A car buyer recently shared on Reddit that they walked into a dealership planning to buy a new car with cash. But the sales manager dangled a tempting offer: take out a 72-month loan, get $1,500 off the price, and just pay it off in the first month. The interest would be around $100, so they’d still come out ahead.
Dealership Discounts Come With A Catch
This strategy isn’t unusual. Dealerships often push financing because they receive incentives from lenders when loans are kept open for a few months. Many Redditors confirmed they’ve done the same to snag extra rebates or discounts. But it’s not always as simple as writing a big check a few days later.
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“Read your loan contract. Probably not,” one commenter replied when asked about prepayment penalties. Others echoed that advice, saying that what the dealer says doesn’t matter, only the contract does.
Some contracts include requirements like keeping the loan open for at least three months or paying a minimum amount of interest. “I had to have a loan for at least three months to avoid any penalties so I financed and got the car for $5000 cheaper,” one person said, describing a common condition tied to dealer kickbacks.
Why would the dealer offer a discount knowing they might lose money? According to another Redditor, “Probably worth the gamble that the person won’t pay it off.”
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Good For You, Bad For The Dealer
The main risk with this approach isn’t to the buyer, but to the dealership. “The finance manager told me straight up, ‘Please wait three months or we have to pay the difference,’ so I waited,” one person admitted.
Another said they paid off their entire loan within five days, paying around $30 in interest but saving $2,000 on the price. The dealership didn’t like it, but couldn’t do anything since there was no early payoff clause.
Others pointed out that most modern auto loans, especially those longer than 60 months, legally cannot include prepayment penalties in many states. Still, not all lenders follow the same rules, so reading the contract matters.
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If you’re offered a discount for financing, make sure there’s no early payoff penalty in the contract. If there isn’t, and you’re not planning to take out another major loan soon, paying it off early could save you hundreds or even thousands.
As one Redditor put it: “Do what’s good for your wallet, not what’s good for some stupid number spat out by a proprietary algorithm that none of us have any real insight into. Finances over FICO.”
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