Questions About Financing New Vehicles

dawnec

Well just to update you - I went down to the dealer 2 days ago & there was no problem when i got there and I told them that i had found other financing. no hassles-nothing. Out of curiosity I asked the woman in the finance dept. what rate they had gotten me & she told me 8.6 or something. I made out better with carfinance.com. the dealership did not offer me a better rate, tho the woman in finance said that my credit was excellent.

CarMan@Edmunds

Shawn, to be totally honest with you I've never seen this sort of provision in a contract before. Even so, it is entirely possible that this is just legalese that many lending institutions include in their contracts.

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CarMan@Edmunds

Rooster3, was the $500 over invoice that your dealership quoted you already including the $3,500 incentive. If so, then I definitely think that you can get a better deal. If you aren't happy with the price that you were quoted you should probably shop around at a couple of other dealerships. You also may want to contact your local bank or credit union to see if they can do better than the 7.35% that you were quoted. You never know until you try.

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dhoff

Regarding the fine print in your financing contract... I recently took out a car loan with People First and believe me, I read every word of the contract and there was nothing in it about demanding the entire loan due at once. This sounds really suspicious to me.

But if you think about it, it's not to their advantage at all to do this. If they call in the entire loan amount before it's paid off, they don't get the interest. If you can't pay off the loan, they have to go through the trouble of repossessing your car and trying to sell it. And since most people are upside-down on their car loans, they would probably lose money.

I would try to get that language struck from the contract. It's worth a try. But if they won't go for it, I wouldn't worry about it. They are in the business of making money from loans, not repossessing and selling cars.

Dave

kpavuk

I would like to lease a car and I would like to calculate a ballpark monthly payment. In order to do this, I need to know what the residual value will be when I return the vehicle after 24 or 36 months.

Does anyone know where this information is available?

Thanks

CarMan@Edmunds

Kpavuk, I can probably find out the information that you are looking for. Please let me know exactly what vehicle you are interested in, how many miles you want to drive, and how many months you want to lease for.

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kpavuk

Thanks for your response. Most likely, we are looking at a Ford Windstar Minivan, and we would lease it for 3 years with 12,000 miles per year.

I appreciate your help! Is there also a general resource that (ie. like a bluebook) that has this information.

shawnmalone

Regarding the fine print in the financing contract... See, the reason I worry is that I plan on making a substantial down payment. That seems like an incentive for the credit union to suddenly demand I pay off the loan, because then they get to take the car and I lose all the equity I have in it due to the down payment. Frankly, I wouldn't worry about it at all except that the loan officer insisted that this was a routine provision found in all new car loans, and neither you nor Car Man has ever heard of such a thing. Lady in post 205 said she had heard of it and I shouldn't worry. Thanks for your feedback.

ral2167

as long as you make your payments-- don't worry-- if a loan place ever implemented this clause on people who pay on time, they'd be out of business in a hurry through bad word of mouth-- there's thousands of places to get loans-- you think this one place would call in a loan while the thousands of others wouldn't?? what's the rate they're giving you anyway?

CarMan@Edmunds

Kpavuk, there is not currently any accurate resource available to the public that contains this sort of information that I am aware of, but I would be glad to help you out. The 36 month lease rate for the 1999 Ford Windstar is 3.0% through Ford Motor Credit. The residual values for this van are 44% for the Base model, 45% for the LX, 46% for the SE / SEL, and 44% for the Cargo with 15,000 miles per year. I believe that you need to add 1% to the 15,000 mi/yr residuals to arrive at the 12,000 mi/yr values.

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kpavuk

Car Man,

Thanks a Bunch !! That is the info. I am looking for.

shawnmalone

You asked: What's the rate they're giving me?
Answer: 6.95 percent APR, that's a simple interest loan with no prepayment penalty. I have to have $2,500 on deposit at the CU when they make the loan to get this rate.

dadiviner

Car_man,

I am one of those unwise one's who is "upside-down" on my car loan. What are my options? Does
being upside down on a car loan only hurt if the
buyer want's to sell the car before it is paid for or the car is wrecked and is a "total loss"?

I don't know if you can help me with this one. . .
is there an $500 discount from Toyota Motor CC if
you have financed with them before?

dadiviner

also . . .won't I become right-side-up later in
the loan?

CarMan@Edmunds

Dadiviner, as long as you plan on keeping the vehicle that you are currently driving until it is completely paid off you don't have anything to worry about. The main problem with being upside-down on a loan arises whey you want to get a new vehicle and yet owe more on your current vehicle than it is worth at that point. Thus, you not only have to pay for your new car, but actually end up paying extra just to get out of your previous one. The best way to get right-side-up on your loan again is probably to make extra payments if you can.

Even though being upside-down is never a great position to be in, as long as you don't plan on selling your car any time in the near future and don't get in an accident where it is totaled you really don't have anything to worry about.

I haven't personally heard about any sort of loyalty cash from Toyota Motor Credit, but that doesn't necessarily mean that they don't have any. Lexus has a loyalty program, so it is entirely possible that Toyota does as well. You really need to check with your dealership to see if such a program exists.

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fronobulax

Yes, you will eventually be right-side-up on your loan. You become upside down in the early years of the loan because your car depreciates fastest in the first year, then a bit less each subsequent year. The loan is the opposite, the value falls slowly in the first year, then more and more each subsequent year as less of your payment goes to interest. At some point, as you pay off more of the loan and as depreciation slows down, your car will be worth the same as the loan.

guest4254

For all you home owners, I would strongly suggest you take out a home equity loan when purchasing a car. First off I managed to get a low 6.74% that is also tax deductible. Plus I believe you'll have the advantage at a dealership, knowing that you're just going to plunk down all the money when the papers are signed. It makes some of them foam at the mouth.

I'd also suggest putting as much as the dealer will allow on a "cash back" type credit card, provided you plan on paying it in full when the bill comes. That's a little more cash back in your pocket.

ruben

Exactly a week ago I went to a Toyota Dealer, who took in my trade-in. While I was there I told the Salesman and the Loan Officer that I had a friend who drove a car for a week, then she got a call a week later for more money down (since then I have found out from another friend that it had happen to him but they wanted more money per month). The Salesman and Loan Officer said that should never happen in a good dealer. The Salesman even said that if that was to happen he would loose his commission first. My credit isn't too good and that is way I mentioned it to both of them. They took my trade-in ('94 Toyota Pick-up, x-cab, 5-speed, 4-cyclinder), give them $600 down, and signed all the paperwork for monthly payments of $515/mt. for a '99 Toyota Camry Solara 2-door SE. The loan officer kepted all the paperwork, saying he would mail them to me. Well, a week later they want me to go back in and re-negotiable because of financing problems and maybe put more money down. My questions are: Can they do that after I already signed everything? And, I did not do any negotiating on the sale. What do you think would be a fair re-negotiate if I do decide to keep the car? Please Rush with the answer since they want me to go in Monday May 24 in the evening. Thank you.

ral2167

i know nothing about financing to the extent of giving an opinion..but.. why are you buying a new car when you have bad credit, and making payments of $515 a month to do this? any car payment of $515 a month seems to me to be way too high and i think you bought more car than you can afford...i'd give that solara up and look for a used 95-96 camry coupe and get into something more affordable while your credit improves....am i nuts to suggest this?? am i wacko??

CarMan@Edmunds

Ruben, unless both you and an employee of the dealership both signed a sale and finance agreement then they probably do have the legal right to renegotiate with you. Also, it is possible that the contract that you signed contains some sort of provision that states the agreement hinges upon your approval with the lending institution. If you have already taken delivery of your car and there is nothing in the fine print of your deal like what I mentioned above than I definitely would not renegotiate.

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nick321

Ford Windstar vs Nissan Quest
Thank you for the informative discussion. I've learned a lot. I'm on the verge of heading to a Ford dealership to purchase a Windstar. A quick check of the Internet shows that there are over 100 Windstars within a 50 mile radius so I think I'm in a good position to negotiate on price and perhaps get an end of the model year deal.

Anyone care to share their Windstar model and pricing information?

Would also like to know how much "sharing" of the first year's depreciation should I factor into the discussion? (In two month's I'll have last year's model-should I expect the dealer to split first yr depreciation?).

Finally, never take a 6 yr old test driving with you. He LOVES the Nissan TV/VCR thing and I've heard next year's Windstars will have it built in.
I'd like it added on to the 99 Windstar at no/minimal cost. Any clues for negotiating?

Thanks!

ldkusmin

My wife and I are thinking about buying a new Saturn station wagon (SW2). Saturn dealers in our area are advertising 39-month balloon loans at subsidized interest rates of around 3.5% with little or no down payment. Since they're not offering any other incentives, and they have that no-haggle policy, it would be nice to take advantage of this and get *some* kind of break from them.

My problem is this: We have the money to make a substantial down payment now--one comparable to what the end-of-term balloon payment would be. But the finance manager at the dealership tells me that the subsidy is only for balloon loans, not conventional loans.

In theory, I figure that we could set aside the money that we would otherwise use for a down payment, put it into our money market fund (where it should earn something close to the 3.5% we'd be paying Saturn, even after taxes) until it's time to make the balloon payment, use it for that, and wind up several hundred dollars ahead of where we would be if we made the down payment, but then borrowed the rest on a conventional loan from our credit union at an unsubidized 6.75%.

But, my wife is nervous about the idea of a balloon loan, and there is some reason to be concerned that the money will "burn a hole in our pocket" if we haven't put it into a down payment. I'm thinking that perhaps we could lock it up in a CD set aside for making the balloon payment, but that seems cumbersome.

Any other suggestions? It just seems weird that Saturn is, in effect, discriminating *against* buyers who want to put some money into their purchase up front.

Lorin

hmergler

Lorin,

Is there any pre-payment penalties on the loan? If not, why couldn't you just write out an extra-large first payment to Saturn. This would, in essence, reduce your principal by that much, leaving the balloon payment at the end to be that much smaller. I would check with someone at your bank about that first though.

HTH,
The Merg

CarMan@Edmunds

Ldkusmin, you are right. Saturn only has support on leases and balloon notes. They do not provide low rate financing or cash incentives like many other brands so. Thus the only way to get some kind of break from them, as you put it, would be to lease or finance your car. It was originally the brand's plan not to have any sort of incentives at all. However, I think that they discovered that it was impossible for them to avoid supported leases and balloon notes because so many people merely shop for the best monthly payment.

The CD idea that you mentioned sounds pretty good to me. You can take the money that you have right now and stick it in a CD that has the same term as your balloon note. You wouldn't be able to touch the money because most CDs have a substantial penalty for early withdrawal, so you would have the money when you need it to pay off your car.

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theinric

I just got approved for a loan from Household Auto Credit, and I received what I thought was a check to take to the dealer to get the car. Turns out that it's a DRAFT, whatever that means, but the dealer is unenthusiastic. What is this? The dealer said it's a way for them to sit on my money?

Teresa

hmergler

A draft is basically the same as a bank check. The one main difference is that the dealer has to fax certain information to the bank before the check will be honored. Most likely you were approved by Household Auto Credit without having to supply them any documentation to back up your application. Before the bank will honor your check, they want to see proof of your income and employment.

As for the dealer being unenthusiastic, well too bad for them. If they won't honor the draft, that's a different story. Although most lenders will allow you to call them and have a backup plan of wiring the money directly to dealer, but they will only do that if it is absolutely necessary.

- The Merg

clarence2

I am trying to find out the best finance rate for a Honda Odyssey(99) for 60 Months.

Does % down make a difference?

What do you know about Peoplefirst.com, Are the Legit? What are the Advantages/Disadvantages about using them?

Thanks

Clarence2

lexi10

I am 18 and have a very large annuity and am going to purchase a new car but don't want to spend a whole lot of money up front or in the first 2or 3 years. Can anyone recomend a creative financing plan that will allow me to invest in other ventures now and pay more on the car later.

clarence2

1. Does the Warranty need to be purchases by the time you sign the papers for your vehicle?

If not, can I buy it when the 3/36k warranty is almost over? Will it cost considerably more?

2. How does the Warrany Gold contracts differ from Honda Care Warranty

I am looking at a $0/7yr/100k warranty for the 99 Honda Odyssey

Thanks
Clarence2

guitarzan

Lexi10, leasing offers low montly payments. However, when you eventually buyout the car, you'll realize the lease may add $1000 or more to the total cost you've paid for the vehicle.

Some manufacturers offer a balloon loan. It has low monthly payments and a large lump sum at the end of the loan. This sounds perfect for you if the make you want offers them.

Clarence, I yield to others for specifics. However, I suspect you can buy a warranty any time. You will, however, probably be charged for a thorough inspection of your vehicle before being allowed to purchase the warranty. I'd ask your dealer for clarification.

nwng

Scenario: want to purchase a new car for $20k. Was going to trade-in but the dealer would only give $7k and I know for a fact that I could sell the car for $10k by myself. The new car I will be buying has a manufacturer backed financing of 2.9%. The plan is to get a loan from carfinance.com for $10k and take another $10k from the manufacturer's financing program @ 2.9%. When I sold my car privately (in about 2 months), I will then use the proceeds to payoff loan from carfinance.com (no prepayment penalty). My gain from doing this is 1) $3k extra from selling the car privately, 2) take advantage of the limited time offer of the 2.9% financing. Can anyone tell me if this will work?

Thank you all
caveman

bblaha

Depends on whether both lenders will allow it (I doubt it). Usually, the lender wants to have possession of the title until you pay off the loan and in your case they can't both have possession. They would both also want to be listed as the 1st lien holder... Whichever lender didn't have possession of the title would probably feel like they were going to get screwed if you couldn't pay up.

Why bother with carfinance.com in the first place? The dealer finance won't give you penalty free pre-payment and 100% financing? 2.9% is pretty hard to beat in the open market.

nwng

bblaha,
yeah, that's right, there will be a problem with the title. However, the reason for me thinking about doing it this way is when financing $20,000 for 48 mos, the monthly payment will be $428.75, even though I pay down $10,000 after I sold my car, the monthly payment will still be the same. Whereas if I have a 2.9% loan for $10,000, the monthly payment will be half. Oh, I got it, get a credit card with a 6 mos teaser rate (maybe 5.99%) and charge the $10k instead of taking out a loan from carfinance.com., and pay interest for about 2 mos. Will this work?

Losing my mind
caveman

CarMan@Edmunds

Clarence2, you don't necessarily have to purchase an extended warranty before you take delivery of your new car. You can usually buy one at any point during the first few years after you have purchased your car or truck. Keep in mind through, as your vehicle gets older it becomes increasingly likely that you will file a claim under your extended warranty and in turn extended warranties usually become increasingly expensive to purchase.

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CarMan@Edmunds

Caveman, I agree with bblaha. I really doubt that either carfinance.com or your manufacturer's captive finance company will let you split your loan up like that. What car are you looking to purchase? You mentioned that the vehicle that you are interested in has a limited time offer of 2.9% financing. In most instances, if they have such a program running right now there is a very good chance that it will be continued after the date that it is scheduled to expire. Thus you may not have to worry about rushing to purchase this car after all.

bblaha

That might work if you can find a CC company willing to let you immediately borrow $10,000 CASH at the teaser rate. However, if I were you I wouldn't even bother. Here are several options I would pursue if I were you, depending on what your financial "discipline" is. Everything assumes you borrow $20K from the captive finance company.

Option 1: When you sell your car, put the money in a savings account or money market mutual fund, which will earn around 4-5% (which after taxes is pretty much a wash with the 2.9% you're paying for the car). I wouldn't put it anything riskier than that. Each month, when you pay the $214 payment that you want to be paying, add another $214 from this savings account. THIS IS A POOR CHOICE IF YOU DON'T HAVE MUCH DISCIPLINE AND WOULD BE INCLINED TO SPEND IT ON OTHER THINGS.

Option 2: Find out whether the dealer loan advances the due date of the next payment if you send in really big payments. In other words, if you send a check for 5 times the normal payment, is your next payment not due for another 5 months. If so, then when you sell your car, send the $10K to the dealer immediately. Then start sending the dealer $214 a month. You'll never end up being behind and finish paying the loan off in 48 months (give or take). If the dealer wants the "payment coupon" then send $428 w/ the coupon EVERY OTHER month (6 payments per year).

Option 3: If the dealer won't advance the due date of the next payment (because he's an imbecile) then when you sell your car, send the dealer $10290 with the first 24 coupons (so you're paid ahead!) and then send him $428.75 every other month with a payment coupon. You should be paid off in 48 months (give or take). You might actually need to write 24 different checks and put them in 24 different individually stamped envelopes each with its own payment coupon, it depends on the mental ability of the people who receive your payment(s).

Option 4: Call the captive finance company and see if they'll let you refinance the loan for the same terms (same rate and length of loan, but smaller payment amount) after you've sold your car and sent the $10K to the finance company. If you try this, MAKE SURE YOU GET IT IN WRITING (that you can refinance your remaining balance with the same interest rate and length of loan)! Otherwise, you might get stuck paying $428 a month for the next 2 years.

Good luck.

bblaha

I hid my last response because it was rather lengthy. This isn't exactly the most frequented group at Edmunds, but still...

drew8

Car Man,

If you're still out there, I have a question. I'm going to take delivery of a Y2000 Mercedes E430 sport, fully loaded. I don't know the exact price, but assume it'll be around $60K (excluding regular and luxory tax).

I've recently had a change of heart, and decided to pursue a lease intead of purchase.

Can you tell me what the residual, lease factor rate (I have excellent credit) and $$ monthly payment should be? (Assume $60K list price (no haggling) and $10K down, 36 month, 12K miles per year)

Also is there a lease calculator around on the web somewhere to help me play around with the variables?

Thanks much,

Drew

CarMan@Edmunds

Drew, I answered your post in the other topic that you put it in. Please check there for my response. Thanks.

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rachelb

Car man,
I am about to order an A6 Avant with a $500.00 deposit. Delivery on this vehicle is running about 2-3 months. Audi has very attractive lease options at the moment, can I lock in a lease deal before the vehicle is delivered?

Thanks for you help, R.

wiechma2

I am looking to buy a 1999 Civic LX Sedan and am getting it at $25 over cost. Honda has their 3.9% (36 mo), 4.9% (48 mo), and 5.9% (60 mo) financing. I am putting down a $11,000 down payment to keep my payments low. The salesman said that I probably couldn't go with a 48 month plan because my payments would be too low. (~$125 mo). Instead, I would have to keep my down payment and stick with the 36 mo payment plan and $156 payment.
Does anyone know if financing places put a limit on how low payments can be or is this some type of scam?
Also, how do car dealers slip in extra stuff like people have discussed when both you and the dealer have settled on the car and the price?
One last question: In order to verify that payments values are correct from a dealer, will banks give you a table so you can check their numbers?
Thanks for the help.

pullio

I recently purchased a new Cobra. When i walked into the finance office the manger went over the monthly payments which I had no problem with. "What interest rate did you get for me?" i said. "We came up with 12.5%" he said. "You're kiddin right?" I can't explain how hot I was. I have impeccable credit. He gave me his bullsh*t spiel that it was only 20-30 $'s difference a mo. and because of my age (23) the rate was going to be higher. I made a quick exit to the nearest privat e phone to make a call to my bank. Ultimately i got in at a 8 or thereabouts from my bank and the dealership did come down to 10. Are these normal tactics they use or an anomaly? If i could have got a Cobra from anywhere else in the state i would have. A few friends of mine are looking to buy new explorers and trust me in won't be from Charles Gabus Ford in Des Moines Ia.

hmergler

Your first mistake was to agree to a monthly payment (as opposed to a price for the vehicle), but at least you asked about the rate. This is a very common "trick" that dealerships will play. By getting you to agree to a monthly payment, they can work the price of the vehicle and the length of the term to something that benefits them and leaves you with that great monthly payment. If you had already agreed to a price, then they usually lengthen the term in order to get you that great monthly payment at the high interest rate.

This is why it is suggested to always go into a dealership pre-approved for a loan. In that case, you will know what your rate and term are to begin with and can easily figure out maximum price for a car in which the monthly payments are suitable for you. This leaves no room for tactics like above to be played on you. The dealership can only work on the price of the vehicle with you. Of course, give the dealer a chance to beat your rate, you never know.

- The Merg

CarMan@Edmunds

Rachelb, you should be able to "lock in" a monthly lease payment for a period of time prior to taking delivery of your vehicle, provided that the manufacturer's incentive program is not scheduled to expire before your delivery date. This is because you are only eligible to receive the incentives that are in effect on the date of delivery. If the manufacturer's program changes prior to your getting the vehicle then you will only be eligible for the new program. Since Audi's current lease program runs through August 3rd, you will only be eligible for it if you take delivery before then.

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CarMan@Edmunds

Wiechma2, I've never heard about any minimum amount that you can finance through a manufacturer's supported program. I suppose that its possible that such a restriction exists, but I find it unlikely. I suggest that you make a call to or visit another Honda dealership to see if they give you the same response about the special finance program.

In your second question you asked how dealerships slip extra charges into the price of your vehicle. Well, the answer is that they really can't as long as you are careful and read everything that you sign very carefully. Problems like this usually arise when consumers don't read all of the documents that they are signing and just assume that the price that they agreed upon with the dealership is what they are paying.

If you want to check the monthly payments that the dealership is quoting you, just take the price that you are paying for the car and the interest rate that you are being charged and plug them into a loan calculator. Here is a link to one that we provide here at Edmund's: Edmund's Loan Calculator.

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CarMan@Edmunds

Great advice Merg about always going into a dealership with preapproved credit. Pullio, this is a mistake that many consumers make when they are car shopping. They spend months researching the price that they should pay for their car or truck and shop around, but then they aren't equally as careful when it comes to the financing. Always make sure to know exactly what interest rate you are being charged on your loan before you even discuss monthly payments. As Merg said, once you have agreed to a monthly payment, the dealership can play around with the price of your car, the term of your loan, the interest rate, or your down payment to arrive at the payment that you discussed. Make sure to know two critical pieces of information before agreeing to any purchase. They are the price that you are paying for the vehicle and the interest rate that you are being charged. Once you know these two pieces of information you can always calculate your monthly payments on your own using a simple loan calculator. I'm glad to see that you caught the dealership before you started paying 12%.

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draco1

I am an exchange visitor in the US from abroad. I am arriving in California in October and will be working with an American company. I'm planning to purchase a new car. I prefer to buy a Japanese brand as I am used to drive such kind of car.

My questions are:

1. What are the possibilities that I'll be accomodated by a bank for short term financing like for 15-18 months. Are interests lower and down payment higher? Can you provide me with quotations?

2. Do I have to go directly to the bank first before I transact with a car dealer? What are the requirements? Is this what they call "capital lease purchase"? Is there a problem with the fact that I'm an exchange visitor and will stay only for 18 months in the U.S.?

3. I want a fully loaded car and I noticed from the internet that the car dealer's price is for standard models only which means all the other accessories are not included. Can I buy these accessories only from the car dealer?

.

CarMan@Edmunds

Draco1, you should be able to find a bank that is willing to give you a loan for 15 to 18 months. Interest rates probably will tend to be a little lower on short terms like the ones that you mentioned. Unfortunately, I do not have access to the interest rates that are available through banks other than captive finance companies. My advice is to shop around at a couple of banks and perhaps on-line to see what sort of rates are available. It is in your best interest to be pre-approved for a loan with a lending institution prior to visiting dealerships. I don't know exactly how banks determine credit ratings for foreign individuals such as yourself. However, chances are that you will end up paying a higher interest rate than someone who has established credit and has been living in the United States for a number of years. Most internet price guides list both the dealer invoice and MSRPs for factory installed options on new cars. The one major exception is Honda. Most of Honda's options are installed at dealerships and not at the factory and their pricing is not available.

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sandracraig

This is a really stupid question, but I'll ask anyway. I'm looking at an Olds Alero and they have a promotion where it's $500 back or 0% or I can lease at 3.9%. Do I still need to compare other financing offers since it seems 3.9% is way below the norm?

CarMan@Edmunds

Salgal, I seriously doubt that you will find any lending institutions other than GMAC that are willing to give you a 3.9% interest rate, let alone gbeat it.

Car_man
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