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united-states car

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March 7, 2026 Score: 3 Rep: 35,002 Quality: Expert Completeness: 30%

The trick is this:

Car dealerships often make money off the loans they provide to customers, as well as the sales of actual cars. Most car salesmen are therefore incentivized to sell clients loans, in the same way that they are incentivized to sell cars. Put simply, they get extra commission when you take out a loan. The dealership itself is also probably rewarded. Therefore they are happy to cut a bit off the price of the car in order to get you to do it (and especially happy to give you a rebate, which doesn't reduce the actual price of the car and thus means you don't take a smaller loan.)

Neither of them care what happens to the loan once it is taken out. They already have their money.

If everything is as they say it is, this "trick" doesn't hurt you at all. You get a cheaper car, they get their money for selling you a loan, and you get to pay off the loan immediately. Only the loan company loses, and they are playing the odds to they don't really care either.

Of course the problem is when things don't work out exactly like the salesman says. For example there may be fees associated with paying back the loan, or it may take a couple of months before you can do it, or some kind of assumed interest even when you've paid it back, or something.

You should make sure you completely understand what would happen, that you've read and understood the terms of the loan, and you get something in writing signed by the salesman saying how you do this. Also get a quote for what it would cost if you paid cash so you can compare.

March 7, 2026 Score: 3 Rep: 2,783 Quality: Low Completeness: 20%

You've already accepted a good answer, but I'd like to make you aware of one "gotcha" that no one has mentioned.

The dealer submits paperwork to the DMV (Motor Vehicle agency whose name varies by jurisdiction) to establish title in your name. If you finance the car, the original title will show a lienholder, i.e., the finance company.

Once you pay off the loan, you will have to obtain a "Release of Lien" document from the finance company and submit it to the DMV along with your brand new title plus a fee to get a new title with no lienholder so that when the time comes to sell or transfer the car, you can transfer a clear title.

The typical DMV fee to process a release of lien in the U.S. is about $50 but some states have famously high fees like Louisiana at $134.50. There's also the hassle factor to consider any time you have to deal with the DMV. You can decide if it's worth it or not, depending on the size of the rebate.

March 7, 2026 Score: 2 Rep: 39 Quality: Low Completeness: 50%

This is actually a fairly common practice at car dealerships and by itself is not necessarily a red flag.

Dealers often receive a commission from the lender when they originate a loan. Because of that, they sometimes offer an additional rebate or discount if the buyer finances the vehicle through their partner bank instead of paying cash.

If the loan truly has no prepayment penalty, you can usually take the financing to qualify for the rebate and then pay the loan off shortly afterward. In that case you effectively receive the discount while still ending up owning the car outright.

That said, you should carefully review the loan agreement to confirm a few things:

  • there is no prepayment penalty
  • there is no minimum loan duration requirement
  • there are no hidden origination or financing fees
  • interest is calculated daily and stops once the balance is paid

Some lenders also have “chargeback” rules where the dealer loses their commission if the loan is paid off very quickly (for example within 60–90 days). That typically affects the dealer rather than the buyer, but it's something to be aware of if the dealer asks you to keep the loan open for a short period.

So the situation itself isn't unusual, but the exact loan terms matter.

March 7, 2026 Score: 1 Rep: 150,747 Quality: Medium Completeness: 50%

Most of the dealers I went to said they could give me a rebate (typical 750) if I financed the car through them. They claim there is no penalty for paying off the loan early.

Other answers have told you the basic reason why the salesman/dealer want you to take the loan. They also explain why they will offer some of their profit to entice you to take the loan. They also explain some of the things that could be hidden in the loan agreement that would make the deal less of a good thing.

I am going to assume that the dealership is honest and there are no tricks, but you might not want to take the rebate and loan deal.

  1. The negotiation will take longer.
  2. The negotiation will be more complex. You will have to agree mot just on price and trade-in but also the rebate and the loan terms.
  3. You will have to fill out a loan application.
  4. They will have to do a hard pull credit check.

Only after they do the credit check will you know what the rate and length of the loan is. The loan they can make might not meet the terms of the rebate qualification.

You are probably thinking "I am getting $750 in free money, and it only costs me an hour of my time." But did you get the best deal?

If you get a 6% loan, that is 0.5% a month interest rate and that $40,000 loan will rack-up $200 in interest that first month. If you don't payoff the loan quickly the $750 will be gone quickly.