How 'forced financing' makes some car dealerships more money

Some dealerships in Canada just don't want your cash when you're trying to buy a car.

Tammy Hussey discovered that when she took her 84-year-old father car shopping this summer. After test-driving a 2021 Jeep Compass at a Toronto dealership, John Hussey had the money in his bank account to buy it outright — but his daughter says he was told he could only drive it home if he financed it.

After spending 30 minutes trying to convince the salesperson to let her dad use his savings to buy the car, Hussey said he "abruptly" told them to "please leave." 

"Everybody jokes about the used car salesman — they're known to chase deals and move product. So to be told to leave a dealership when you basically are ready to write a cheque for the car? I still can't get over it."

North York Chrysler did not respond to an interview request. However, according to its website, "to prevent exports and non-retail purchases, cash sales are restricted to local customers residing within eight [kilometres] of the dealership."

That meant John Hussey, who lives in the northeastern Ontario city of Timmins, was out of luck. 

But one consumer watchdog says what happened to Hussey is an example of "forced financing," a tactic some Canadian car dealerships have been using to make more money on every sale.

Shari Prymak, executive director of the non-profit Car Help Canada, says when a dealer sets up a loan on a used vehicle, it gets a commission from the lender — whether that be a bank, credit union or alternative lender. 

But that doesn't happen when a customer pays cash.

"The dealership makes more money when you finance. So it's in their best interest for you to do so." 

Cost of Living reached out several times to Canada's largest lenders: Scotiabank, CIBC, RBC, BMO and TD for more information about the commissions they give dealerships, but their spokespeople either did not respond or declined to comment.

According to Kenton Maitland, general sales manager of Platinum Mitsubishi in Calgary, commissions can range from $500 to $2,000 per vehicle, depending on how much a customer finances and the interest rate on the loan.

While Maitland said financing is a "big revenue source" for dealerships, he doesn't turn away customers who want to pay cash because he thinks that would tarnish his "long-term relationship and reputation."

While lender commissions are a long-standing practice in the automotive industry, Car Help Canada only started hearing about forced financing in 2022. Since then, the non-profit has received more than 100 complaints.