DONT PAY CASH AT CAR DEALERSHIPS! (Heres Why) – Car Dealer Reacts – Marko – WhiteBoard Finance

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We like marco no i i and and i think marco’s spot on and i and i think he’s got a wonderful way of presenting the information too it’s actually really nice in a clear and concise fashion way better than us well yeah because we don’t use a whiteboard because can we be confident my name is marco and i’m here to help you master your money and build your wealth and

Today we’re going to react to the video okay today’s video we’re going to be talking about how you should never tell a car dealer that you are paying cash especially during the sales process and especially during the negotiation process if you’ve saved up money to buy a car with cash congratulations that is a good thing however most people think that this is a

Positive thing and it’s a negotiating chip in their favor when in fact it’s probably hurting them making them pay more for the cost of the car is he right um yeah i guess yeah to a degree yeah yeah yeah i i mean so far everything marco said i you know we’re 30 seconds into checks out to to papa shovska 32 seconds in and and i’m on board with marco so new car

Sales account for 58 of sales at a dealership so when most people think of car dealerships they think that they make a majority of their money on the sale or the price of the car which couldn’t be further from the truth although new car sales make up 58 of sales it only accounts for 26 percent of gross profit the reason for that is because pricing is transparent

Now people have phones they have apps they have the internet you can find out what the price of a car is in roughly five to ten minutes if you just do some preliminary research it’s not that hard um i don’t know if i agree with like get the pr you getting actual price of a car is actually really hard i mean we’ve been looking i mean the cost the invoice yeah i

Mean like it almost seems like a misnomer to suggest like you can just google search invoice price of toyota rav4 and it’s gonna pop right up it doesn’t you know like everyone has estimates around what it is yes that being said um i 100 agree with that i mean pricing is much more transparent a lot of one price dealerships it’s it’s a lot easier to know what a

Dealer’s yes and and and he’s also absolutely correct that that the dealerships aren’t making a lot of money yeah on the on the sale of the new cars um you know if 58 of their volume is in new car sales but only 26 percent of their gross profit is off those numbers actually seemed high to me i was reading an nada report i mean i think it’s even less gross profit

Comes but i mean let’s let’s assume for a second that that the numbers he chose to use are accurate well you know more than half of your business is producing barely a quarter of your gross profit that speaks volumes you know the money is not to be made selling the car itself it’s what happens after you sell the car which i see he’s got number two and number

Three let’s see what he says so car dealers need to make money elsewhere so what do they do they make a majority of their profits from f and i accessories service fees and parts these are the major profit centers of a dealership the car is simply a vehicle to get you into high margin finance and insurance products that’s what fni stands for those are the guys

In the back that do your paperwork so fni is simply where they sell you gap insurance wheel insurance extended warranties protection packages etc etc and the funny thing is is that 55 of these extended warranties according to extensive research shows that these extended warranties are never used so you’re paying for a product that you end up not utilizing so if

I was a casino and i had a five percent house edge right here at 55 i would be salivating at those numbers uh that’s spot on yes i mean we’ve we’ve been saying from almost day one in our videos yeah um you know that the that the big profit center is part service and finance and insurance and on the on the vehicle side of things it’s finance and insurance and

The 55 percent of extended warranties that are not used i don’t know how many times do you pay for your automobile insurance and that’s not used yeah yeah it’s i mean it is it it is it’s a hedge um that you’re that you’re paying now in case you have a problem the in in to be clear the dealership doesn’t benefit if you do it don’t use your warranty no it’s the

Warranty company exactly it’s it’s it’s the the issuer of the warranty yeah um that that benefits so that five percent edge is for aul corp the third party warranty provider it’s not for john doe mercedes-benz no the moment they sold it at a 1500 markup that’s when they were happy and that’s all their profit exactly yes whether it gets used or it doesn’t get

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Used exactly yes greeted by a salesman hey i’m marco with no lube chevrolet where we service you with no lube how can i help you today uh i qualify you i put you on kid’s show a car you go on a test drive you come back from the test drive hey mr and mrs car buyer how’d you like that new car smell you know let’s uh would you like some coffee or tea we’ll take you

Inside look at some numbers how does that sound and we go through the sales process and this is where the negotiation starts most people that are cash buyers shoot themselves in the foot at this step right here do not tell them you’re paying cash this is where you kill all of your negotiation power and i’ll explain why so dealerships are incentivized remember the

New business model where does uh 74 of their revenue come from outside of the sale of the car it’s from fni and other things service packages accessories etc etc the way that dealerships make money is by literally becoming the bank so they can either be their own lender or they can shop out your profile and your credit score to all the different lenders in their

Network and they can probably get you a pretty good score however this is where they make money and this is where you have more room and number one to negotiate on price you lead them to believe that you are financing with them okay just pretend that you’re not a cash buyer you’re putting down 10 15 i don’t know make up a number so once you do that the dealership

Knows that they’re either going to make a flat which is basically a commission so when mr mrs car buyer you know end up taking a loan with dealerships bank x bank x is going to pay the dealership a flat fee or a commission or the other way that dealerships make money through financing is through loans is through points or financial reserve so basically all this

Is is that you qualify for a buy rate say you’re an 800 credit score the loan is gonna be four percent right that’s the buy rate the dealership will bake in numbers they’ll bake in two extra percent called the sell are you over 25 have a clean driving record you can drop your auto insurance rate all right and that’s where they make the arbitrage that’s where they

Make the two percent spread so for quick math if you took out a 20 000 loan financed at sixty months at uh four percent and they get it two at six that two percent difference is worth one thousand thirty three dollars over the course that loan and spread that might be true except the dealership doesn’t get a hundred percent of that all right explain that okay

The reserve um compensation is usually the dealership gets 70 and the bank gets 30 interesting so yes there could be a thousand sixty three dollars um and the dealership’s gonna make a little over seven hundred dollars out of that 1063. that gets paid to the dealership though uh once the loans like signed off on right it’s not over the lifetime of that loan well

But let’s say that most customers don’t pay off their loan over the full course of time they trade it in they pay it off they pay off a 60 month loan in 36 months so the dealership can be charged back interesting okay for uncollected future profit so the the the bank gets to charge the dealership back interesting so they might get paid out immediately but then

They get charged back oh they do there’s chargebacks every month wow finance people hate that so now you can see where the dealership would be more willing to negotiate on price is because they’re making money here on the payments makes sense so now you’re probably asking yourself well marco you know i don’t want a loan what does all this lead to i thought the

Point of this was to buy the car with cash yes so when you go into the back office and f and i okay where they sell you the gap insurance the wheel insurance all that good stuff that’s actually where you find the sheet and you basically break down every single one of the costs okay and we’ll get into that right here okay so this is where the rubber meets the

Road in the video this is what you’re going to do in the back office so you are taking out a loan from either the dealer themselves someone part of their network or actually the manufacturer’s financing arm so like lexis financial gm financial et cetera et cetera the reason you were doing this as mentioned earlier in the video is because you’re going to beat

Them up on price once you finish the sales negotiation on the floor with the salesman you’re going to be in the back office and they’re going to present to you your final numbers okay so typically what this looks like is is you’re going to see retail price this car was 32 997 dollars well you got us down to the sales price which is now 30. they’re gonna break out

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Your local taxes in this case i just assumed ten percent that’s high but just assume that uh for easy numbers then you have like doc fee fee one uh government fee fee two you know some bs fees that they make up which i’ll explain to you in a second here what to do you have gap which they’re going to build into this gap insurance and then accessories and service

Packages things like that i just ran out of room on the whiteboard so you’re going to come to a total number of whatever that is you know five figures minus your down payment and that’s going to be the amount financed now this is where you actually want to still continue the negotiation process and don’t be afraid to walk away if they don’t meet this okay this

Is going to save you money so pay attention so since you’re taking out the loan first and foremost you need to understand if this loan has a early prepayment penalty if it does then what i’m explaining is not going to work it’s not worth the effort if it doesn’t which most loans shouldn’t have an early prepayment penalty um then you just save yourself a bunch

Of money and you can send me a commission check in the mail if you want to just kidding not really all right so what happens is once you break all this down you’re gonna say oh uh doc fee 500 bucks uh no thanks i’m crossing that out government bs fee no thanks i’m crossing that out yeah what is he referring to with government bs fee what do you think uh i have

No idea and and and if if i may um you are allowed to pause whenever you want by the way okay if i may the the argument i have here is that honestly there’s there’s a mistake in the whole concept and the mistake is as you and i tell people is negotiate the out the door price okay and that’s done with the sales person and the sales manager that is not done in

The finance office because the finance guy only controls the paperwork and the financing he does not control the pricing so if you want to argue about fees that and and we’ve discussed this in other videos do you want to if you want to you want to i’ll link to it yeah we’ll link to it up here somewhere um fees that are taxed are fees that can be negotiated fees

That are are not taxed are fees that can’t be negotiated and you can know that while you’re still negotiating with the salesman or the sale or sales person or the sales manager so that should all be done when you’re working on the out the door price don’t worry about the the payments at that point don’t worry about the interest rate at that point once you’ve

Agreed to an out the door price then you can say now let’s establish what my payments will be yeah and i guess so the the point is like accessories you’re not going to be able to negotiate that with the f and i manager they’re not involved in that you know really they’re not so you need to the type of accessories that they’re involved with are the products or the

Products the shelves yeah not not the uh you know they added door cards or something like that that was the sales manager who put that on the car yeah so you so i agree with you negotiating the out the door price should happen on the sales floor or over email then when you get to the fni office i’m interested to see what marco says here but i mean he’s pretty

Pretty much spot on the thing that i’ll mention about government fees however is um your point tax welfare’s non-taxable i mean if you’ve got uh like local tax or local fees for registration and title and things i mean they are what they are you can’t negotiate yeah yeah yep i don’t need it i’m just saying for this example if you want gap use it whatever i don’t

Care uh accessories i don’t need it unless you want it then you have them redo the price they’re gonna say oh this doc fee that’s state mandated if i charge you x i have to charge everyone else x otherwise i’ll lose my license blah blah blah blah well guess what for all the big brain people in the comments that are going to leave a negative comment this is just

A negotiation chip okay you don’t have to knock this out all you do is you take this 500 and you take it off the price of the car you say okay i’ll pay the 500 dollar fee if you charge me does that make sense so you’re just buying yourself more negotiation power but i could have said no i can’t do that all could have been done with the sales person and the sales

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Manager that yeah that doesn’t have to happen in the finance office yeah that’s why you discussed the out the door price okay i’m sorry that you know what you say thanks mr f and i have a great day and you walk away with a smile on your face and you drive off into the sunset i’m just kidding but anyway you’re buying yourself more negotiation power so you’re still

Going to end up paying for the sales price of the car you’re still going to pay the same tax that you would have paid you may buy yourself some negotiation power with these bs fees you’re not going to pay this stuff you have them redo the total you put down whatever you said you’re going to put down and this is the point of the video you get your payoff amount

From the lender let’s call it 30 days later or 45 days later you say hey what’s my payoff amount it should simply just be these numbers sales price tax whatever the amount you financed minus your down payment and you send them a check cash you just paid cash for the car while still this summer at least you got a paid one thing yeah we don’t even get paid for having

These ads in our videos did you no there is video getting all the benefits of the sales price negotiation does this make sense okay so now that i saved you a bunch of money this is how i’ve been buying cars my entire okay i don’t care how he’s been buying cars his entire life be careful you don’t want to come across no no no i don’t no no no because because that

That’s that’s irrelevant to the conversation around yes and i think marco’s spot on and i and i think he’s got a wonderful way of presenting the information too it’s actually really nice in a clear and concise fashion way better than us well yeah because we don’t use whiteboards because then we would be copying them but my point is you don’t have to wait 30 or

45 days by waiting 30 or 45 days there’s a daily interest charge on your car loan yeah okay so it normally takes a bank about a week to book a loan once they’ve gotten it from the dealership okay so wait a week to ten days call the bank what’s my payoff send them a check or do a wire transfer then yeah and in essence you’ve paid cash and you’ve you’ve financed

Whatever you financed and you’ve paid a finance charge on whatever amount you financed for seven or ten days as opposed to 30 to 45 days and you’ve just saved yourself a few more dollars yeah that’s a good point yeah so that that that that’s my only quibble um with that otherwise i i think you know just out the door pricing if you want to if you want to pay the

Loan off after do it a week to 10 days after you’ve bought the car not 30 to 45 days other than that marco’s 100 percent spotlight and maybe we’ll have to try and get in touch with marco i mean we have the out the door price estimator back on our website yourautoadvocate.com out the door price or if you go under tools it’s right there and i mean that’s meant

To help you understand what your taxes you know estimated taxes are going to be on your purchase and your title and registration fees in your state what that’s going to be so to help you kind of you know you see an internet price online and then what’s that really going to be out the door and then to his you know point use the um you know the dock fee that’s

A negotiation piece you know work that off of the selling price um but no i i really think this is a really it’s a smart way to approach it because if you do walk in you say i’m paying cash then you’re gonna end up paying more for that car because they’re not gonna make as much money and now as usual have you as you’ve explained the chargeback system to the

Dealership you kind of got one over on it so kudos to you good for you well it’s not kudos to you or good for you it’s just you’re trying to you’re being strategic you’re trying to maximize your savings exactly and there’s nothing wrong with that no no and then and that’s that’s what you should be trying to do when you’re spending your money so marco good job

Proud of you my friend um you know like i said only a couple little things that i would quibble with but other than that 100 spotted

Transcribed from video
DON'T PAY CASH AT CAR DEALERSHIPS! (Here's Why) – Car Dealer Reacts – Marko – WhiteBoard Finance By Your Advocate Alliance (YAA)