Hi, I was thinking to lease but now thinking to buy in cash. Would be between 30-35k cash.
What are some tips? What % discount should I seek? I see a lot of advice sharing not to say you will pay cash until the end or to finance and then pay it in full if there is no prepayment penalty.
Any advice/tips?
What benefit do you think you gain by doing that?
Keep in mind that dealers typically get some amount of kick bank from the bank when you finance, so you’re willingly removing one of their income streams (which is definitely going to come out of your pocket instead).
For a dealer, a cash deal is a negative. It means that they have no chance of making reserve (money made by marking up the rate), or even a flat fee for writing the contract at the buy rate. The odds of selling warranty products also declines to almost zero on a cash deal.
I’m retired from over 25 years in the business, working for a manufacturer, captive lender, and running dealerships. The notion that a cash deal is somehow better is rooted from decades ago when it took time for banks to fund a deal. If a dealer had to wait weeks or longer for a lender to fund them, it made sense to offer a discount so they could get their money now. With modern systems, a deal is often funded the same day.
If you’re talking about cash in the terms of paper bills, not a check, then many dealers won’t even want to do it at all. Reporting cash transactions to government agencies, tying up multiple employees to count and recount the money, escort it to the safe, and then to the bank to deposit it is costly and time consuming.
Where cash can sometimes make a difference is with smaller mom and pop used car lots. They don’t typically have access to the big lenders with immediate funding, and a cash deal is more attractive to them. Make sure you’re not at a buy here pay here lot, though, they don’t want anything to do with your cash, as they make money on the high-rate finance-repo-finance it again strategy.
Everything begins with vehicle selection. There’s really no point discussing anything hypothetically
Research the vehicle and see what’s out there for discounts. If the dealer won’t play ball say you want to pay cash but if they can give you a better discount you are willing to finance and keep it open for three months. Then just pay like 95 percent of the loan down immediately so interest is minimal.
I’ve done that twice now either to keep good graces with the dealer (so I continue to get allocations) or to thank them for a great discount.
Don’t. Finance at the dealers rate to get max savings up front. Then ensure there’s no early payoff for the financing and then payoff in full.
I financed my M550 instead of paying cash, and got a $500 incentive from BMWFs.
It cost me $33 in interest before I paid it off 3 months later.
I kept it open that long so the F&I person didn’t have her finance commission clawed back.
If there are rebates to finance, finance it, wait 4-6 months (if you want to be nice and not have the F&I guy get charged back), and then pay it off in full, alternatively, if they’re offering a heavily subvented rate like 2.99-ish or below, consider if paying cash is even worth it. Lastly, don’t expect some extra or special discount just because you’re paying cash, they don’t prefer that method of payment above all others.
Even better, finance it but pay off everything (except for the 3-4 months of payments finance needs) the day after delivery…will save some hundreds in interest.