A power tool with a housing, a motor, a transmission, a spindle and an impact mechanism. The motor has an output shaft that drives the transmission. The transmission has a plurality of planet gears, a planet carrier journally supporting the planet gears for rotation about an axis, and a ring gear that is in meshing engagement with the planet gears. The impact mechanism has a plurality of anvil lugs, an impactor and an impactor spring. The anvil lugs are coupled to the ring gear and are not engaged by the planet gears. The impactor is mounted to pivot about the spindle and has a plurality of hammer lugs. The impactor spring biases the impactor toward the ring gear to cause the hammer lugs to engage the anvil lugs. A power tool having an impact mechanism with an external adjusting member that can be moved to vary a trip torque of the impact mechanism is also provided.