed car then their software application should have accepted the payment (electronic transfer ID) from financed bank. In this case the bank should have given the payment on behalf of your son. I believe the dealer know in advance about the paper work and deal they were doing with your son. Financing a car is a big process between dealer and bank. "Once the examination is done, it is recommended to begin calling around to different purchasers. The most solid reestablished auto purchasers are scrap auto evacuation organizations, scrap terraces, and ""money for autos"" administrations. These are the parts that compensation the most for rescued, assaulted, and trashed vehicles and furthermore give junk car quote. It is critical to contact a few associations, additionally in the event that they are not in your general vicinity. This sort of research will offer you a thought for the going rate of the piece vehicle you have and the condition it stays in; at that point you could unquestionably recognize reasonable offers and forthcoming cheats. They ended up being the best cash for Cars Company." "I bought a car a few years ago. The salesman had the order, I knew the car I wanted and we had a price agreed on. When I refused the payment plan/loan, his manager came over and did a hard sell. ""99% of buyers take the financing"" was the best he could do. I told him I was going to be part of the 1%. With rates so low, his 2 or 3% offer was higher than my own cost of money. He went so far as to say that I could just pay it off the first month. Last, instead of accepting a personal check and letting me pick up the car after it cleared, he insisted on a bank check to start the registration process. (This was an example of one dealer, illustrating the point.) In other cases, for a TV, a big box store (e.g. Best Buy) isn't going to deal for cash, but a small privately owned ""mom and pop"" shop might.  The fees they are charged are pretty fixed, they don't pay a higher fee cause I get 2% cash back, vs your mastercard that might offer less." I have used car buying services through Costco and USAA.  Twice with a Ford, and once with a Honda.  In all instances I was directed to sales people that were uncommonly friendly and pleasant to work with.  I was given a deep discount without any negotiation.  In two of the three cases I did not have a trade.  In one case I had a trade, and negotiated a deeper discount then was originally offered.   Did I get a good deal?  Eh, who knows?  Really it depends what your goal is.   If your goal is to avoid negotiation, avoid idiot salesmen, and receive a good discount then a quality car buying service may be for you.  My research, a few years old, indicated Costco's program was better then the USAA one. If your goal is get a deep as a discount as possible on a new car, well then you have some work cut out for you.  Keep some hand sanitizer handy when you meet one of the slime ball salesmen.  Keep in mind that not everyone understand the difference between the words value and cheap. If your goal is to pay as little as possible for quality transportation.  Avoid most dealers and new cars. But I don't think that is what you are looking for. Let's say Tommy has a really awesome Mom. She packs Oreos with Tommy's lunch, and every. Single. Day.   You're on the school meal plan, and get that boring old doughnut or jelly from the cafeteria daily as part of your lunch plan. You would really rather have Oreos.   For some reason, Tommy hates Oreos, but has a real hankering for the cafeteria dessert of the day.   You seek out a mutual friend, and Alice, and tell her that you wished your mom was as awesome as Tommy's mom. Alice knows about Tommy's opposite predicament.   So Alice says, why dont you pass me your cafeteria dessert every day, and ill pass you a packet of Oreos in return.   Never one to turn down a sweet (pardon the pun) deal, you and Alice shake on it.   Before the day is out, Alice finds Tommy and makes a similar deal with him.   Ive just described a swap transaction. Two corporates, you and Tommy, seek out a swap dealer (usually a bank or broker) who makes two back to back transactions that offsets the position on the dealer's books. They collect a fee, in terms of the bid/ask spread that they quote to the corporations.   If you would like to know more about the details, feel free to drop a reply. I work on swap pricing daily as part of my job and would be happy to answer. "A while back I sold cars for a living.  Over the course of 4 years I worked for 3 different dealerships.  I sold new cars at 2 and used at the last one. When selling new cars I found that the majority of people buying the higher end cars honestly shouldn't have been - 80%+.  They almost always came in owing more on their trades then they were worth, put down very little cash and were close to being financially strapped.   From a financial perspective these deals were hard to close, not because the buyer was picky but rather because their finances were a mess.  Fully half, and probably more, we had to switch from the car they initially wanted down to a much cheaper version or try to convert to a lease because it was the only way the bank would loan the money.  We called them ""$30,000 millionaires"" because they didn't make a whole lot but tried to look like they did.  As a salesman you knew you were in serious trouble when they didn't even try to negotiate. Around 2% of the deals I did were actual cash deals - meaning honest cash, not those who came in with a pre-approved loan from a bank.  These were invariably for used cars about 3 to 4 years old and they never had a trade in.  The people doing this always looked comfortable but never dressed up, you wouldn't even look at them twice.  The negotiations were hard because they knew exactly how much that car should go for and wouldn't even pay that.   It was obvious they knew the value of money. That said, I've been in the top 3% of wage earners for about 20 years and at no point have I considered myself in a position to ""afford"" a new ""luxury"" car.  IMHO, there are far more important things you can do with that kind of money." When the 2016 models come out, the dealership marks down the 2015 model and then it sells pretty fast.  The process doesn't take that long in the car market because the 2015 models are just as good as the 2016 so if they are just a little cheaper, they will sell quickly.  If you want a 2008 Audi that has never sold, you are going to be looking for a long time. The same thing happens in every industry.  Where are the older versions of digital cameras?  Cell phones?  Blenders?  Digital pianos?  Any item that changes from year to year sits on shelves for a little while after its replacement comes out until the retailer reduces its price by enough and it sells.  The only exceptions are goods that depreciate very quickly or go bad, which are recycled or thrown away (like fresh produce, for example). It seems kind of crazy at first that essentially all goods that are produced by the economy are consumed, but that's the magic of capitalism: prices make markets clear. I have a few recommendations/comments: The trick here is to make it clear to the dealer that you will not be getting a new car from them and their only hope of making some money is to sell you your own car. You need to be prepared to walk away and follow through. DON'T buy a new car from them even if you end up turning it in! They could still come back a day later and offer a deal. Leasing a new car every 3 years is not the best use of money. You have to really, really like that new car feeling every three years and be willing to pay a premium for it. If you're a car nut (like me) and want to spend money on a luxury car, it's far wiser to purchase a slightly used luxury vehicle, keep it for 8+ years, and that way you won't have a car payment half the time! "This is completely disgusting, utterly unethical, deeply objectionable, and yes, it is almost certainly illegal. The Federal Trade Commission has indeed filed suit, halted ads, etc in a number of cases - but these likely only represent a tiny percentage of all cases. This doesn't make what the car dealer's do ok, but don't expect the SWAT team to bust some heads any time soon - which is kind of sad, but let's deal with the details. Let's see what the Federal Trade Commission has to say in their article, Are Car Ads Taking You for a Ride? Deceptive Car Ads Here are some claims that may be deceptive — and   why: Vehicles are available at a specific low price or for a specific   discount What may be missing: The low price is after a downpayment, often   thousands of dollars, plus other fees, like taxes, licensing and   document fees, on approved credit. Other pitches: The discount is only   for a pricey, fully-loaded model; or the reduced price or discount   offered might depend on qualifications like the buyer being a recent   college graduate or having an account at a particular bank. “Only $99/Month” What may be missing: The advertised payments are temporary “teaser”   payments. Payments for the rest of the loan term are much higher. A   variation on this pitch: You will owe a balloon payment — usually   thousands of dollars — at the end of the term. So both of these are what the FTC explicitly says are deceptive practices. Has the FTC taken action in cases similar to this? Yes, they have: “If auto dealers make advertising claims in headlines, they can’t take   them away in fine print,” said Jessica Rich, Director of the FTC’s   Bureau of Consumer Protection. “These actions show there is a   financial cost for violating FTC orders.” In the case referenced above, the owners of a 20+ dealership chain was hit with about $250,000 in fines. If you think that's a tiny portion of the unethical gains they made from those ads in the time they were running, I'd say you were absolutely correct and that's little more than a ""cost of doing business"" for unscrupulous companies. But that's the state of the US nation at this time, and so we are left with ""caveat emptor"" as a guiding principle. What can you do about it? Competitors are technically allowed to file suit for deceptive business practices, so if you know any honest dealers in the area you can tip them off about it (try saying that out loud with a serious face).  But even better, you can contact the FTC and file a formal complaint online. I wouldn't expect the world to change for your complaint, but even if it just generates a letter it may be enough to let a company know someone is watching - and if they are a big business, they might actually get into a little bit of trouble." "Uh, you want to lease a car through a dealer? That is the worst possible way to obtain a car. Dealers love leases because it allows them to sell a car for an unnegotiated price and to hide additional fees. It's the most profitable kind of sale for them. The best option would be to buy a used car off of Craigslist or eBay, then sell it again the same way when you leave. If you sell the car for what you paid, then you get the car for a year for free. If you are determined to go through with the expensive, risky and annoying plan of leasing a car, then you should use a leasing agent. I recommend reading some car buying guides before going out into the wilderness with the tigers and bears. Comment on Leasing Tricks Don't get tricked by the ""interest rate"" game. The whole interest thing is just a distraction to trick you into think you are getting some kind of reasonable deal. The leasing company makes most of their money from fees. For example, if you get into an accident it is a big payday for them. The average person thinks they will never get into an accident, but the reality is that most people get into an accident sooner or later. They also collect big penalties for ""maintenance failures"". Forget to change the oil? BOOM! money. Forget to comply with manufacture recall? BOOM! more money. Forget to do the annual service? BOOM! more money. Scratch the car? BOOM! more money. The original car mats are missing? BOOM! you just paid $400 for a set of mats that cost the leasing company $25 bucks. The leasing company is counting on the fact that 99% of people will not maintain the car correctly or will damage it in some way. They also usually have all kinds of other bogus fees, so-called ""walk-away fees"", ""disposition fees"", ""initiation fees"". Whatever they think they can get away with. The whole system is calculated to screw you." You mean auto dealer bailouts? Has happened multiple times already.  Also dealerships have been doing this type of lending with banks for years.. which is why direct sales is likely a mu have better model than dealership model...but hey I didn't invent this. "There are two fundamentally different reasons merchants will give cash discounts. One is that they will not have to pay interchange fees on cash (or pay much lower fees on no-reward debit cards).  Gas stations in my home state of NJ already universally offer different cash and credit prices.  Costco will not even take Visa and MasterCard credit cards (debit only) for this reason. The second reason, not often talked about but widely known amongst smaller merchants, is that they can fail to declare the sale (or claim a smaller portion of the sale) to the authorities in order to reduce their tax liability.  Obviously the larger stores will not risk their jobs for this, but smaller owner-operated (""mom and pop"") stores often will.  This applies to both reduced sales tax liability and income tax liability.  This used to be more limited per sale (but more widespread overall), since tax authorities would look closely for a mismatch between declared income and spending, but with an ever-larger proportion of customers paying by credit card, merchants can take a bigger chunk of their cash sales off the books without drawing too much suspicion. Both of the above are more applicable to TVs than cars, since (1) car salesmen make substantial money from offering financing and (2) all cars must be registered with the state, so alternative records of sales abound.  Also, car prices tend to be at or near the credit limit of most cards, so it is not as common to pay for them in this way." "For the future: NEVER buy a car based on the payment.  When dealers start negotiating, they always try to have you focus on the monthly payment.  This allows them to change the numbers for your trade, the price they are selling the car for, etc so that they maximize the amount of money they can get.  To combat this you need to educate yourself on how much total money you are willing to spend for the vehicle, then, if you need financing, figure out what that actually works out to on a monthly basis. NEVER take out a 6 year loan.  Especially on a used car.  If you can't afford a used car with at most a 3 year note (paying cash is much better) then you can't really afford that car.  The longer the note term, the more money you are throwing away in interest.  You could have simply bought a much cheaper car, drove it for a couple years, then paid CASH for a new(er) one with the money you saved.   Now, as to the amount you are ""upside down"" and that you are looking at new cars.  $1400 isn't really that bad.  (note: Yes you were taken to the cleaners.)  Someone mentioned that banks will sometimes loan up to 20% above MSRP.  This is true depending on your credit, but it's a very bad idea because you are purposely putting yourself in the exact same position (worse actually).   However, you shouldn't need to worry about that.  It is trivial to negotiate such that you pay less than sticker for a new car while trading yours in, even with that deficit.  Markup on vehicles is pretty insane.  When I sold, it was usually around 20% for foreign and up to 30% for domestic: that leaves a lot of wiggle room. When buying a used car, most dealers ask for at least $3k more than what they bought them for... Sometimes much more than that depending on blue book (loan) value or what they managed to talk the previous owner out of.   Either way, a purchase can swallow that $1400 without making it worse.  Buy accordingly." I am currently a college student and as a part time hobby/business I buy used cars from bank repossesions and flip them. In the past three months I have noticed brand new cars (less than 5000 miles on them) flood the local auctions. 449 of the 500 companies in the S&amp;P 500 used 54% of their earnings to buy back shares for over $2 trillion.   Rather than invest in development, capital, human capital, bigger dividends, they're repurchasing shares to boost their EPS and increase share value in the short term. Why is this an issue? Because it shows that these companies are uneasy about the long term. It stunts growth. Doesn't have to be research, simply expansion or rewarding employees/shareholders. Employees of the company receive no benefits and bagholders may make a quick buck short term, but suffer long. Execs of the company however get fat AF checks for hitting target ratios and price. Stock buybacks enable this.