This comment was posted to reddit on Oct 12, 2017 at 2:32 pm and was deleted within 9 hour(s) and 33 minutes.

That's not quite true, actually (re:cash). A cash sale is more lucrative than a financed sale; on vehicles, financing uses the vehicle as collateral, so the dealer needs to work with both the buyer and the lender to complete the deal. As a result, there may not be a *published* incentive for cash payments, but you wield more negotiating power when you intend to pay cash.

Here's why:

Say you go to a dealership that has six salespeople and averages 2 car sales per day. Each sale is worth a gross amount of $20,000, which comes out to a net of $5,000 to the dealership (after factory incentives, dealer discounts and throw-ins, etc.), of which 10% ($500) goes to the salesperson as commission.

On average, 1 out of every 12 people who come into the dealership each day get to the point of entering the purchasing process on that day, meaning we can expect 24 people to come through the door each day (2 cars sold per day). Assuming four salespeople work each day (i.e. 2 people are off every day) a 10 hour average day, we can say that the average salesperson works with each car buyer for 50 minutes.

Of course, that isn't really practical since non-serious car buyers will only be around for 30 minutes, while converted sales will take longer. Assuming a salesperson serves 12 people per day, then on days where nobody buys, they have 6 hours of service time and 4 hours of down time, but on days where someone converts they have 4.5 hours to convert a sale.

Most vehicle sales involving financing require multiple trips - one for initial negotiations and a second for finalization of financing - so for the sake of argument, let's say that it takes 4.5 hours in total - 2.25 hours for each appearance (and a total of 2 hours of time is spent arranging financing). This would give salespeople who make a sale roughly 2.25 hours of down time on days when they are actively in the sales process. A lot of assumptions here, but let's stick with it.

What all of this means is that a dealer wants its salespeople spending their time working active sales, but because every minute spent working an active sale takes away a minute that could be spent working *another* active sale, there is incentive to reduce the amount of time it takes for a salesperson to complete a sale.

If you have one sale that requires financing and takes 4.5 hours but another sale that does not require financing and takes 2.5 hours, that means the finance-free sale gives you 2 full hours to dedicate toward another sale. Your salespeople's time is not unlimited (keep in mind that down time is related to customer rhythms, not to the salespeople themselves).

Down to the point here... if we say that you have a bucket of 5 hours, you can spend those 5 hours making two cash sales or one financed sale. On the financed sale, you will earn $4,500 for those 5 hours of work. On the cash sale, you can earn up to $9,000 for those 5 hours of work. This means that you have $4,500 to play with. If you offer cash buyers an extra $500 incentive to close, then you could clear $8,000 - $3,500 more than financing one car.