Buying a car has never been fun, but one shopper found out just how upside down the process can be. Instead of scoring a deal by flashing cash, he was told it would cost him $1,000 more than if he agreed to finance.
The frustrating scenario popped up in the Dave Ramsey subreddit under the post titled, “Buying a car, and the dealer says it’ll cost $1000 more if I pay cash.” The buyer spelled out his confusion: “As the title suggest, dealer will charge me $1000 more if I don’t finance through the dealer. Is there any reason why I couldn’t finance the car, collect $1000 discount, and pay the car off tomorrow without paying any interest?”
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It might sound backwards, but other users quickly explained why it happens. One, who worked in banking, cut right to the chase: “Simple — the dealer gets a kickback on the financing, usually a couple of percent.” Another, raised in a dealership family, said it’s not just a little bonus. “They get more than a kickback, they mark up the interest rates up to 4% higher and get a large portion of that in return… dealers make money on service, finance, rebates and hold back and used cars. There is very little profit in a new car if they don’t mark it up.”
That’s the hidden math: dealerships often make more from arranging the loan than selling the car itself. Cash doesn’t come with extras like interest, warranties, or markups, so in today’s market it can actually be less valuable to them. As one commenter bluntly summarized, “Dealerships are not selling cars, they are selling loans.”
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Still, some buyers try to play the game. One user bragged about gaming the system: “A dealer tried this once with me, I tricked them by agreeing to financing it with them, signed an agreement, then told them my down payment would be just $100 short of paying off the entire car… They ended up just giving me the discount and I paid for the car fully in cash. Basically, I ‘flipped that sh*t.'”
But not everyone was convinced the trick would work. Another user pointed out that most lenders set minimum loan amounts, making a token $100 loan unlikely. Others raised the bigger warning: don’t assume a loan can be wiped out right away. “If you are going to finance just make sure there isn’t a prepayment penalty,” one commenter advised. Some contracts even require you to keep the loan open for several months before paying it off, which can erase any savings.
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So is this common? In recent years, yes. Big dealerships with manufacturer financing deals often sweeten the price only if you take their loan, then punish cash buyers for cutting them out of the profits. Smaller or independent dealers may not do it, but the practice has spread enough that many buyers have run into the same headache.
The original poster summed it up perfectly in his edit: “I hate buying cars, and your support is appreciated!”
Dave Ramsey himself wasn’t part of the conversation, but his stance is no mystery. Ramsey’s philosophy has always been simple: skip the financing altogether, pay cash, and negotiate for the best deal. The numbers may not always make sense in a dealer’s showroom, but Ramsey’s core principle hasn’t changed — don’t play their loan games.
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