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Comments
Last time I financed a vehicle was GM Credit. I found out when I went to trade I owed a lot more than I should have. GM would take all the Interest in the first few years of the loan. It should have been illegal. A real scam operation. And I still gave GM two more chances. Well they have to wait now till 2038 for my next GM purchase. You can only carry a bunch of losers so long. GM will be a Chinese company by the end of the decade.
So, I made payments of $5,000, $5000, $5000, and $3000, all before the first payment of about $358 was due on November 7. I think I made the December 7 payment around November 8. And just made the Jan 7 payment a few months ago.
So far, I think I've paid about $64 in interest, and the March 7 payment should pay it off, in full.
Um you know that's how loans work. You pay interest on the principal owed and at first most of your payment goes to interest so you owe a high principal amount.
It is definitely atypical to calculate and charge 100% of the interest at the front-end of the loan, and I would never do business with a bank that did that.
On a long-term loan, such as a 30 year mortgage, or even most 15's, that's true. But on a 3-5 year car loan, even the first payment should be mostly principal.
On my 2012 Ram, which I financed $19,451 at 3.99% for 5 years, the first payment would have been around $64.67 in interest, and about $293 in principal, if I hadn't started paying it down aggressively.
Most consumer loans today are simple interest loans - interest is calculated based on the balance. The interest paid goes down every month as the payments are made. The first month, most of the payment goes to interest and it drops each month as the principal is reduced.
All my recent car loans have been through my credit union and they withdraw the payment weekly from a checking account there. With my current one, about 15% of the payment was going to interest at the beginning and is now at about 12%.
There is something called a Rule of 78 loan which is rarely offered anymore. These loans have more of the payment applied to interest up front. These types of loan have been outlawed in many states. If GMAC offered gagrice a Rule of 78 loan, it must have been before 1992 because that was when Congress investigated the use of those loans. I remember the loan on my 1984 Cavalier from GMAC was a simple interest loan as I paid extra on it every month to pay it off for less than the total payments.
It's the same with a mortgage - the difference is that the amount is higher and the term longer. If one were to take out a 15 years car loan, it would probably be closer to 50/50 on the payment allocation.
This is why I generally tell people to just use their own banks unless someone's offering a 0% deal. :shades:
Here is one article (of many I found) that calls it a simple interest loan:
http://www.realcartips.com/carloans/382-simple-interest-vs-pre-computed-car-loan- s.shtml
They can still offered today for loans under 61 months (Feds passed a law outlawing them beyond that) but not in the 20 so states that don't allow them.
I would say that the shadier the dealer, the more likely at Rule of 78's loan could be offered.
I haven't driven the new Altima yet, but my sister had an older model with the HSD and it was a pretty nice ride. Even the CVT didn't bug me a bit, and as a Subie fan, I absolutely loathe the one in the new Impreza.
Maybe Subaru was still getting the hang of the things. You should try the one in the 2014 Forester (N/A and XT Turbo). I intend to.
Anyway, back then it was definitely worth it to do the 0.9%. I financed $20,389 at 0.9%, which over the course of five years came out to a total interest payment of ~$469. My monthly payment was $347.66.
If I had taken the $1000 cash back, I would have only financed $19,389, but over the course of the five years, would have paid about $3510 in interest. The monthly payment would have been around $382.
Nowadays though, with interest rates being so low, it might not make much difference. My credit union is now offering 2% for a 5 year loan.
Nowadays though, it seems like the rebates are a bit different. For example, with my 2012 Ram, I got a $500 rebate for financing through them. Chrysler Financial is history though, and the loan is with Chase.
I actually drove it back to back with the 2.5l Mazda 3s 6EAT, and I liked the Subie better. Of course I don't live in a hilly area...
But look at this, from your own link, Gary:
> 2013 Mercedes-Benz GL350 Bluetec: 7 days
> 2013 Subaru XV Crosstrek: 7 days
> 2013 GMC Acadia: 8 days
> 2013 Toyota Avalon: 8 days
> 2013 Toyota Avalon Hybrid: 8 days
> 2013 Ford F-250 crew cab: 10 days
> 2013 Ford F-350 crew cab: 10 days
> 2013 Ford Fusion Hybrid: 10 days
> 2013 Honda Civic sedan: 10 days
> 2013 Nissan Pathfinder: 11 days
> 2013 Subaru Impreza hatchback: 12 days
Those are the models with the hottest demand, note the XV is tied for first and the regular Impreza ain't far behind.
The only problem Subaru has is a supply shortage.
Told ya they should consider building them in Indiana...
Wow, considering how good the SkyActiv 6-speed auto is, that's something. I think the Subie CVT is pretty good but I'd rate the SkyActiv automatic higher. Then again, I like to bump shift, and don't see the point of a manual gate without a + and a - .
Subaru is expanding SIA, but anything that doesn't go to Toyota may end up building the new Forester.
I remember now, it was the older five speed auto, 5EAT. That's with the 2.5l.
The 2.0l SkyActiv had the 6 speed, but the doofus at the dealership brought around the wrong car!
No free lunch!
I'm like you in that I always pay cash for a car, but I did make an exception when I bought my 2010 328i.
BMW offered no discounts for cash, but if I financed through BMW, I got a $2500 discount off the sales price (rebate) at .9%. I kept trying to understand where the "gotcha" came into play, but never could find it. No pre-pay penalty, no minimum payments.
So, at the dismay of the dealer and salesperson, I financed the entire car, less my trade in value, and paid the note off when the 3rd payment came due. The finance charge totaled up to about $240, but I received a $2500 discount, so it was not a hard decision to make.
I'm still not sure who designed that deal, but it worked for me...
Probably because people like you are few and far between, and most people make the company beau coup bucks, so even if you didn't it all works out for them overall.
Sometimes a dealer will "buy down" a rate in order to give a customer who is focused on the interest rate.
Thay can't do this and deeply discount the car at the same time!
Or they will lie and tell you your credit isn't as good as it really is, and give someone focused on price their way, but tell them they need to pay 7.9% instead of whatever they thought they were going to get.
They offered me a 3-day contract buy-out option to appease our disagreement about my credit worthiness, but I wasn't sure whether to believe them after what had already been told (that I only had baby credit), and I didn't want to be in a position where I NEEDED an auto loan from a credit union, rather than SHOPPING an auto loan from a credit union.
I ended up taking the deal anyway, at 7.9 % because I was tired/worn out, made them take off $25 more extra bucks, and thought I could maybe eventually refinance anyway.
I ended up convincing the Honda finance manager to change the contract from 7.9% to 5.9% the next morning after he noticed me; and asked me why I didn't seem happy right after buying a nice new car (forget why I needed to go back the next day/morning now). He made it seem like it was a misunderstanding and clarification that allowed him to match what I thought my credit union was offering. After telling him why I was perturbed; He matched the rate I was asking for but did it with BofA (bigger commission?).
Regardless, I refinanced about 50 days later to 5.25% with the credit union as rates dropped a bit.
Lesson learned:
Don't even discuss financing with the sales people or managers; let the finance manager handle it, unless you are asking for something extra "special" financing wise.
There's another reason to not go through a dealer for financing: Each one will run your credit, and that dings your credit rating. Shopping and choosing a bank ahead of time means your credit is run ONCE, and you can go in carrying a pre-approval for an amount, knowing exactly what you can afford.
Actually it doesn't. Fair Isaac (the almighty FICO score purveyors) treats multiple auto loan or mortgage credit checks within 45 days as one single credit check as they recognize people shop for loans.
http://www.myfico.com/crediteducation/creditinquiries.aspx
About half way down.
Sometimes the dealer has to eat part of that "zero" percentage rate and that can, indeed, affect the price of the car.
If a manufacturer is offering a great, legit rate like 2.9% your local bank or credit union probably won't be able to match that. Otherwise it is a good idea to check with your local lender and get a pre approval.
Rates on cars and houses is about as low as I've ever seen them.
During the Carter administration people were happy to get a 15% loan rate.
Could you please point where it says that?
Does the formula treat all credit inquiries the same?
No. Research has indicated that the FICO score is more predictive when it treats loans that commonly involve rate-shopping, such as mortgage, auto and student loans, in a different way. For these types of loans, the FICO score ignores inquiries made in the 30 days prior to scoring. So, if you find a loan within 30 days, the inquiries won't affect your score while you're rate shopping. In addition, the score looks on your credit report for rate-shopping inquiries older than 30 days. If it finds some, it counts those inquiries that fall in a typical shopping period as just one inquiry when determining your score. For FICO scores calculated from older versions of the scoring formula, this shopping period is any 14 day span. For FICO scores calculated from the newest versions of the scoring formula, this shopping period is any 45 day span. Each lender chooses which version of the FICO scoring formula it wants the credit reporting agency to use to calculate your FICO score.
Bottom line, you're better off NOT having everyone and his brother run your credit.
I agree. When I bought my 08 Nissan PU truck they asked if they could run my credit. I said, why I am paying cash? Just our policy was the answer. OK, and his eyes got big and said wow 830 that is good. I did not think about it until a month later when we were doing a refi to get a lower rate on our home mortgage. My score had dropped to 810. So no one gets to run my credit score unless it is absolutely mandatory for a loan.
That way if the check turned out to be a "reader" we could do a contract and finance the car if they didn't make the check good.
Some complained but we didn't lose any money either.
I had a couple of stores try that with me. I walked out. I always walk in with a pre-approval from my credit union, unless I'm looking for a 0% financing deal (which hasn't shown up while I was car shopping yet). Why they would want to run my credit anyway when they know they can't get a better rate I don't know. Most of the dealers here have the same local credit union as one of their finance providers, though I'll bet they prefer to use others for various reasons.
Until the store get's a check from your lender, they have nothing.
We would be happy to do the deal under your conditions but we just wouldn't deliver the car until we were paid.
Most people understood our position.
Which is why no one in this area understands your position.
If I'm paying cash, I'd tell your dealership no. If they didn't think my check was good, they could call the bank and verify the money was there. Then, if that wasn't good enough I'd offer to be back with a certified cashiers check in 15 minutes.
If that wasn't sufficient for them, they could find another customer.
I don't mind a credit check if I'm financing something, but I sure as heck will not oblige any business if I'm paying cash just because "That's what we do with all our customers".
We might as well end this. I spent 13.5 years in the business. How about you?
I had customers tell me they were pre approved that were not.
On an incoming car we would have no problem doing this the way you want to. We just wouldn't "roll" the car until we were funded.
Things may be more laid back or different in your neck of the woods. We ran a tight operation and since we were the largest volume honda dealer in nine states for the past 32 years our customers must have understood why we did what we did.