The Loan Calculator and Prime Rate Widget mentioned here are available in our Financing A Car Lesson.
Here’s the script for the “How To Negotiate A Leased, Financed, Or Cash Car” video:
You’ve submitted your new or used car counteroffer, and the sales manager has prepared a list of options from the desk. Basically, they’ve called you out, so it’s critical to understand how to negotiate a leased, financed, or cash car.
Now it’s time to show your hand, just like in a poker game. If you aren’t familiar with poker, it’s a card game with a series of hands where players will either keep betting to stay in the game or they will quit, called folding. Ultimately though, once all cards are dealt, if there are two or more people still playing, then they will have to show their cards to see who has the highest hand.
It’s at this point when you negotiate a leased, financed, or cash car that we make our true intentions known.
We’ll write what we want to accomplish on our initial offer sheet and sign it.
If you want to buy the car and finance it, you’ll write what you’re willing to pay for it. In the case of this F-150, I’ll write the invoice price of $40,237 for the price minus current rebates of $1,755 for a total of $38,482. I know that my Pilot is worth $11,000 on trade, so that’s the number I’ll write there. My objective is to put zero dollars cash down payment as my Pilot money will serve as that down payment.
Now you can pull up any auto loan calculator or use the one on this site or in the finance section. Don’t forget that we’re going to add 10% to the purchase price to cover taxes and fees. We’re also going to use the current Prime Rate to get close to our payment target. Going after the prime rate is an aggressive play, but a manufacturer’s lender may be able to get close.
Now after everything’s set, it looks like my payment target is a little over $500 a month at 72 months. We’re putting down 26% in this scenario, so even credit scores in the low 600s should tier well enough to land a decent interest rate.
Putting it all together, I’m going to write $500 in the payment section and sign that if they honor these terms, I will buy it today. This offer is aggressive, though, and I’m well aware of that. However, the dealer will still make some money if they accept it.
Remember that up to this point we’ve been doing our best to keep the sales team off balance but by laying out our intentions for them like we just have, now they understand that you know what you’re doing and so they should be less likely to play any games…not to say they won’t try though.
After all, when you’re a hammer, everything starts to look like a nail.
In this scenario, If you’re going to pay cash or if you’re already approved for outside lending, then just tell them. Offer the same price and ask for the same on trade. Write the number for the difference in the down payment section and scratch out the payments. Sign it and send it and send it to the tower.
Things get a little bit different on a lease, but since a little over 30% of all new car sales are leased, it’s important to know the strategy here as well.
Remember when I had you get the invoice and base your initial counter on that invoice price to get options for financing?
That was to set up a counter where you can get the lease below sticker price. The tower already accepted an offer for you at invoice price, so they can’t go back on that now without losing face. The important distinction here, though are rebates. You will lose out on purchase rebates when you lease.
In fact, on this particular truck at the time of filming, there were zero lease incentives, only cashback on a purchase. Many manufacturers do have lease incentives, so we’re going to pretend that this one does as well. In this case, we’re going to say that Ford is offering a $500 rebate.
So this is how our counter looks on a lease.
The purchase price went up because we lost some rebates, but we did manage to take $500 off of the invoice price. Just getting that couple grand dip from MSRP will end up saving us around $60 a month in this scenario. This is a far better outcome then if we’d gone in hot from the start saying that we were looking to lease a truck.
It’s unlikely that the dealer would budge from sticker in that scenario because the payments look so attractive anyway, especially for people who have only ever purchased before.
We’re sending it in without payments filled out because frankly, the formulas are too complicated to figure out for most people because they lack all of the information, such as the money factor and residual value.
As long as they honor the price, in a lease, it’s called the capitalized cost; the payment is what it is based on the money factor.
Just make sure to tell the dealer that you will only lease from the manufacturer’s finance company so that you can have the best potential for the lowest money factor. Those captive finance companies encourage sales by reducing monthly payments due to offering low rates.
Regardless of if you want to negotiate a leased, financed, or cash car, it’s essential that you play your hand correctly.