Request the Car Dealer's Buy Rate
| Request the Car Dealer's Buy Rate |
If you intend to finance or lease your next car, the dealer's Buy-Rate is the most important piece of information that you can obtain. It is also the most challenging to extract from the dealer. The buy-rate on a loan or lease is proprietary information that is meant for the car dealers only. (This is how they are able to sell cars below invoice and still make nice gross profits on the “Back-End”).
The buy-rate is an interest rate (or on a lease it is a Money-Factor) that the dealer “buys” from the bank and then “resells” to the customer at a profit. For example, a dealer buys a loan at 7% then sells it to the customer at 8 % making 1 % in finance profit.
There is no "silver bullet" that you can use to get the dealer to share this information with you. As we mentioned earlier, one of the best strategies is to mention to the salesman or F&I Manager that you understand that the dealership will need to make money on the rate. However, in order for you to craft an appropriate offer you will need to know the buy-rate.
Never-the less, this is not easy information to get from the salesman because most of the time they will not have access to the buy-rate. Usually, they will have to ask the sales manager or the F&I manager, who may purposely provide the "Liner" with inaccurate information.
The best solution is not to ask the salesman for the buy- rate but instead ask the F&I Manager. This can be accomplished by requesting to speak with Finance Manager to ask him some quick finance questions.
Ask the Finance Manager for the buy-rate. This also can be tricky; ideally the customer should try to meet with the F&I Manager in the finance office and not in the showroom. If the Finance Manager comes out to meet you in the showroom, he or she will have to go back to office to reference the buy-rate and when they return they most likely will provide you with "packed" rate or money-factor.
It is most effective to catch them in their office, off guard. Keep in mind, F&I managers are not used to customer's asking about the buy-rate. Most customers have no idea buy-rates even exist.
Once the you meet with the F&I Manager, you should explain that you are considering a purchase of a specific vehicle and would like to know the Term and interest rate (or if leasing, the money-factor).
Usually, the F&I Manger will then supply the customer with the retail amounts.
This is where you need to catch them off-guard. Then say “I know you have to make a profit on the rate, how much over the buy-rate are you quoting me?”
The manager generally will freeze and say one of two things: “that is the buy-rate” (which is probably a lie) or the will tell the customer how much over the buy-rate they are charging. Keep in mind, the buy-rate will be valid for only certain terms.
It is important to include “I know you have to make a profit on the rate” otherwise the manager will see no benefit in sharing the information.
...the customer should say “I know you have to make a profit on the rate, how much over the buy-rate are you quoting me?”
Example of buy rate information gathered from the F&I Manager:
Rate: 7 %
Term: 60 Months
Buy-Rate: 6.25%
This applies for leases in the same way except the “rate” is called a “money-factor” and the customer must request the “Residual value”.
Example of the buy rate information gathered for a lease from the F&I Manager:
Money-factor: .00375
Term: 36 Months
Buy Rate: .00280
Residual: 52%
Recap: After the initial dealer visit, the customer has Test driven the car. Discovered the ACV (Actual Cash Value for their Trade-In) and the Dealer's Buy-Rate |
| < Prev |
|---|
