Difference in dealer's cost when leasing via SFS vs financing via SFS?

Ask the Hackrs
1

So, I’m working on a lease for a 2024 Hornet R/T Plus at a dealership here in East Tennessee. For the purposes of taxes and fees, I specifically reside in Blount County. The sales guy reduced the actual dealer discount by $4,500 just for the privilege of me executing a lease via SFS vs financing via SFS. “Adjusted Price” on the agreement for a financed transaction is $34,345. Then for the lease agreement, the “Adjusted Price” jumps all the way to $39,845. That’s a difference of $5,500. If the same dealer discount were offered, should the final “Adjusted Price” not be $35,345?

Is there anything that makes dealer costs higher when leasing a vehicle via SFS as opposed to financing it with the same lender? If there is, can you please explain why the dealer cannot offer the same actual discount when leasing the vehicle? I feel like they’re just trying to yank me around. But I’m always open to being wrong and do not want to make crass assumptions. I’ve included all of the numbers that were relayed to me by the sales guy below. Your input is sincerely appreciated.

1st Dealer Offer on Customer Financed Option vs SFS

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1st Dealer Offer on Lease via SFS

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Revision of 1st Lease Offer with Supposed Breakdown of “Total Savings”

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2

Finance incentives and lease incentives are usually different so that seems legit. Regarding the incentives…make sure what they are offering you matches the calculator…looks like you are super supporter so you should have access…or you can check Edmunds…https://www.edmunds.com/dodge/hornet/2024/deals/

Holiday Offer
Available for: Cash Purchase, Finance, LeaseRequirements and Restrictions:
Contact dealer for details. Must take delivery by 03/03/2025. (39CRH)
Customer $ Offer
$500

Start
02/04/2025

End
03/04/2025

Clean Vehicle Offer
Leasing Bonus Cash
$6,500

Start
02/04/2025

End
01/06/2026

3

And purchase option has listed incentives in the rate findr of

7,500 for passed on EV credit and the 500 Presidents Day Bonus for a total of 8,000.

I wouldn’t have asked without having already evaluated the details on rate findr. But thanks for the suggestion.

So that makes it 8K vs 7K when comparing financed vs leased incentives. Considering that, shouldn’t the “Adjusted Price” on the agreement go from only $34,345 to $35,345? Nothing but that seems to make sense to me. Thanks again for your feedback.

4

I ran into this exact same problem when shopping for my Hornet. NO dealer would honor their “advertised price” on a lease. They all have disclaimers in the fine print that says it does not apply to leases.

On the sample you posted here, rebates are wrong. There is a total of $7000 in rebates right now. The way it is laid out, the dealer is apparently keeping $4500 for themselves. So the actual sale price is ~$46,845 and the discount is only $5335. That’s not horrible, but they should not be misrepresenting it like that.

And, to be clear, we are NOT talking about the difference in manufacturer rebates. It drives me crazy when people answer “well the rebates are different” No s**t* they are. But why is the dealer discount different???!

To answer that question, we can run the numbers in reverse on the first offer. $38484 financed over 72 months at $677/mo is… 8.5% APR. So yeah, the dealer is getting $ through the back door on that financing. If we assume for a moment that the market rate is under 6%, we can calculate that the proposed financing in an extra $3,300 in interest

So now we can see:
3300 loan kickback (?)
8000 mfg cash
6535 dealer discount.
$17,835 total off MSRP.

For the lease proposal we have:
7000 mfg cash
5335 dealer discount.
$12,335 total off MSRP

Based the he behavior of dealers, I can only conclude that the backend kickbacks on financing are pretty sweet, one dealer quietly mumbled that they might take in several thousand dollars on a deal with their “preferred lender”. This just confirms it. Most people are bad at math, so the dealer can get away with advertising a low price and then bake in a few extra points on financing to make it up.

FWIW, they can do the same thing on leases, one trick I saw was to quote me a $9k discount and then offer a lease with a zero missing from the money factor :roll_eyes:.

With this in mind, the best I was able to get a dealer to agree to on a base lease with no markups was $3000 HIGHER than their advertised price. So instead of a dealer discount of $9500, I got a dealer discount of $6500. This makes sense if they are giving up the chance to score $3k on the financing. I found only one dealer who would accept this and only on a demo car. Nobody else would even come close to it. About $2000 off MSRP was the typical “easy to get” deal, and they almost universally tried to inflate the apparent size of their discount in every imaginable way.

5

Thanks so much for this information. So, I guess you’re saying that it’s legit for the dealer to reduce their actual discount by 3K on the lease due to that being the standard kickback amount for a financed purchase, which would make it reasonable for the dealer discount to be reduced from the 9,835 to 6,835 in the case of a lease vs finance option.

6

That is my conclusion based on talking to a lot of different dealers. At the end of the day, money talks and they have no reason to steer you away from a lease other than to make $ on financing. If you can make the lease deal the same net cost to the dealer as the financing, then they will take it.

Unfortunately we are not privy to all the secret numbers to go on behind the scenes, so it’s a bit of a guessing game. They know this and try to keep as much in their pocket as they can. Ultimately I don’t think they are making any money on these leftover Hornets, so they are reluctant to give them away any cheaper.

But based on the rough math above, a dealer discount of around $6500 on an RT Plus should be within the realm of possibility.

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7

To add: I don’t think there is a “standard” kickback, it varies depending on amount financed, loan term, any bank specials being offered to the dealer, and the overall interest rate environment. I could be wrong, but for this car on this day, yeah, I would guess it’s around $3k.

1 Like
8

Thanks, Gary! I realized too that some of my numbers were incorrect in the original post. I updated it to be accurate as well as more concise. My thought is that dealers are gonna have to start offering much deeper discounts if they ever want to move this Hornet inventory. We shall see though. They’re pushing the typically misleading ads for supposedly low monthly leases like crazy right now on social media hoping they get some gullible souls in there to bail them out.

9

Asking dealers for a quote is a huge waste of time. This is all avoided by putting together a well-researched target deal and then driving the negotiations by making your own offer.

2 Likes
10

I’m quickly figuring that out. Gonna opt for your recommendation now. I’ll build offers for each VIN that I’m interested in and will then email them to the relevant sales managers.

11

Look at my most recent post here. The dealer did indeed offer the $9,835 discount. Curious to know your thoughts.

THANKS!

12

One thing to remember when calculating the dealer reserve (the money they make for marking up the rate), it doesn’t all go to the dealer, it’s split with the lender at usually 60/40. Also, the finance reserve can be clawed back from the dealer if the loan is refinanced in the first 90-120 days.

It’s risky profit, and most dealers shy away from trying to hold reserve on a deal since a savvy customer is just going to go the next day to their credit union and refinance.

Another thing to keep in mind is that the manufacturers often have crappy rates if you’re not using the subvented program (subvented = programs like 0%, 2.9%, etc.). It’s not uncommon for a manufacturers finance arm to have standard rates a point or two higher than the more competitive banks and credit unions.

13

Also worth keeping in mind that the incentives are often different with the subvented rates. You may be getting 0%, but with thousands less in incentives. Sometimes, the subvented rates are more expensive to use.

1 Like
14

I’ve been comparing both subvented and non-subvented rates when calculating the number for this lease. But I’ll always keep this in mind. Thanks.

15

At least with the jeeps, its more common with the finance programs than the lease programs. The non-subvented lease programs suck.

16

This is so true. I asked for SO many quotes before switching tactics and making offers. Quotes got me nowhere, offers got me a deal on the 4th try.

The only advantage of making offers is that I got to learn all of the dumb tricks they like to play (e.g. dealer add-ons, “trade in allowances”, preferred lenders, marked up MF, etc.) so by the time I got around to making offers I able to specifically exclude those in my offer.

17

This is true. At the moment the reason the subvented lease works on the Hornet is because Stellantis is passing through a $6500 EV credit AND subsidizing the residual AND a MF near zero. Although if you plan to buy the car at the end, this a high residual might not be an advantage and it would be better to take the $9750 IDL cash and get a cheaper buyout at the end.

18

Worth noting that idl cash doesnt apply to the standard rate sfs or ccap programs. Only non-subvented, external banks (ally, usbank, etc)

19

Correct. And those banks typically have a (much) lower residual. So if you’re buying the car at the end, the extra cash up front helps out the overall cost.

If you’re going to return the car, then just go with the whatever gets you the lowest effective monthly. It will typically be the subvented lease.

20

Under no circumstances will I be purchasing this vehicle at lease-end. So, the buttressed residual is only to my advantage. People that are actually buying this upfront or at lease-end are really putting themselves in a hole.