I started email negotiations with some dealers which led to a couple of phone conversations. While chatting with one dealer about the adj cap rate, he claimed that it was not important to me (but to him).
He said that he has two levers to make money and that’s on him to worry about: cap rate and MF. He claims that on his papers he can either raise the cap rate and or reduce MF to arrive at the same monthly payment for me, but adjust it to bonus his team. For example, he can lease the car to me with a $1 cap rate and a super high MF (to commission his finance team), and the monthly payment can come out the same as a $30000 cap rate with base MF.
So, he was trying to get me to focus on the monthly and DAS I wanted so he could either accept or counter.
Is this sound reasoning or is he trying to hide something that I’ll be surprised with later?
If you know the base money factor, and all the proper numbers, dealer discount you want, etc, and you determine that some hypothetical car would be a great deal at 399/mo with $1500 total due, using the base money factor, incentives etc, then in a way, it really doesn’t matter how the dealer gets there if they make that specific pricing happen. They could discount the car more than your target and up the MF.
Obviously I prefer a straight up deal that doesn’t involve funny math, but like I said, if you have all the factors considered, and you know what a good price is with pre incentive discount, mf, etc, then it really doesn’t matter how they get there, if they get there.
Now, if you don’t know any of this stuff, then that’s a great way to get a bad deal. They’ll make it seem like they accomplished your goal but for all you know they could have a huge marked up money factor and not much discount but because they hit your number you’re happy. That would be on you for not knowing ahead of time what a good deal looks like.
Yeah, I mean if you tell me you can’t do 11% base MF but you’ll do 13% with a marked up MF and it’s ultimately the same price, who cares. Sometimes things like this can literally just be done to appease or make a deal look better to management.
This dealer knew that I had the nearby comps and base MF. He hinted that he was willing to take a ‘loss’ on the cap cost (14% below MSRP is what I calculated at base MF) because he wanted to push volume.
For context, this Mazda dealership recently expanded/rebranded: bought a couple of acres and built a new building. So, he claims that he needs to hit volume quotas to get on the manufacturer’s special list for priority treatment.
It’s worth understanding that dealers have different payment structures. Sometimes they get bonuses on amount of volume sold, sometimes on amount of marked up mfs. It may be in his best interest to mark the mf up and increase the discount a corresponding amount. There’s nothing wrong with that. All comes down to you having done your homework ahead of time to know if you’re getting a commensurate discount or not.
Yes, it can be a good thing if the dealer gets to your desired numbers. I had a dealer refuse to get me base mf unless I bought a protection package. It was like $250 for tire protection but ultimately saved me $20/mo because I got the base mf. If it’s on the exact car you want, no reason to give up a deal for $5-10 per month or worry how they got there.
Ther others above have said it best. I you havent done your homework and go in asking to hit a monthly, you run a high chance of getting taken to see George Jefferson (he owns the cleaners).
As for dealers reading posts here…of course they do. Many of them may not know their own rebates, models names, or MFs, but most know how to use the “Googlemachine on the Internets”.
The 2nd option will, as far as I can see, will pretty much always be better for the buyer. Ive tried to concoct a scenario where it wouldnt be, but I cant think of one?
This is a great input - I observed dealers doing what you said but could never connect the dots. Somehow I felt MF was more of a finance function and not a sales function, and sales guys don’t benefit from the MF changes.
Yes, this is one way to do the deal but make sure the monthly and DAS are very well researched - meaning use these LH,Edmunds forums to get to the competitive number. And do showcase in your email that you have done your due diligence.
It also depends on the dealership. Many times I’ve made a reasonable offer and the dealers just accepted. No math breakdown needed.
Others you’ll show them all the numbers and you’ll never meet. It’s not because they’re not understanding the math, because they are. They know those number well but they may not be willing to give base money factor, or the discount you think you deserve
Well, sometimes the dealers give you this kind of message even though our offer is reasonable. “if you are able to get a signature model CX-5 for several hundred less per month than what I quoted you, I would drive to the dealership immediately and purchase. Please let us know who it is as well so that we may purchase from them too.”
Not every dealer is going to be willing and able to meet your numbers. Nothing wrong with that; just move on to someone that will.
This is where it’s important to have your numbers be well researched so you know that your ask, while aggressive, isn’t completely unreasonable. You need to have the confidence in your numbers to recognize that a statement like that is as much a sales pitch as it is them declining your offer.
In all my past personal deals, being upfront has worked well for me. I lay out everything cleanly, MSRP, Discount Pre-Incentive, Incentives, MF, Residual, Monthly, DAS Amount, etc.
I then simply tell them that if those numbers are acceptable I’ll either be in today to sign or will leave a deposit/credit app immediately (just depends on whether the deal is close by or 4 hours away).
It doesn’t always work on the first try, but it has never failed me ultimately. It’s how I wound up with that $676/mo Macan 2 years ago.
Those kinds of responses are always hilarious! I have gotten a few of them as well.
Another variation on that response was received one time when I was actually looking for two cars. I made an offer that, if the dealership accepted, I confirmed to them I was willing to come down and sign on two cars at the same time.
Their response was “We would lose $X thousand dollars selling you a car at that price. We don’t have any interest in selling you one car at that price, never mind two!”
This is word for word my approach. I find it particularly useful when F.O.L.P. (fear of low payments) shows up with the dealer.
There are other times when just giving a monthly/das works as a negotiating strategy, however, I personally have had better luck breaking things out. My last several leases were negotiated in two emails this way.
