Car Finance cash back, how does it work?

Ru44

Hi, my friend had a call from car shop saying that she could have 3k cash back as her car has 2k left to pay on it and they say the car is worth 5k. Can anyone explain to me how this cash back system works? Are you just adding another 3k to your existing car finance? So in turn giving yourself more to pay off again, thus earning them interest? I don't want her going down another route of debt, in my mind it's better for her to pay off the car and sell it than be in further debt.... Any help much appreciated.

Thanks in advance...... 

DrEskimo

They are highlighting that the cars value is higher than the amount of finance owing on it.

If she wanted to, she could sell the car, or part-exchange it against another car, and have £3k in her pocket or towards the purchase of a new car.

The question is, does she want or need a new car? Along with her car being worth more, all other used cars are equally priced higher, so what she gains by selling her car now, arguably she is losing against the higher price of the replacement.

f she is happy with the car, she can just focus on paying off the finance (overpaying to save interest if possible) and ignore it's current value.

BTW this isn't specific to car shop. She is free to sell the car to any garage/dealership/online broker she likes and then use the money to settle the finance and keep what's left over. Whether she clears the finance first and sells it really only matters if she wants to make a private sale easier (possible she can command a higher sale price than a garage would offer).