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Car Financing - How it Really Works Prior Lake MN

Car financing is frequently misunderstood by automotive consumers. Learn how dealer financing works, how to get approved, when to get a co-signer, and the importance of good credit.

St. Paul, MN
Prior Lake State Bank
(952) 447-2101
Prior Lake, MN
Getten Credit Co
(651) 645-5881
202 Snelling Ave N
Saint Paul, MN
North Ridge Community Credit Union
(218) 748-6868
921 17th St N
Virginia, MN
Rochester Methodist Hospital
(507) 535-1460
Rochester, MN
McCarthy Auto World
(916) 420-9923
3350 129th Ave NW
Coon Rapids, MN
Midwest Home Loans
(952) 888-4038
10800 Lyndale Ave S
Minneapolis, MN
(218) 773-1132
1512 Central Ave NE
East Grand Forks, MN
Wells Fargo Bank Na
(218) 847-1361
211 Holmes St W
Detroit Lakes, MN
Security State Bank of Marine
(651) 433-2424
120 Judd St
Marine On Saint Croi, MN

Car Financing - How it Really Works

One of the most misunderstood concepts about buying or leasing a new car is how car financing really works. Dealer financing, specifically, is misunderstood.

We'll say it again later, but the key concept to understand is that car dealers do not finance car loans and leases. However, dealers can most certainly affect how you finance and what you pay for financing.

Dealers always sell for cash
Car dealers are independent business people who have an authorized franchise with one or more car manufacturers. They do not work for the manufacturer; the manufacturer does not own the dealership.

Dealers buy cars from the manufacturer, usually with large "floor-plan" loans from a bank or finance company. The bank charges dealers interest on these loans. Dealers have to sell cars to pay off these loans with associated interest, as well as cover other expenses of running a business.

When a dealer sells or leases a car, he always receives cash, whether it's directly from the customer, or from a finance company or bank who has loaned a customer the money.

A common misconception is that dealers would rather get cash directly from a customer, bypassing the financing step. Some people mistakenly believe that dealers give cash customers a discount. This is not true. In fact, dealers typically get a commission or "finders fee" on car financing provided by banks or finance companies and therefore prefer that customers finance or lease...

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