If dealer can reduce money factor to cover the warranty then aren’t you at a marked-up money factor? Dealer can’t/won’t reduce MF below base. Goal is to avoid marked-up MF in the first place.
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In my deal. Started with the base 0.00155 MF that Lexus was offering at the time, I put down 4 MSD that put the MF down to 0.00123. Either they ate the $750 as a “discount”, or the money factor was actually reduced.
When I ran the numbers the money factor came out to be around 0.00098 for my case to cancel out the $750.
Maybe they were hiding the number somewhere else, but either way, essentially came away with an extra $750 in my pocket with near zero haggling after the msrp was already reduced by 12%.
Just something that people can try to haggle into the sale if it means they’ll reduce the price further since they just assume most people won’t cancel it.
Personally, I would consider this as negotiating in “bad faith” if this was your plan from the start. It’s not illegal but I wouldn’t advise somebody going into a lease with this strategy.
However, from your story, it seems like they start messing around and doing something not “straightforward” so they have nobody to blame but themselves.
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I hope you don’t go to this dealer for service for the next 3 years. They tried to make some extra money without hurting your deal and you essentially screwed them. Agree with @chrisgo
Out of state deal 800 miles away. They won’t be hearing from me anytime soon.
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@Ursus, I think @MConte05 gets a pass after the dealer does this to him … not feeling so bad for the dealer. Just wouldn’t use it as part of any normal negotiating strategy 
Dealer isn’t stupid (or shouldn’t be in business if they are). They know the possibility of someone canceling. Yet they voluntarily made this offer anyway.
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And Walmart or Costco sell big screen TVs before Super Bowl knowing perfectly well that there will be many more returns right after. Does it make people who buy right before and return after Super Bowl less unethical?
But the OP did not go in with that plan so it’s a flawed analogy.
Anyway I can already see we probably have two irrreconcilable POV so we can just agree to disagree
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Was this a Lexus warranty and what did it cover above and beyond the standard Lexus new car warranty?
http://www.fidelitywarrantyservices.com/
This is all they cover:
- One brake pad change
- One battery change
- Headlamps
- “Belts and hoses”
- One set of wiper blades (clearly the biggest value here! :p)
- “Electrical coverage”
- One Wheel Alignment
Basically complete B.S., nothing the standard lexus warranty wouldn’t cover. But they were pushing it hard.
Yes, he did:
Also, read the title of this thread. But if that dealer tried to screw OP on the deal before, so who can blame him for screwing dealer back?
All I’m saying is that this “hack” is unethical if a dealer acts in good faith.
After reading the warranty, I think it is fair to cancel. The warranty was itself a rip-off.
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Of course it is. But in this case OP’s lease terms were adjusted (lowered) to include warranty, on which dealer obviously planned to make money instantly rather than on inflated MF over lease length.
Again - I’m not talking about buying warranty and then cancelling it. It’s absolutely normal.
All is fair in war and leasing!
I don’t see the difference in this and refinancing a car loan after making the first payment. My credit union has a program to reduce your existing loan by 2%, but they don’t offer much in the way of the initial loan. So we got the loan from the dealer then immediately refi’d. I know car dealers and banks have kickback agreements.
Yea as far as I’m concerned I had no intention of getting an extended warranty (especially on a lease) but after saying no several times they persisted and explained they’d drop the mf more. If they wanted me to buy this so badly then sure. Except I knew it was total b.s. and didn’t want anything to do with it.
What warranty plan for a lease would be “in good faith” on a dealer in your opinion? The factory warranty offered by any manufacture for the first 36/36 is pretty comprehensive. I see it on par as trying to sell undercoat spray or window etching by a dealer. They are just trying to screw us over for some more money.
Anything they offered (lease terms, warranty or anything else) and you accepted. No one can force you to do something you don’t want to do. Your explanation that they “persisted” (forced you? threaten to break your legs?) sounds like an excuse for putting extra $750 in your pocket at their expense after you agreed to their terms.
But this is IMO and I’m not judging anybody here in this particular case. However, I disagree with the title which suggests a “hack” on how to cheat dealers - buying warranty (while never intending to keep it) in order of getting discount for the corresponding amount to lower monthly payments, wait for financing to clear and then canceling.
When I say they persisted, they gave me the option, I turned it down, they brought it up again saying “oh everyone does this”, turned it down. Then mentioned “we’ll bring the MF down so it basically cancels it out” , even then I still turned it down. They mentioned a few more times that the payment absolutely wouldn’t change, then after making absolutely sure the payment stays the same, agreed to it.
They could have just as easily said “alright, no problem” and moved on. Even though my deal was through email and over the phone, still felt like I was in an F&I office trying to get offered warranty plans that they are hoping a sucker will buy.
Guess it’ll just be something that we’ll have to agree to disagree on. 
I personally don’t see the problem when they had the opportunity to let it go the first three times I turned it down. Seems they tried to sweeten the deal, and so I now see it as a way to get some more money back, since that’s what we are all after.
I think some people also don’t realize that you can indeed cancel out these warranties and often get prorated for what you haven’t used. I’ve had friends who felt extremely pressured by dealers to get these things when in the F&I office, and agree to it just because of the pressure. On a new car, it’s terrible way for a dealer to act IMO. If buying a used M5 with 100k miles? Okay, gimme some warranty options that I can shop around for… for a brand new luxury car with bumper to bumper factory warranty for 36 months and 36k miles? Get outta here.
People give up to pressure all the time and buy things they don’t want/need, which is completely understandable. Then they just go home and cancel whatever was pushed on them. The difference with your case - you still managed to make $750 on this. So I put it this way, if you like it better - you outsmarted your dealer
So was the mf marked up? How can they lower the mf if it is not marked up?
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