So you haven't figured out yet that the interest is basically added into the base price? They aren't losing anything on this deal.
And why pay off the car?
1. Debt sucks.
2. Making payments on a totaled/wrecked car sucks.
3. I'd rather pay the car off, then stick additional money into something that will get me 10-15% interest.
the buying price of the vehicle doesn't change regardless of the interest rate you recieve... so, no the the loss of finance charges isn't re-couped in the base price of the vehicle. Whoever told you that knows nothing about how a dealership works. Very few dealerships do in-house financing. So, recouping the cost that you would inevitable make through finance charges isn't even possible. The lender and the dealership are two seperate Companies. GMAC, who typically offers 0%, is a lender owned by GM... not the private franchise owner of a GM dealership.
This is the dumbed down version of how new car sales works between Manufacturer and Franchise dearlerships
Manufacturer allows certain allotment of vehicles per dealership depending on market area, past sales history, and customer satisfaction.
Manufacturer sells vehicles the dealership at an invoice cost minus cost of dealer hold-back to cover cleaning of cars - gas fillups when car is sold - etc.
Dealer sells vehicles at the MSRP (manufacturers suggested retail price) to make a profit. Some dealers will tack on a Market area adjustment for rare cars or add on aftermarket equipment to boost profit.
Custumer then decides how they want to finance the vehicle.
Dealerships assist with the paperwork/financing much like a broker would, but they do not lend the money.
The finance person is basically making money from what the lenders pay them through holding interest points, selling extended service contracts, GAP protection etc.
It makes no difference to the dealer if a customer gets 20% from their own bank or 0% from GMAC. They're still selling cars and increasing their market area.
Who is taking the loss on 0% would be the manufacturer, but it doesn't matter to them, because they just want to move inventory to make room for new model year inventory that people are willing to pay 6% interest with no incentives to buy. Make sense?
So you buying a car at 0% is a great deal for you. You get the same car, at the same price as when people were paying 6% earler in the model year. You just don't have to rap up all your money paying finance charges.
As for paying the car off; it's really more of a personal choice. There's benefeits to either; I just don't see the point in sinking money into a depreciating asset when you could put into an appreciating asset.
