Agree to dealer financing to get a lower sale price on used car?

Looking at buying a lightly used car for my wife from a Toyota dealer's used lot.

We can pay cash and prefer not to take out a loan/have a monthly payment.

As the title says, can we expect to negotiate a meaningfully lower price if we agree to dealer financing? We would plan to pay off the loan at first opportunity.

My gut says that's more likely on a new car purchase than a used car purchase but really have no idea.

It can work sometimes. The big dealer doesn't usually own the cars on its lot. A bank owns the cars on a "floorplan" system. The dealer just pays an interest payment each month on the dollar amount of the inventory in the floorplan. 

The bank that has the floorplan will usually give the dealer a % kickback on the loan amount if financed through them, like 1% so don't get too excited. There are other things that will get you a better deal, like timing, depending on when they start the monthly count and what goals they have. New cars add the factory incentives to the mix. It could be a quarterly sales goal that gives the dealer a kickback on every car the sold in the last 90 days. 

Also be weary of any penalties to pay off a loan early. Idk if it's common or not but I've heard of it, where someone gets a loan and wants to pay it off at the first payment and realize there's a penalty for doing it

I just did this in January. We were negotiating for the final selling price. My maximum number was a couple thousand below what the salesman was trying to get. I waited until the discussion stalled, then suggested I finance with them, leave the loan with them for three months so they got credit for the financing, then refinance with my credit union. It worked.

I was totally open with my plan, saved a few thousand.

edit: I also only chose to make one or two payments in that time, as the financing offered no payments for the first three months. 

My father-in-law can pay cash for any car he buys, but he has learned to finance the purchase for a few months, then pay it off, to get a better price from the dealer (these are always late model used cars).

Hoppps said:

Also be weary of any penalties to pay off a loan early. Idk if it's common or not but I've heard of it, where someone gets a loan and wants to pay it off at the first payment and realize there's a penalty for doing it

It's not common at all and it's in the paperwork before you sign. When I bought my new '23 BRZ in Sept '22, I let the dealer finance it with the idea that, "I'll just refinance with PenFed if the dealer doesn't get me a good rate."

The dealer beat PenFed by .75% for a new car purchase. I suspect most people who say, "Oh don't let the dealer finance it they will screw you over." Typically have poor credit and/or can't get past the emotional aspect of getting something new and shiny and sign whatever is in front of them. 

Don't be surprised if they don't negotiate the price. Everyone says they want "no games" so most dealers put the best price up front, then people get upset when they won't play the game. 

Used car its probably more unlikely. Sometimes there are deals with in house lenders on new cars. Maybe CPO. Also the bank usually will give the dealer a kickback for the loan after a couple months and give you a cut of that. I always have my financing ready ahead of time, but if the dealer can match it I'll get them do the loan.

As for a prepayment penalty- read the actual contract no matter what the dealer says. Pro tip- federal law prevents them on loans longer than 60 months. So if you get a 72 or 84 month loan, it for sure won't have it.

I bought my 2016 Chevrolet Silverado with an extra $1800 finance rebate. Refinance under 6 months and the $1800 get tacked back on the principle.  So I waited.

I forgot they had to redo the state title so that cost was added to my refinance. 

Thanks for the responses guys.

We tried to buy the car last night, but didn't get down to doing paperwork,  so not sure yet if dealer financing is in play.

I'll guess I'll do a writeup of the fiasco, when and if we actually buy it.

Update, we did buy the car, but did not get to answer whether there was savings to be had for using their financing. We had agreed on a price, had vaguely said we intended to finance, had a minor dispute over replacing the charge cord they had lost, and after all that they took us to "finance" and the guy says, so you'll be paying cash then? Guess so.

Kinda bizarre experience overall, a mix of them bungling things and having seemingly no motivation to make the sale made it hard to give them money. Was a month from the first visit to see the car and actual purchase. And to top it off, our (Erie) insurance's website got hacked and their agents can't write new policies since last Saturday, so we haven't really been driving the car until that's sorted.

In reply to sevenracer :

New cars often have manufacturer discount options tied with financing with the MFR. 

with used or CPO vehicles.. that's rare or nonexistent.