Anonymous asked in Cars & TransportationBuying & Selling · 4 months ago

How does buying a used car from a dealership work?

*Please don’t judge, this is my first time buying a car without the help of my parents* 

So if a car is listed for $7,995 and the processing fee is $495, that would make the total price $8,490, right? So if I put down $1000, making the price $7,490; with 60 month payment plan, that’ll be about $124 per month, right? My credit score is good. 

18 Answers

  • Anonymous
    4 months ago

    When buying a used car from a dealer just pray that they use lube before they screw you.  Check Kelly Blue Book, Carfax, and Craigslist to find what the same car is selling for elsewhere before you even step on the lot.

  • garry
    Lv 5
    4 months ago

    first he dealership will add there profit margin , usual 25% more than what they paid , plus the cost of making the car sellable( cost of tyres , service , any other cost) which you pay . 

    TiIme payment is the cost of doing the paperwork ($500)added to your loan , and interest is added to the final amout incuding the commision . And you pay alot more on payment .

    In other words they make more on a used car compared to a new car.

  • 4 months ago

    They will add all kinds of fees if you let them.   Paperwork preparation fee,  license,  sales tax,   delivery etc.  If you finance the car thru them they want to have ASK MUCH as possible financed to get the interest.   And then if your credit is not so great they will charge you a higher interest.  You might see what kind of interest you can get from your bank before you go walking into a dealership. 

  • Anonymous
    4 months ago

    1)  isn't there sales tax where you live?  what is the interest rate on the loan?   2)  if some used car dealer says there is a $495 processing fee, I would tell them to fxxx off and leave - they are crooks and probably sell junk.  PERHAPS a $25-$50 fee for them to obtain a new title for you but NO "PROCESSING FEE" . . . .   3)  If the asking price on a used car is $7995, you should be able to dicker them down to $7000 or LESS.  4)  it is apparently an older car at that price . . . . so you're going to be paying for it for 5 YEARS?  How old will it be then?  How many repairs needed on an older car in 5 years.

    I'm not trying to be Debbie Downer - - I've bought good cars that had 100,000 miles on them and older cars too . . . but I know something about them and dealer tricks.  At the least, you should have the car inspected by a mechanic to make sure you aren't buying trouble.

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  • 4 months ago

    We don't know what your used car loan interest rate is. You're better off going to your bank or credit union for a loan instead of letting the dealer set the loan up. Only put down $100. Don't let them talk you into an extended warranty or other add ons.  Used cars are always over priced on the lot. Offer them $6500 and dicker.

  • ?
    Lv 7
    4 months ago

    Not even close. There's probably sales tax on the purchase as well. There is also interest on the balance. You don't want to take 5 years to pay it off. The car may not last that long.  Your payments are more likely to be $160 - $190 and don't forget the cost of insurance.

  • 4 months ago

    Don't worry, we've all been through it.

    Your math is right, but your answer is wrong.

    You never mention the INTEREST RATE.  That gets added to the $124.

    IMO, I would NEVER buy a used car and pay for it for 5 years.

    By stretching out the payments they're really stretching out the INTEREST they will be STEALING from you...with your consent.

    Here's how it works: 

    1.  The initial dealer made money when they sold the car.

    2.  They made money again when they purchased the car in a trade-in...they BUY LOW.

    3.  They made money when they sold a replacement car.

    4.  They plan on making money when they sell it again...SELL HIGH.

    If they give you a hard sale and tell you that they're not making any money...THEY'RE LYING.  They won't sell AIR without making a profit. 

    Did you do a Kelly Blue Book search to see if the car is overpriced?  

    You need to learn how to haggle and offer them no more than $7000 for the car.  They're also making over $400 just on the processing part.  All it is it a title transfer with your lender being listed as the lien holder.

    You also didn't mention it's age or the type of car.  At $8500 it's at least 5 years old and will be requiring EXPENSIVE maintenance/repairs SOON.  Do you have the money for that?

    I don't know your financial situation or your urgency of need for a car, but IMO, you would be better off saving more money to buy a newer car.  I'm pretty sure it's not the words you wanted to hear (read), but that's my opinion.

    FWIW, I've paid cash for every car I've owned since the 1990's.  I had a difficult time buying my 2018 Honda Accord since they wanted me to finance it (to make money).  I refused.  They called me 2 days later...I wrote them a check for $32,400.  The car was paid off when I drove it off the lot.

  • A.J.
    Lv 7
    4 months ago

    The first question is whether the car is worth $8000. Check its value at They have street value and retail value. On the price they add a no value to you fee as their extra profit. PAYING $1000 down payment is part of the price. Used cars need more maintenance and may not last 5 years. You are required to carry full insurance. The loan on the car has interest payments you have not included. The payment is MORE than $124/month, unless the car is worth much less.

    Dealer financed is usually a rip-off. You must go to a credit union or bank for a car loan and price it out based on the car.

    At the dealer, even with "good" unstated score, probably not very good at all, figure 8% APR where it should be 4% with a credit union with truly good credit. The APR could be offered at over 8% actually for higher payments from the dealer.

    $7490 @ 8% APR 60 months (5 years) is about $152/month

    $7490 @ 4% APR Is about $138/month.

    AT 8% it's $9120 total paid, plus the $1000 for $10,120 total for the car.

    It is only worth about $6500 in typical street re-sale value.

    You are committing to the loan, though you can pay it early avoiding future interest.

    If the car is worth $1500 after 5 years, it cost $8620 over 5 years, plus maintenance, insurance, registration costs. You cannot resell it without the loan being paid off.

    You have to pay extra money to sell the car because at $1000 down, from a dealer it is usually worth less the day you drive it and stays underwater in value.

  • k w
    Lv 7
    4 months ago

    just don't over extend yourself, it is quite easy to do......I'd buy a late model cream-puff and there's not much available these days for list price of 7,995 ! maybe in the 1970's

  • 4 months ago

    Processing fees are a trick that dealerships use so they can get away with falsely advertising lower prices.

    Processing the paperwork is part of the cost of doing business as a car dealer. Charging your customers $500 to file paperwork is ridiculous.

    So you need to either negotiate to have that fee waived, or just mentally think about it as though the car is $8500 and decide if that's still a good deal.

    As for your math - yes that's the correct way to think about it: add up the TOTAL cost of the car, then subtract the amount you're going to pay as a down payment (aka deposit) and what's left is the amount you'll need to finance. The monthly payment will vary based on your credit score (which affects your interest rate) as well as the length of the loan.

    But you're forgetting the cost of taxes, title fees and licensing. When you buy a car at the dealer they'll collect the sales tax, the title fees (paid to the state for issuing a new title that shows you as the owner) and licensing (covers the first year of registration). Ask the dealership for an estimate of those fees and go through it line by line to make sure they're not sneaking additional fees into the deal. I already don't trust any dealer that charges a $500 "processing fee"

    Remember to look at the total cost, not just the monthly payment. the fastest way to being broke and in debt is to buy a bunch of stuff with "low payments" but failing to look at the actual total price of the deal.

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