You've been brainwashed into thinking that by paying cash for that new or used vehicle of your dreams, that you'll get a “better deal. " You hear it in all the car buying circles as well. The logic is the deal is much easier and more simplified. The truth is, you can actually get a much better deal if you finance your next dream car.
In “old school" car buying, paying with cash did have some benefits. But if you want the best possible deal on a new or used vehicle, make sure you tell your salesperson that you'll be financing the purchase. In fact, let them know that you want the extended warranty and the gap insurance as well!
Now you might think that I'm out of my mind here, but if you truly want the best possible deal on your next car (or truck) purchase, read on and learn the “new school" of car buying. This technique will save you $500-$1,000 on your next vehicle purchase. Guaranteed!
Let's look at this scenario and put yourself in the dealers shoes and you make the decision. Mr. Customer is looking to purchase a brand new Ford Taurus. There is no trade involved; it's just a simple straight out purchase.
The customer knows that the invoice on the vehicle is $25,388. Ford's rebate is twofold: there is $1,500 available and an additional$500 if you finance with Ford Motor Credit for a total of $2,000. The customer knows that there is $830 in dealer holdback and the dealership has a documentation fee of $599.
He's calculated the dealers net cost on the vehicle to $21,959.
He makes an offer to buy and drive the car home today at $20,500 plus the tax. That would equate to $1,459 below actual dealer cost. Not an acceptable deal for the dealer right? They can't afford to stay in business taking a deal like that.
The sales manager who is controlling the deal is going to tell the sales person that they need to sell the car and get at least $23,000 to be anywhere close to a deal. Assuming that was the bottom line figure from the dealer, that would mean you'd be $2,500 apart right? If the customer won't budge off his $20,500 figure and the dealership needs to be at $23,000, it looks as though this deal won't happen.
As this deal starts to end, Mr. Smart and savvy customer asks his salesperson how much a 6 year 100,000 bumper to bumper warranty will cost as well as the gap insurance. When the salesperson goes back to the manager to find out what the cost is, a light bulb goes off in the sales manager's head.
The sales manager is starting to think differently about the deal now because he knows the dealership will make money on the back end from the financing.
The sales manager will get his finance manager involved at this point to see what kind of money they can make on the back end. When the business manager sits down with the customer and goes over all the options with the warranty, gap insurance and the payments of the vehicle, the business manager determines that he can make $3,000 in profit from those products.
The sales manager now has a decision to make. The store would lose $1,459 by selling the car but would make $3,000 on the financing and the back end products or a net profit of $1,541. Is that a deal worth taking?
If the customer was paying cash, there is no way the store would take that kind of deal. However, since the customer is financing and the dealership is going to turn a profit on the whole deal, that's a deal you could get, and that's a deal most sales managers would take.
Since car dealerships make money on the financing, you can always get a better deal by financing as opposed to paying cash. Therefore, if you want the best possible deal on your next vehicle, make sure you communicate to the dealer that you'll be financing with them.
Now I know what you're thinking. . . You don't want all the back end products. You want the deal for $20,500 without the additional back end products. In my next article, I'll show you how to get it for $20,500 and not end up with the extras!
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