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Questions About Financing New Vehicles

NancieNancie Posts: 13
This continues topic #21 in the Smart Shoppers
Conference where we talk about financing your new
car. To read the earlier part of this discussion
click here, then return to this topic to post your
comments and questions.



  • msellowmsellow Posts: 11
    I'm seriously interested in the Passat GLX. It looks like demand may mean a lengthy wait for delivery. I'd love to order the car now, and arrange financing w/ my credit union in April/May when the car would be expected to arrive. Is this feasible, or should I wait until April when I'll have financing finalized?
  • ashkanashkan Posts: 1
    I am interested in leasing an SUV. I have never leased an automobile before and don't know anything about leases. How does a lease work? How can I be sure I am getting a good deal on a lease?
  • I would like to have A.P.R. explained. For instance if the current Chevy rate of 1.9% is one I want to consider, does it mean 1.9% times 4 if financing for 4 years? I have bought/financed cars before many times, but I was usually looking at the amount of monthly payment I was willing to pay for 4 years. Can anyone explain the A.P.R. thing to me (not too technical please)?
  • CarMan@EdmundsCarMan@Edmunds Posts: 38,515
    Mesellow, I don't see any reason why you can't just put you name on a waiting list for the new Passat and work on the financing while you wait. If you decide to go this route you will probably be asked for a small deposit just to show the dealer that you're serious.
  • CarMan@EdmundsCarMan@Edmunds Posts: 38,515
    Ashkan leasing is much like financing except you do not actually own the vehicle. When you lease you agree to pay the company that you are leasing from a monthly payment in exchange for being allowed to drive the vehicle for a certain period of time. This monthly payment consists of the depreciation that the car will have over the term of the lease and interest that you pay to the company that you are leasing from. At the end of this period you have the option of purchasing the vehicle that you leased for what the the company originally estimated it would be worth at the end of your lease. Or you can simply return the car and pay nothing except for any excess mileage or disposition fees that you are subject to.

    Here is a sample lease. Right now you can lease a 1998 Honda Civic DX Coupe for $149 per month and a $1,500 down for 36 months. When you take possession of the car you will probably be required to pay the first month's payment ($149), the down payment ($1,500), a security deposit ($150), and an acquisition fee ($495). Please note that under the terms of this lease you are only allowed to drive the car 12,000 miles per year. You will be charged for any mileage over that amount that's on the car when you return it.
  • CarMan@EdmundsCarMan@Edmunds Posts: 38,515
    Isaiah5417 it is extremely important to get as low an interest rate as possible when financing a vehicle. Financing a car works the same as calculating interest on your bank account. If you do decide to buy a Chevy you are actually better off financing it at 1.9% and putting the money in an interest-bearing account than paying cash all up front!
  • ryenryen Posts: 3
    A low interest rate on your car should be part of the whole deal. On my last car purchase with my Nissan Quest, I set the purchase price: invoice +1% minus the $1500 incentive, minus the blue value/trade-in on my 94 Quest; then, I let them know I was aware of the 5.9% rate Nissan is offering and made the deal contingent upon getting that low rate.
  • tfangtfang Posts: 1
    I am going to buy a Toyota 4Runner. The salesman told me that their 6.99% finance rate will end this month(3/31). Is this true? Or is it likely that this rate will continue next month?

  • CarMan@EdmundsCarMan@Edmunds Posts: 38,515
    Tao, I can't guarantee this but I doubt that 4Runner interest rates will increase significantly even though Toyota's programs end on March 31st. Most dealers have a large supply of Sport Utility Vehicles on their lots because of the mild winters in many areas. Although it is sometimes true, dealers frequently tell their customers that a program is going to end soon because they want to pressure them into a quick deal.
  • SingeonSingeon Posts: 1
    I have only lived in the US for about a year and don't yet have a credit history here, although I do have one in Canada. How hard would it be to get financing based on my Canadian credit history, or is this even possible?
  • CarMan@EdmundsCarMan@Edmunds Posts: 38,515
    That is a very good question, Dale. As long as you had good credit in Canada and could proove it I really don't see any reason why you would have a problem getting financing.
  • pbbpbb Posts: 2
    I'm looking at a new Chrysler and have read about their "gold key plus" program which is similar to a lease, but you own the car..???? Anyone experienced or knowledgable about the program and its advantages and disadvantages?

    I would appreciate any wisdom!
  • CarMan@EdmundsCarMan@Edmunds Posts: 38,515
    Parker, I believe that the Chrysler "Gold Key Plus" program is what is referred to as a "balloon" program. This is actually a type of financing so you do own the car, but people associate it with a lease because of its low monthly payments. Basically a balloon note allows the customer to make much lower monthly payments than normal financing, however at the end of the note the customer must make a large "balloon" payment to pay off the rest of the car. This final payment is usually very high. Depending upon the price of the vehicle it can be well over $10,000. This is not a very popular type of deal because people rarely have the cash to make that large payment at the end of the note. Although I have heard of individuals who get a balloon note on a car and then finance the large payment at the end. I believe that this type of program is much more popular in the South.
  • shawkinsshawkins Posts: 18
    Greetings All,

    I would like to mention that after purchasing my 1998 Toyota Sienna XLE the other day, I applied for financing at the web site. Got 7.25% for 5 years. When you fill out the application (about 5 minutes), they will call you in about 15 minutes to notify you of their answer. You can get a draft check overnight as well. Great staff I talked to and the service was perfect. I got a call to make sure the check got to me overnight and they asked me to call them with any questions. Great financing service!!

  • gdikegdike Posts: 2
    I understand that you should have your financing arranged before you go to the dealer. How does this work with leasing? Can you arrange a lease before you go to the dealer if you know what you want? How do you find the residual value of a vehicle?
  • CarMan@EdmundsCarMan@Edmunds Posts: 38,515
    Geoffrey, calculating a lease payment is a little more complicated that calculating a finance payment. In order to calculate a lease payment for a vehicle you must have two very important numbers. One is the money factor or the rate of interest that you will be charges. The other is the vehicle's residual value, or how much the model will depreciate during the course of the lease. These two numbers very widely between vehicles and even between leasing companies. Unfortunately, it is not really possible to have your leasing arranged before you begin to shop. If you have any specific questions about a vehicle's residual value please feel free to ask me and I'll see what I can do for you.
  • NurseMBHNurseMBH Posts: 7
    I want to trade in my 1997 Dodge Grand Caravan, as the payments are too high. I am about 3 grand upside down. I am trying to buy a less expensive car, and refinace the negative equity. None of the dealers here in Las Vegas want to work with me. Guess they figure they are not going to make anything on the deal. I have even gotten preapproval from a lender. The dealers all want 3-4 grand down. I was told by one dealer," You cannot control the loan, the trade, and the price of the car. This was at a so called "One Price/No commision" dealership. help or advice please.
  • gdikegdike Posts: 2
    The car we want to lease is a Dodge Grand Caravan SE. We would probably do a 5 year lease. What would the residual value be on that. We are also considering terminating our current lease early (6 payment left). Is that a bad idea? We are still under our mileage (within 4000 miles though), state inspection is due, and we're thinking that repairs will need to be done. We don't want to put much money into the car if we are only going to have it 6 more months. Thanks for you help.
  • CarMan@EdmundsCarMan@Edmunds Posts: 38,515
    Gdike, terminating your current lease six months early will probably end up costing you some money. I doubt that the company that you are leasing from will let you out that early for free. Furthermore, if you don't think that your car will pass inspection you probably have some pretty noticeable problems with it. If this is the case, you will end up having to pay to fix them anyway when you turn in your leased vehicle.
  • CarMan@EdmundsCarMan@Edmunds Posts: 38,515
    Nurse, since the dealership told you that you can't control the loan, the trade, and the price, why don't you take some of those factors under your own control. Try selling your car yourself instead of trading it in. This is a good idea if your are upside down on your lease because this is the way for you to get the most money for your used van. You can also go to a bank in order to secure financing instead of doing so at the dealership.
  • harriet7harriet7 Posts: 1
    I bought a 97 Kia last July and financed it through my State Employees Credit Union. I want a Ford Ranger (or other small truck). Should I continue to be pleased driving my Kia (great car) or trade it in for a small truck? With all of the great finance plans that dealers are offering, I am confused if this would be a good move or not!!
  • BrutusBrutus Posts: 1,113
    I don't think the financing will interfere with your decision. The question is, will you be happy with the price you can get for your Kia? Depending on how much you put down on the vehicle and how good of a deal you got, you may not get what you owe. I think you will really be disappointed with the low ball trade-in offer a dealer will likely give on a one year old vehicle, so you will probably need to be prepared to market it yourself. But you never know until you try. I suspect the value of the Kia will be the deciding factor for you, not the financing. Good luck!
  • I had the most wonderful experience dealing with PeopleFirst internet financing over the last few days. Both the SERVICE and QUICKNESS OF RESPONSE beat everyone, including my local credit union!! For a new car, 36 month loan, their rate was 7.25% if you have payments automatically deducted from an account. You can decide which day of the month the payment is deducted. The credit union insisted my husband must co-sign the car loan or I must open brand new accounts (fat chance!) and car's interest rate was slightly higher.

    PeopleFirst states you must have excellent credit, own your own home and they will have an answer for you within minutes. Well, they are located in California and I'm on the opposite side of country. I had to wait until they opened to get an answer! :-) But they had one within minutes of opening!!

    You can check out their web page at I'm not affiliated with the company in any way except that's how I'm financing my VW Cabrio.
  • shawkinsshawkins Posts: 18
    Ditto what Rochelle said! I had a very pleasant experience with these people. They exceeded my expectations on all claims they made.

  • gamengamen Posts: 2
    Thought I'd pass along something I discovered when I bought a 98 Passport last week. I was planning to get my financing through my credit union which was running a special rate of 7.15% fixed for a 60 month loan (no down payment required). When I made the offer to purchase, I told the dealer that I wouldn't finalize the deal until my financing was approved, UNLESS they could match the 7.15%. They did. 6.99% for 60 months, no down payment required, and with no creative financing tricks.
    What I learned is this. In addition to their published loan rates, banks also provide lower preferred rates in some circumstances. These rates are not generally available to the public, but through a combination of volume (dealer referral in my case) and excellent credit on the part of the lender, an individual can sometimes get the preferred rates. The 6.99% I got was through NationsBank, whose published rate was somewhere in the 8.25% to 8.75% range.
    My advice is to always let the dealer try and beat the rates you can get on your own. But DO be very careful that any dealer financing which beats what you can already get has the same conditions (i.e. fixed/variable rate, same length, penalty clauses, down payment, etc.)
  • pocahontaspocahontas Posts: 802
    Gamen's right about about lower rate offered to dealerships; they're dealing with hundreds of loans everyday, so they often do get a preferred rate. As to whether they will pass that discount onto you, that's all in the negotiation.

    It amazes me how many people will go to such extremes to get the best car price, then they just settle for the what ever interest rate the dealership offers. Don't sign the purchase agreement, until you've seen the financial officer and have agreed on the interest rate. If they say, that's the "best they can do" and you don't believe them, get out of your chair and head for the door. More often than not, they'll try to find a way to lower it. The dealer will be eager to match or beat your lowest rate so you'll take possession of the car right then.
  • ay107ay107 Posts: 7
    So after the purchase price is agreed upon, and without signing anything I should then let them check my credit and begin negotiations on the credit rate and terms? What gets signed then, a credit form or a purchase agreement? Is the agreement the last thing signed? Also when the rate, term and finance rate are written up, if there is an "error" in the calculations can the delaer keep the extra money? In order to check the calculations I guess I need a financial calculator since I won't have a computer.
  • shawkinsshawkins Posts: 18

    You can negotiate the deal after which they will probably ask you to fill out a buyers order describing the vehicle you negotiated on and the price, including trade-in and such. DO NOT SIGN it and just tell them you will complete the form when the financing has been agreed upon. The buyers order says it is a legal contract somewhere on it, so if you sign it, all they have to do is provide financing to you. The buyers order has your SSN and enough info for them to decide what sort of interest rate they will offer you. I always shop around so they know what they have to beat, then if they can't beat it, they'll give you a Promissory Note and you have 5 days to get a check to them. Just did this about a month ago.

  • ay107ay107 Posts: 7
    Hi Scott,
    Wanted to thank you for the info on the Edmund's site re: car buying.
    I have never purchased a new car before and so I have been painstakingly
    researching everything. I did get outside financing thru and
    would just as soon stick with them if the Factory rebate for Toyota goes into
    effect again. There is a dealer incentive on now though. I am also putting
    down almost 50%.
    I understand that I should NOT sign the buyer's agreement until either my
    financing or the dealer's financing goes thru. In the case of
    that means faxing documents to them and providing proof of income to
    complete the qualification process. I assume I can do this before actually
    committing to the vehicle by signing the buyer's agreement. Then if financing
    goes thru,(I assume that happens right away?), I sign and drive. If it takes
    longer, then I do not sign, and I do not drive, until it does?
    I was confused about the prommissory note you mentioned. What is that and
    is it given only after a buyer's agreement is signed in the case of someone
    wanting to shop around for a loan after they have committed to a purchase

    Suzanne,Scared -but -making- progress
  • shawkinsshawkins Posts: 18
    I went through for my financing a little while ago. Great people. They approved me for the amount I requested, which was $19,000. Then they sent me a draft check, which is a check I can make out to the dealer for up to $19,000. The check is good for 45 days. My rate was 7.25% for up to 5 years. I gave the dealer a chance to beat the interest rate and he couldn't, so they gave me a promissory note saying that I would pay them within 5 days.

    Sooooo, it is a good idea to get your pre-qualification stuff out of the way before you go shopping. Then you already know that you are approved for X% interest rate and for X dollars for Xyears.

    I signed the buyers order before I spoke to the finance officer because I knew I had financing already arranged. It was just a matter of whether the dealer could beat it. Does this help you any more??

    Don't be scared about buying a car. The dealer will sense your fear and try to take advantage of you. Take along someone who knows how this all works or just do your homework and gain control of the transaction. Just remember, you have the money they want. Don't give it to them easily. If I can help any more, let me know!

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