All the so called car buying experts say “never buy a new or used vehicle based on payments.” Most franchised car dealerships will attempt to work their deals based on payments because they know that if they can get the customer to focus on a payment that they will make more money on the deal.
Payment buyers always pay more money for their vehicle of choice. Well almost always. There are exceptions to the rules and if you follow my lead here you can get that once in a life time deal. First of all you have to do a little homework on the vehicle that you’re looking to purchase whether it’s a new or used vehicle.
Second, you’ll need an amortization calculator in order to figure a car payment. Thirdly, you need to know what interest rate you can qualify for. And lastly you’ll need a little patients to play the back and fourth game. When it comes to homework, you need to know what “triple net” (dead cost) is on the vehicle that you’re looking to purchase.
I’m going to assume that you know how to figure out what dead cost (triple net) is on the vehicle that you’re looking to purchase. With the knowledge of knowing what the triple net (dead cost) figure is on the vehicle you want to purchase and your amortization calculator this is how you buy your next vehicle and get that once in a life time deal.
First of all, if triple net on the vehicle you want to purchase is $20,000, the MSRP is probably somewhere around $23,000. When you sit down to negotiate your deal, the first set of payment figures you’ll see will be inflated. They might hit you with a $699 payment on that $20,000 vehicle!
Your goal is to buy the vehicle $2,000 back of triple net. Depending on the vehicle that you’re looking to buy, $2,000 back of dead cost could be adjusted up or down but that’s a good place to start on most vehicles in the current depressed car market. Assuming you can qualify for a 7% interest rate this is how you figure your deal: Remember, your goal is 2K back of triple net or dead cost.
So on your first offer you need to make the offer based on 3K back of the $20,000 figure. If you take a figure of $17,000 (3K back of triple net) and add your sales tax that will put you somewhere around $18,000. If you can get 7% on 60 months financing your payment will be in the 350 range.
When you negotiate your deal, you negotiate strictly on the payment and the term. Your first offer to buy on this deal should be $350 a month at 60 months. That would equate to about 3K under triple net. The sales manager working the deal at this point is going to start crunching numbers to see how far apart they are.
More than likely he will take that triple net figure and see what kind of payment he can get to. At 72 months he can get down to about $375 a month so he’ll think there’s a deal that can be put together. You’ll get a counter offer of somewhere in the 4-5 hundred dollar range depending on how “strong” the sales manger is.
On your next offer, you can make a $15 increase to $365 per month on 60 months And you tell the salesperson that if they can’t do that then you’re leaving. When the salesperson goes back to the sales manager, stand up as if you’re ready to leave. Seeing that you’re on your way out the door, the sales manager is going to get involved which will “cut to the chase.”
If you were able to buy the vehicle 1K back of triple net your payment would be in the low $400 range on 60 months. The sales manager is going to try and make a few hundred dollars at this point so his payment will be in the mid 4’s which will put you pretty close to a deal. Let’s say that his best number is $439 per month at 60 months.
You could tell him that the most you can pay is $385 and hold firm on that number. You’re $54 a month away which would equate to about 3K so you’re probably not going to get that deal. But the way dealers are hurting to move units right now, that’s a deal that could possibly go down depending a few variables. You could say that if you can get the deal for under $400 a month you’ll sign up.
The sales manager is going to think that you’ll close at $399 which means they will make another payment concession to get even closer. If they went $500 back of triple net, you’d have a $425 payment. So now your only $26 a month apart from making your deal. At this point it’s all about “splitting hairs.” You’ve got a deal it’s just a matter of how much more you want to play with them.
But here's the "Bottom Line" on why buying on payments can get you a better deal. When you're focus is on payments and not on price, your perception by the dealer is much different. If you're all about price and keep trying to beat them up over price, they are more apt to throw you out of the store.
But when you're focused on payments, the dealer will be more willing to work with you to get you the vehicle. They will cut their deal even further than they would normally sell the vehicle for knowing that you're buying on payments and will finance the vehicle with them.
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