Questions About Financing New Vehicles

CarMan@Edmunds

Thomas6, if your budget is only $5,000 you may be better off looking into purchasing a used vehicle. You will probably have a hard time finding a lease that will only cost you $5,000 over the length of the term. However, if you are planning on working while you are in school and will have a little extra money that you can spend on a car you can probably lease something for the low $200s per month.

Your Host

bobpass

I went through bankruptcy in Jan 1993 and have not established any NEW credit since then, because I pay only cash. Even though I own a home, have been steadily employed for many years and make a very good salary, I was recently declined auto credit by CarFinance.com.
How should I approach this with a dealer. Negotiate car price first then handle finances? What interest range would I be looking at? Do most dealers handle poor credit buyers? I plan on buying a Sentra with $2K rebate down plus added $3K down.

CarMan@Edmunds

Bobpass, I don't know how strict Nissan Motor Acceptance Corp. is about providing consumers credit. I bet that captive finance companies, like NMAC, are probably a little more forgiving than banks are because they obviously want to help their manufacturer sell more vehicles. You can negotiate the price of your car prior to talking about the financing, however you can not combine Nissan's special interest rates with the $2,000 cash that they are currently offering.

Your Host

jhall18785

Most dealerships offer some type of alternative financing. The pricing structure is not as flexible as bank financing because of discounts (fees) charged by the lenders. The normal interest rates charged by these specialty companies would typically run from 19% to 24%. If you look at it from the perspective that after this purchase is paid (or nearly paid) you would then be a suitable candidate for captive source financing, all within 3 to 5 years instead of 10 to 12 years otherwise.

amadeus131

I'm currently looking into getting a small pickup. I asked this question in the Smart Shoppers conference, but was unclear in my wording, so that Mr. Shiftright misunderstood me; besides, this looks like a better forum for it. -- I'd especially like to get a new '98 S-10 or Sonoma, because the $1500 consumer cash just went up to $2000, with another increase in about 2 weeks surely possible. I'm looking for a loaded model, with an invoice price of about $21000. Assuming I get $8000 for my car, and have the rebate check mailed to my home, I should get on-the-road for about $14000. What I would like to do is put maybe $4000 down and finance the rest over 12 months. (Yes, these payments will hurt, but I'm only in the area for a year, and when I move next summer, I want to own the truck. I figure it beats plunking down all $14000 at once!) I can get a rate of 7.1% from my credit union for a 12-month loan. I know I can't have the consumer cash AND the GMAC 0.9% rate. Will GMAC *still* let me finance, but at a higher rate; or must I pay cash if I take the consumer cash? Obviously, if GMAC will give me even 5.9% for a 12-month loan (I have good credit), it beats 7.1%! Finally, any opinions on signing the consumer cash over to the dealer as part of my downpayment vs. having the check mailed to me? One book I've read warns that dealers may try to "steal" this cash by not subtracting it from the total; others (apparently noting that merely watching carefully will prevent this) don't share this opinion. Thanks, and happy shopping/buying/selling to all!

CarMan@Edmunds

Amadeus131, you shouldn't have to mess with any check from the manufacturer. If you opt to go with the cash, the dealership can just deduct this amount from the price that you are going to pay for the truck. You're right, you can't get both the cash and the special financing. You should be able to take the cash and finance the vehicle through GMAC if you want to. However, I doubt that their standard rate is any much if any better than the 7.1% that you are already getting.

Your Host

sandrao

my 19 year old niece is trying to buy a mazda 626? what is the best way to get the vehicle financed without a consigner? she has a decent job but has been there only 4 1/2 months.

CarMan@Edmunds

Sandrao, your best bet may be to try to finance the car through Mazda. Mazda currently has financing as low at .9% available to customers who qualify. Not only is this rate next to impossible to beat, but manufacturers' captive finance companies are occasionally more lenient than other lending institutions because they want to move as much product as they can.

Your Host

diye

I may have a strange question. It seems that around 7% APR is the best rate you can get from a loan. Why can't I borrow money from Credit cards?
I am receiving so many credit card offers for 4.9% or 5.9% APR for the first year, something like that, with a decent credit line. So is it better just accept the card(s), borrow the money, and hopefully(and i believe) next year i would get same special rate offer too, the worst case i can still apply a loan after one year. Anybody did this before?

msellow

Unless you're buying a used car, not many credit cards will offer you a line of credit that high. Also, depending on how you charge it, it could be a cash advance which acrues (sp) interest daily. A tradtional car loan figures interest in a comletely different way from a credit card. Also, with a tradtional loan, if you pay more than the minimum, the difference is subtracted from the principle. With a credit card, it's similar, but you'd really have to pay off the entire amount to really make any savings. And remember, a credit card minimum payment is based on a percentage of the outstanding balance. A tradtional loan has a fixed monthly payment.

BTW, if you're getting these offers from credit card companies, then your credit is probably good enough to get a tradtional loan.

Ludster

I will be purchasing a new car soon (2 months) and was wondering whether I should negotiate the price of the car first with the dealer and then discuss financing or approach the dealer with financing already settled.

I have heard views on both and would appreciate some more feedback.

Ludster

CarMan@Edmunds

Ludster, I think that it is a probably good idea to already be approved for financing before you go to the dealership to discuss price. If you already have some sort of financing to fall back on you won't get trapped into paying an unreasonable interest rate by a salesperson. Furthermore, if you bring a financing quote that you have already been approved for into the dealer there is a very good chance that that they will beat it.

Your Host

Ludster

Your Host, Thanks alot for your information. The Town Hall has been very beneficial in helping consumers better equip themselves with negotiating skills.

Ludster

Sharin27

What is the formula to figure the annual % rate? I have completely forgotton, or maybe I remember, and I just think it is wrong. 5.9%, 5yr, $22,300

thanks

CarMan@Edmunds

Sharin27, I'm not sure that I understand your question. Are you asking me how to translate lease money factors into their equivalent interest rates?

Your Host

Pulpfictionado

Who has college grad programs?
I've been told that GM & Toyota have them.
I want 2 lease a new car, (I'm out in DEC), and I will probably have almost $0 2 put down.
Also, I have minimal credit (2 visas, dept. store & gas, pay 'em promptly)
I'll probably already have a job lined up upon exit.

What kind of car should I expect (if any), how much of a payment, lease length, etc.

also, do they lease 1 or 2 yr old cars? I'd probably have a better chance

Or am I outta luck?

CarMan@Edmunds

Well, as long as you have a decent job lined up and no past credit problems I don't think that you will have any trouble leasing a new car. A sale is a sale to the manufacturers. In fact, many captive finance companies are more lenient on recent college graduates than they ordinarily would be. GM, Ford, and Chrysler all have cash available for recent college graduates. Many other manufacturers do as well. I am not aware of any college graduate program that Toyota has off of the top of my head, but I suppose that it's possible that they have one.

party73

Pulpfictionado-

Beware of Car_man's advice-
Last year I leased a Honda Accord, have good credit, and was making an engineer's salary, and still had to get a cosigner for my lease. If you have not made any major financing purchases-car, house, lease, etc., you may run into that. Of course, it could just be something specific to AHFC.

CarMan@Edmunds

It all depends upon your situation. I leased a Nissan Altima right out of college several years ago without having anyone co-sign with me and I know several other people who have done so. The funny thing about financing a new car is that there are so many variables involved that it is tough to generalize about anyone's specific situation.

Your Co-Host

honest1

My daughter is 22 and has a very well-paying nanny position that she has held for just 3 months. One of her employers is a radiologist who makes about $300,000 per year, the mother is a corporate lawyer for Dow Chemical. The Doctor is co-signing for my daughter. She is getting a sub-compact, very basic car and wants to use the $500 rebate as a downpayment. She has a few late payments froms over a year ago on 2 credit cards (which are all paid up or paid off now) from a period when she was in college. The dealer's sales manager keeps speaking for their finance manager who always seems to be busy when we ask to speak to himd directly. Anyway, we negotiated just 3% above dealer's cost on this car (a good deal that we had to fight to get). Now I think they are trying to jack her around on the financing to recoup more profit. They told us today that they can only get her "secondary financing" at 18% to 21% even with her co-signer who they insist on seeing in person and not just take his application over the phone. Does this rate sound correct when they said the doctor's credit was AAA? Any advice?

CarMan@Edmunds

Well, Honest1, it sounds like you have already negotiated a good deal on your daughter's new car. Congratulations, but as you are aware your work is only half done. Finding a reasonable finance rate for this car is just as important as negotiating a good price. I haven't seen your daughter's credit report, but in my opinion I think that she probably can do better than 18% - 21% if she has a co-signer with excellent credit. There's a good chance that dealership may be trying to make some of the money that you bargained them down on the car back on the financing. Fortunately, financing the car through the dealership is not your only option. You should shop around a little and see what rate she could get at your local bank or credit union. Chances are that she will be able to beat the rates that the dealership gave you. In fact, if you get financing approved by a bank you can take that quote to the dealership and there's a good chance that they will all of a sudden will be able to mysteriously beat it. Good Luck.

Your Host

chrisdj

I have a question that I am very surprised I haven't been able to find an answer to anywhere: when I buy a new car, what sort of protection does that car have when I drive it off the lot? I can't believe that it wouldn't be covered, and I have never heard of having to pre-arrange insurance for a new car purchase, so how is the car protected in case of an accident?

CarMan@Edmunds

Chrisdj, it all really depends upon your situation. Many financial institutions require their lease customers to show proof of insurance and to have the dealership verify this before they let the customer have the car. I have heard that you have up to 24 hours after you physically take possession of your new car to activate your insurance and you will still be covered. I suppose that this sounds possible, but could you imagine getting into an accident and then trying to insure the vehicle. It would probably be pretty messy. It's not really that hard to do, so I suggest that you get your insurance lined up before you take delivery of your new vehicle.

Your Host

risKay

Ok..i have been reading over this site for the past 2 hrs...and car_man and scott seem well informed...now i have one for y'all...
Im in dire need a of a new vehicle...i have no money to put down but i have a trade-in...im needing to get the best possible intrest for the best possible amount per month...but our credit is horrible because of a past medical experience...
after reading thru all these post and looking at other sites...i feel we do not have a chance in *ell. Because if we lease they want the trade-in plus some ...and if we can't get what we want on trade then we are gonna have to finance an ungodly amount that will make our notes over 400 a month which we can not afford. But our current vehicle is just way too small and a gas guzzler ..which i told my husband this when we bought it 3 yrs ago ..and paid cash for it then. Please im desperate in Mississippi!!!!!!!

msellow

As far as credit, if you've been current for the past 6-12 months on your other bills, getting a respectable intrest rate should not be impossible.
You'll need a current copy of your credit report, from all 3 bureaus, to see exactly what's listed.

If you can, I'd find and join a credit union. They generally have the best interest rates and are pretty forgiving of credit blemishes.

In your figuring, be sure to include car insurance.

Also, you can sell your car privately and get the money now. Or, if you can swing it, donate the car to a charity--you get to claim the full blue book value--and use the tax write-off when you do your taxes.

happiness

My 18 year old son went and signed papers for a new car. He has no money to put down and thought that we would back up his deposit check. We would have done this gladly if the monthly payment is something he could handle. He is newly employeed and makes only 7.50 an hour. He has several debts totaling over 1500 dollars. When his father told the car dealer our son could not afford this they told him they had a binding contract because he was 18. I thought that when you signed a contract you had 72 hours to reconsider. They said that this does not apply to car sales. They took our sons car as part of the down payment. It probably isn't worth more than a couple hundred dollars. He is driving the new car. Is there any recourse other than to hope he doesn't get approved for the loan? His payments would be over $300. a month. He was talked into a bunch of extras he didn't need and bought a car that he really doesn't like. There is no way he can make the payments along with high insurance premiums. He has been turned down once for financing. Is there any possible way a bank would be dumb enough to loan to a kid with a new job,no money,and nobody to co-sign?

CarMan@Edmunds

Happiness, even though most lending institutions would probably reject your son's application it's possible that the dealership may be able to find some bank that will lend him the money at an exorbitant rate. Unfortunately, there may not be much that you can do in this situation. One option that you have is to consult a lawyer and see what he says about your situation. Another option if you get stuck with the car is to try and sell it on your own before your son falls behind in his payments. By selling it on your own as soon as possible you will lose a lot less money than if you traded it in to a dealer. It's a lot better to sell the car and have your son drive something less expensive than to let him fall behind on his payments and ruin his credit report. Good credit is a very valuable thing.

Your Host

milaird

I read somewhere that you only pay the sales tax on the remaining portion of the purchase price after the trade-in, but cannot remember where I read that. In other words, if the purchase price negotiated is 23,000 and your negotiated trade-in is 10,000, then the sales tax would be based on 13,000. Can anyone verify if this is true?

tinyguy

Yes, that's how it works. So to get equivalent value from a private buyer, you need to charge the trade-in value plus tax to get the same effect.

milaird

Is it the same in most states, I'm from Mass, and unsure where to go to find out the real info.

tinyguy

It works that way in Canada too. I expect all states to work this way. If you want to be sure, just ask a car salesman from your local dealer.

CarMan@Edmunds

Milaird, I am almost positive that in most states consumers only have to pay tax on the difference between the price of the car that they purchased and their trade-in. In order to be absolutely positive what the exact law is in your state, you may want to consider calling up your local DMV. They should know the answer to your question.

Your Host

ridge1

DOES ANYONE HAVE EXPERIENCE WITH AUTOMOTIVE WARRENTY CORP. THE HAVE MUCH BETTER RATES THAN ANYONE ELSE THAT I HAVE CHECKED

castroe

I am really looking at buying a 98 or 99 accord coupe v6. The price msrp at $21500, with dealer invoice of $19400, roughly. I am looking at putting $3000 down, and am wondering about how much should of a loan I should take out and what would be a good interest rate. I was thinking of maybe taking out a $19000 loan @7.35% for 60 months, with my down of $3000 for a bargining total of $21000. Is this sensible? Please help!!!!

hawker

Castroe,

I would try to negotiate the deal before you tell them how much money you plan on putting in for the down payment. Find out for each additional $500.00 of a down payment is the dealer willing to deal! Sounds like you could get a better purchase price and finance rate than what you listed. If you can get a better finance rate without negotiating more of a down payment, do that and hold on to your cash. If you can earn more interest in your bank account than the finance rate, hold the cash! If the finance rate is less than the bank interest rate, hold the cash! Good Luck! (Maybe think about buying an American car instead)

CarMan@Edmunds

Castroe, hawker is right. You should negotiate a price for the exact car that you want before you discuss any financing with the dealership. It is usually a good idea to actually have some sort of financing already arranged before you begin negotiating with the dealer at all. That way they can't trick you into financing the vehicle at a higher rate than you could have gotten elsewhere. Furthermore, if you already have financing the dealership will often be able to beat the interest that you have already been quoted.

As a general rule of thumb, unless you are able to get an unusually low interest rate, you are almost always better off putting as much money down as you can when you finance. The more you put down, the less interest you will end up paying in the end.

Your Host

honda7

I am about to buy a Honda Civic a '99 model. It costs 15,045. What is the price I should be paying per month on a 60 month finance. Thanks for the help.

CarMan@Edmunds

Honda7, your monthly payments will depend upon how much money you gave the lending institution as a down payment and what interest rate they gave you. If you let me know these two details I would be glad to calculate what your monthly payments should be for you.

Your Host

esuomm1

Honda7, Roughly on a 5 year loan at 7.5%, your car payment will be very close to $100 per $5,000 borrowed and about a $10 swing for each % point up or down. 8.5 % = $410/mos or 6.5% = $390 per month.

Example. 5 yr loan, $20k @ 7.5% = $400/month. For a car loan w/no promotional rates from the company 7% is very good.

Also if the money you would put down is being invested and earning more than the % rate you are borrowing at you are better to borrow the full amount of the car and keep the money that was going to be used as a down payment, invested.

ashim

Hello, let me start by saying what a great site this is. Like Honda7, I am about to get a '99 Honda Civic CE. But I'm in somewhat of a special situation for the following reasons. I am a foreigner, who just arrived in Washington to work for my embassy. As such, I have no credit or driving history in the US. Is there any hope for me to get a decent financing rate...what should I expect? I was also wondering if leasing the car would be a better idea, given that I expect to be here for at least four years.

Thank you much!

CarMan@Edmunds

Ashim, whether to lease or to purchase a new vehicle has been a popular debate for quite some time now. Neither one is really better than the other. It all really depends upon your unique situation. If you like getting a new car or truck every couple of years and don't plan on driving more than 12,000 to 15,000 miles per year then leasing may be for you. I personally prefer to lease, assuming that I am able to get a good interest rate, but that's just my personal preference.

It's always tough to try to secure financing when you don't really have much of a credit history. If for some reason you have trouble securing credit see if you can have someone with better credit that you have co-sign your loan. This will definitely help. Another idea is to check with officials or other people who work at your or another country's foreign embassy. I'm sure that many of them have been the same situation that you are in right now at one time in the past. Perhaps your embassy has some sort of special program that's available. Or perhaps someone there can recommend a good lending institution for people without much established credit.

Your Host

father

Is anyone here? I need some advise right now. Can anyone help me?

father

Does this work?

father

no one is here

ladyblue

father:
This is a conference, so you can only get a response when someone happens upon your post.

If you have a question, post it and someone will answer you as soon as they see it.

father

Thank you I did not know. I will give it a try.

father

This is my situation: I went to the dealership to buy a new car. I told them that I had had a bankruptcy and since I just graduated from college I do not yet have a permanent job, I have been working through a temp agency the last 6 months. I singed a contract and drove away with a new car on 12/24/98. On 1/25/99 I get a call saying that I will have to return the car since my financing was not approved. I offer a cosigner over a conversation on the phone. The cosigner I am told will not work. I am told that no one will finance a temp job. That night after I hang up on the dealership I do some investigating and find out that another dealership will finance me since I am a recent college grad.

father

(cont.)
That night I go to that second dealership and buy sign a new contract to buy a used car. The next day I call the first dealership to see how can I return the car. The dealer rep tells me that he is still trying to get me financed. Two days later the first dealer rep calls and says he got me financing for a lower amount and that if I can come in and sign a new contract. The new contract says that I will pay $500 more but that my 60 payments will be reduced by $50 saving me $3000.00. I cannot afford two car payments but I think I just bought two new cars. How can I return one?

ladyblue

father:
I am not one of the hosts in here so I do not presume to have answers for your problem. You may have to wait until someone with more knowledge can respond.

I can think of many things you should NOT have done, but by now I think you already know what they are. Did you get financing approval on the second car before you drove it off the lot? If so, I would think that contract is more binding, even though it came after the first one.

Did you tell the first dealer that you had already purchased another car and want to return the first car? Maybe you can still return it.

Sounds like you've really gotten yourself in a bind here. Hopefully, one of the two dealers will allow you to return the car without too much hassle.

CarMan@Edmunds

Thanks for the help, ladyblue. Father, I personally think that since you have already signed and I assume been approved for credit through the second dealership that you should keep that car and just tell the first dealership that you went to that you are no longer interested. I have a feeling that it will be much tougher for you to get out of your second vehicle because you already signed a contract and have been approved.

Your Host