Car Buying Tips - Back End Profit Center

The ‘back end’ of the car deal is essentially all the variables and salesmanship that you are confronted with once you enter the dealer’s F&I (Finance and Insurance) department to sign all the necessary paperwork (and then some).

On the back end of the car deal is where a buyer can really get lost in the numbers and the dealership can score very well on the profit… particularly if the buyer has opted in for letting the dealership arrange for the financing .

And by the way… it’s probably O.K. for you to let the dealer ‘compete’ for your financing. I say compete because I know at this point you’ve done your financing and have a good idea of what you qualify for in a loan, what your credit is, and what your interest rate will be. If you don’t know this or haven’t researched your financing situation… you DO NOT want to have the dealer do this for you! Remember the ‘back end’ is where a dealer can make a lot of money on your car deal.

Bottom line… get yourself pre-approved before you even set foot on a car dealership’s lot.

One aspect of car deals and car buying tips that we’ve not touched on is the element of cash… and more precisely… if you are going to pay cash for the bottom line amount.

We all should be so lucky to even have this as an option. But, if you do, it is probably not in the best interest of you getting the best car deal possible if you tell this to the sales person right up front.

Why you ask…

Remember… we just talked about the back end of the deal and how dealers rely on the back end to make additional money on the whole deal itself. If the dealer / sales manager knows that there is not going to be a back end because you are going to pay cash; then (s)he knows that they are going to have to make their number on the front end of the deal… this means getting them to come off the selling price of the new car or squeeze some additional money out of your trade-in is going to get much tougher.

The same will probably hold true if you’ve been pre-approved for your financing… in essence you’re taking away the ‘back end’ profit for the dealer, so it’s best from a negotiating perspective that you hold those cards close your vest.

Having said this though, there is certainly nothing wrong telling the dealer up front that you would welcome offering the dealership a chance to beat the financing numbers that you’ve already got in your pocket.

Selling cars for dealerships and sales people is a very competitive business and something that you as a consumer can certainly leverage. Many times you may decide on which deal to go for between multiple dealers based simply upon how you were treated at each of the dealerships… whatever the ultimate reason… the numbers you arrive at are greatly determined by your diligence in your research and homework and your patience at the car dealer.