When Dealers Say “We Can’t Do That” 🚨 Documentation beats Conversation!

Why did the dealer suddenly find you a lower interest rate? Here's something that happens in car dealerships every single day. You're sitting there trying to buy a car and you have some plans to do some financing. You've negotiated the price. You've talked about your trade. And finally, you get to the financing part. The finance officer hurriedly goes in and out of his office and then comes back and says, good news. We got you approved. Great, you say. What's the interest rate? Feeling you out a bit, he says, 9.9%. Wait a minute. You say, I have good credit. I don't think I should be paying 9.9%. Now something magical happens. The finance manager leans back in his desk. He thinks about it for a second and then he says, you know what? You're right. I know this banker pretty well and they owe me. Let me make a phone call. I might be able to call in a favor. Oh boy, here we go. Maybe he leaves the office but goes somewhere to pick up a phone where you can still see him. This is great theater going on. Maybe he just punches a few buttons on the computer and waits. He has a visually animated phone call and five minutes later, he pops back in with some amazing news. I got in touch with the bank. I got them to drop you to 7.9%. Wow, what a guy. It looks like he just saved you 2%. Do you owe him for working for you, you wonder? Except there's something I want you to understand. The bank may not have lowered your rate at all. It's even unlikely that there was any conversation happening at all. The dealer finance manager may have simply lowered his built-in profit. And today I'm going to show you how this works. Because if you're financing your next vehicle, this is exactly why I want you pre-approved before you ever walk into a car dealership. I'm Kevin Hunter, The Homework Guy. And now we're going to do some homework. First, you need to understand two different rates when a dealership arranges financing. There can be a difference between the rate available through the dealer's lender program and the rate ultimately written into your retail installment contract. People in the business commonly talk about lenders buy rate and customers contract or sell rate. Let's make this really simple. When the dealer sends their credit application to a lender, the lender approves the deal at a particular rate. It's a rate you're unlikely to see. For our example, let's say that rate is 7.9%. But depending on the lender, the program, and applicable rules, the dealership may be able to write your contract at a higher rate and receive additional compensation for arranging that financing. So maybe he or she presents you at 9.9%. That two-point difference can represent money. And who do you think is paying for it? Well, you are, my friend, through your monthly payment and the interest you pay over the life of that loan. Now you look at the finance manager and say 9.9%? No, that's way too high. And this is where things get interesting. Let me call the bank, he says. And then he comes back. Great news, Kevin, I got them down to 8.9%. What just happened here? Is it possible that something actually changed with the lender? But it's also possible that the dealership simply gave up some of that finance profit that was built into the original offer. The bank didn't necessarily discount your interest rate. The dealer may have discounted its own profit. That is a very important difference. So what about that phone call? Now before somebody gets excited in the comments, yes, sometimes the finance manager really does need to call the bank. Absolutely. The dealer may be asking the lender to reconsider something. They may be changing the term. They may be changing the down payment. They may be trying a different lender. They may be correcting something on the application. They may be trying to get an exception. There are legitimate reasons for that phone call. But here's what I don't want you to do. Don't assume that because somebody picked up a phone, the bank just gave you a special favor. I don't care whether they called the bank, the president of the bank, or their Aunt Betty. I want you to know, what interest rate do I actually qualify for? And there's only one really good way to have an answer to that question before you ever walk into the dealership. Get pre-approved. This is why I've been telling car buyers for years, if you're financing a vehicle, get pre-approved before you go shopping. Get your pre-approval with your bank, your credit union, or another reputable lender. Shop your financing because when you get pre-approved, you walk into that dealership with something incredibly powerful. Information. Let's say I walk into the dealership and they tell me, Kevin, the best we could get you is 9.49% and I didn't do my homework. What do I know? Nothing. Maybe 9.49 is fantastic for my credit. Maybe it's terrible. Maybe I could get 7%. Maybe I could get 12%. I don't know if I don't have a pre-approval. I'm completely dependent on the person selling me financing to tell me whether the financing is good or not. That's a terrible position to be in. Now, let's change one thing. Before I walked into that dealership, my credit union pre-approved me at 6.49%. Now the dealership says, great news. We got you 9.49% and I say, no thanks. I'm already approved at 6.49. Boom. The whole conversation just changed. I don't have to argue with anybody. I don't have to accuse anyone of marking up my rate and I don't have to know what the dealer's buy rate is. I don't even need to care. I have 6.49%. Here's my response. I'm already approved at 6.49. If you can beat it, I'll finance with you. That's it. Now they have something to beat. You just turned financing into a competition. This is where car buyers get this backwards. The dealer should be competing for your financing business. You shouldn't be begging them for a loan if you already have an approval. Now you can say, here's the rate. Here's the term. Here are the conditions. Can you beat it? If the answer is yes, great. I don't have a problem with dealer financing. In fact, sometimes the dealership may have access to an excellent rate. The manufacturer's captive finance company may be running a promotion. The dealer may have a relationship with a bank or credit union that can beat your rate. That does happen. They may have a 0%, 1.9%, 2.9% or some other subvented APR offer for qualified buyers. If they can save me some money, I'll take their financing. The problem isn't dealer financing. The problem is walking into the dealership without knowing what you could get somewhere else. That's the mistake many car buyers make. Why would the dealer suddenly lower your APR? There are several possibilities. Number one, the dealer reduces finance markup or participation. Number two, the dealer found another lender with a better approval. Number three, the original lender reconsidered the deal after something changed. Number four, the dealer found a manufacturer subsidized program that you qualify for. Or number five, and I really want you to understand this one, the dealer realized you were about to take your financing somewhere else. Think about this. Let's say the dealership had an opportunity to make some money by arranging your financing, but then you put your credit union pre-approval on the desk. Now they have a choice. They can try to beat your rate and potentially still earn something for arranging the financing, or they can watch you use your credit union because they get none of that financing business. Now they have a reason to sharpen their pencil. Funny how that works, isn't it? And here's where the monthly payment game gets dangerous. This is also why I don't want you negotiating a car based on monthly payments. The sale price is a number. Your trade value is a number. The interest rate is another number. The term is a number. Finance products are numbers too. And the dealership can move those numbers around and still arrive at a payment that sounds good to you. You say, I need to be under $700 a month. They say, great news, we've got you at $697. Oh, wonderful. But what happened here? Did they lower the price? Did they change your trade value? Did they lower your APR? Did they extend the loan from 60 months to 72 months or 72 to 84? Did they put more money down? Did they add products? You don't know if all you're watching is a payment. That's why we negotiate the numbers separately. Here's another trick I want you to watch out for. Let's say you're pre-approved at 6.49%. The dealer says we can do 6.29%. Great. But don't just look at the APR. Check the term. Check the amount financed. Check the total of payments. Check for products you didn't agree to buy. Make sure they didn't change something else to create the appearance of savings. The lower rate sounds great, but we still read the contract and every single number. And don't give up your pre-approval too early. Here's how I would handle this. I want the dealer to show me what they can do first. I don't necessarily walk through the front door announcing, hey, everybody, I'm pre-approved at 6.49%. Why? Because I'd like to see their offer. If they come back at 5.99%, fantastic. You just beat my credit union without me having to say anything. But if they come back at 8.9%, now I have my benchmark. I say, thanks, but I'm already a pre-approved at 6.49%. If you can beat that, you can have the financing. Now watch what happens. That's negotiating from strength. One more important point here. I wouldn't walk into the finance office and start accusing the finance manager of lying. Don't say, I know you marked up my interest rate. You probably don't know that. And you don't need to. This is where car buyers sometimes turn good information into a bad negotiating strategy. You don't need to win an argument. You need to win the deal. Your pre-approval does the talking for you. I have 6.49%. Can you beat it? Yes or no. That's all I need. And this is why we preach homework. I want you to think about how different these two buyers are. Buyer number one walks into the dealership with no financing lined up. The dealer says, we've got you pre-approved at 9.9%. The buyer asks, is that good? The buyer has handed all of the information and all of the leverage to the dealership. Buyer number two walks in pre-approved at 6.49%. The dealer says, we got you at 9.9%. The buyer says, I already have 6.49%. Beat it. Which buyer would you rather be? That's what doing your homework does for you. The bottom line when the dealer suddenly finds you a lower interest rate, don't automatically assume the bank just did you a favor. Maybe they did. Maybe the dealer found another lender. Maybe the deal structure changed. Or maybe the dealer just gave up some of the profit that was built into the financing. You don't have to guess. Get pre-approved before you shop. Know the rate you can get. Know the term. Know your payment. And then give the dealership an opportunity to beat it. That puts you in control because the interest rate is a number and numbers don't care about the story. Somebody tells you, need help buying your next car? If all this sounds like a lot to keep track of, this is exactly the kind of stuff we deal with every single day through the Homework Guys Hassle-Free Car Buying Service. We help car buyers work through the deal, get written out the door pricing, negotiate the numbers, and understand what they're actually being asked to pay before they say yes. You can find out more about our car buying service by clicking the big red button on our website, thehomeworkguy.com. And remember, the dealership does this every single day. You might do it once every five or ten years. So, do your homework, know your numbers, and don't be afraid to make them compete for your business. I'm Kevin Hunter, The Homework Guy. We'll see you on the next video.