Questions About Financing New Vehicles

CarMan@Edmunds · November 2004

You certainly do have good credit, hophop1125. You are correct, Honda is not currently providing any sort of special financing rates on the CR-V. In this sort of situation, it is in your best interest to get pre-approved to finance the vehicle that you are interested in prior to discussing financing with any dealers. Many local banks or credit unions have fairly attractive interest rates on new vehicles. Check there to see what sort of rates they are currently offering. You may also want to check some of the banks that do business over the Web, like Capital One Auto Finance or E-Loan. Getting pre-approved serves two purposes. One, it gives you an idea of what sort of interest rate to expect. Two, it often motivates dealers to try to beat the rate that you already have.

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hophop1125 · November 2004

Thanks Car Man. I appreciate the words of wisdom!

I looked online and Cap One says 3.65, the credit union through my job says rates start at 3.0. Is that truly the starting rate? Or do they go lower.
We will put more than 20% down, and with the credit score I feel we should get the best deal out there! Is 3.0 the best we can do!?

Thanks again.

kyfdx · November 2004

If Honda isn't offering any special rates on the CR-V (and, I don't think they ever have), then 3% from your credit union is likely the best you could hope for.. Just make a call.. Credit Unions aren't like car dealers.. they will give you a straight answer the first time.. If you can get 3%, I'd jump on it.

isellhondas · November 2004

If you can get a 3% car loan, I would jump all over it. That is a great rate!

CarMan@Edmunds · November 2004

You're very welcome, hophop1125. I agree with the previous two posters. Three percent is an outstanding interest rate for an auto loan. If that is indeed the rate that is available through your credit union, then I don't see any reason not to take advantage of it.

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stickguy · November 2004

at 3%, interest on a 20K loan starts at about $50/month (and goes down each payment). So, there is a limit to how much a 1/4% or so will change your payment.

wco81 · November 2004

Is this standard, that they still want to run a credit report on you even if you're paying cash?

Is there any way to get around it?

This is out in Northern California, at a Lexus dealer. Their best financing is still higher than credit unions. Which brings up another question. If you're financing it through another institution, not using the dealer at all, can they compel you to divulge your finances?

rroyce10 · November 2004

  ...... Forget all of that info stuff ..

           Just leave a good deposit to hold the vehicle and bring back a certified or a bank check for the balance, then take delivery ...... simple.

                          Terry.

wco81 · November 2004

Aren't they required to report cash transactions above $10k?

So from that standpoint, they have to get some of your info.

I would guess they have to get your social security at least?

But presumably, you still have to sign something for them to run a credit report?

financeinfo · November 2004

Looking for guidance on what APR to look for given a messy history, but it's been good for almost 3 years.

I have a bankruptcy from about 3 years ago. Shortly after that I purchased a slightly used car for $18000 with $500 down and paid a 17.5% interest rate. Since this time my credit is very good and I have no debt on credit cards, etc., a higher paying job, etc. My credit score is currently at 585. I'm about $1500 upside down on that vehicle which I will pay off in cash and sell on my own. In looking to purchase a new vehicle for about $27,000, given my history, what should I expect from a dealer interest rate? Also, I can put about $8000 cash down - how much should I put down? Should I look online for financing and if so will I need to look at the bad credit auto loans or try the conventional ELoan, Cap One, etc.?

Thanks

CarMan@Edmunds · November 2004

Hi financeinfo. It certainly sounds as though you have "righted the ship" so to speak. I am glad to hear that you have been so successful at putting your financial troubles behind you. It is also good to see that you have a substantial amount of money to put down on your next purchase. It is in your best interest to make as large a down payment as possible on your next vehicle. I say this for two reasons. The first is that even though your credit is getting better, you will still probably have to pay a fairly high interest rate on your next loan. The more money you put down, the less interest you will have to pay. Secondly, the more money you have to put down, the better your interest rate will be and the more likely it is that you will be approved. There is a pretty good article on the financing vehicles by consumers with credit problems. Here is a link to it if you want to check it out: Tips For Subprime Borrowers - Making the Best of Blemished Credit.

I have a feeling that you will be better off trying to finance your new vehicle through a local bank or credit union that you will be through one of the on-line banks that you mentioned. The on-line banks usually require consumers to have fairly high credit scores. Shop around with a couple of local banks and a credit union if you are a member or can join one and get pre-approved to finance the vehicle that you are interested in. Then go to dealers and negotiate an attractive selling price. Being pre-approved to finance the car or truck that you want will give you a good idea of what sort of interest rate to expect and may motivate the dealer that you are working with to beat the rate that you have already been quoted.

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gocanon · December 2004

Hi everyone,

I went to Stevens Creek Acura in Santa Clara. I had a Capital One check with me and after we agreed on the price they said I have to fill up a credit application. I said I already have applied for credit and got a check with me. They said they can't sell the car with out a new credit application for Acura/Dealer financing. Is this normal? The guy told me that sometimes that Capital One takes money back after the check is cleared. I find it hard to believe this.

Comments and suggestions are welcome.

danf1 · December 2004

Their check is a draft. It is the same as a loan contract and they can decide to pay the full amount or not. That said, Capital One is not the easiest bank to deal with from a dealer's standpoint, but I don't believe that you should be required to fill out an application. The only reason that I can see them asking for it, is to give them a chance to get your financing. They might have a better interest rate through the dealer so it could be to your advantage.

qbrozen · December 2004

their check can't be a draft. Its either a check OR a draft. Very different things, I agree.

Back when it was called PeopleFirst, I financed through them and did, in fact, receive a check and not a draft. That was specifically pointed out as an advantage to using PeopleFirst vs. the other online lenders. I don't know if its still the same, however, under the new management.

qbrozen · December 2004

i just went to their website to check (no pun intended).

this is their statement:
A Capital One Auto Finance Blank Check® works just like a personal check.

wlbrown9 · December 2004

Well, if you bring a check from a bank that would not be a 'cash' transaction that would have to be reported. Now if you brought in a bunch of cash to the bank to get the check, the bank would have to report it if it was $10,000 or more.

What some dealers worry about is the fee they might have to pay if they use a check verification service. If it is a certified check, then they should not use the verification service and incur the fee.

Bill

isellhondas · December 2004

Won't touch a draft. A draft is nothing more than a check with strings attached. No thanks!

Of course, these internet companies have learned this and are issuing mostly checks now. Still, I can't understand why anyone would rather deal with a faceless enity when in most cases the local banks and credit unions can match these rates?

anonymousposts · December 2004

Capital One has two different approval tiers. The top-rated customers get a check. There are no stips to be met and the dealer simply needs to make sure the total is less than what's printed on the check as the max finance amount. They also have a check that the dealer can't deposit until Capital One gives their OK and states that all customer stips have been met. The stips could include pay stubs, proof of residence, etc.

The dealer is probably acting in their best interests. If they run your credit they will be able to determine if you will be able to get alternative financing through them if Cap. One decides not to pay them.

isellhondas · December 2004

The drafts go to the people with marginal credit.

They can be so picky about all of their "stips" and cause long payment delays.

Exactly why a smart dealer won't accept them.

rroyce10 · December 2004

........ Thats a "double true" ... dealers don't like waiting 5/10 days for their money when the customer is out pounding miles on the vehicle ..

Terry.

clovisguy · December 2004

Has anyone else besides me had any trouble obtaining financing through Honda on-line? I checked my credit and don't even have a 30 day late. I just payed off my last credit card balance and only have a $613 per month payment to make on my 31K mortage balance. Never before have I been turned downed for anything!!!

fester2000 · December 2004

Here's my situation:

I need a vehicle (my wife just totalled our 2000 Mazda -- she's OK, but pissed). We have a bankruptcy from 2 1/2 years ago and have been steady since. I checked out my credit report for the first time in years yesterday, and found my FICO is 547, based on the Chapter 7 and some late payments I was surprised to see (including 3 car payments) I think I got smacked with delayed payment postings through my electronic payments to Mazda. I'm disputing those, but not optimistic I'll be able to clear them.

Although my wife and I haven't re-established any new credit, I have stability (two years with my employer) available income (Salary over $50K, with no debt but an $800 mortgage and the $300 car payment) and down payment cash ($2,000 plus). My wife is a non-working student, but her loans aren't on my credit profile.

I've paid off two cars now (first one in 2000, no lates, and it's still on my credit report), and can easily afford a payment up to $350. I think I could get into a subprime loan at most dealers, but I would first like to explore getting a high-risk loan from a credit union, as the moderator here recommends. I found two CUs in my area offering up to 18 percent rates on auto loans, so I'll be talking to them this week.

Does anybody have experience getting credit union loans with FICOs in the 500s? What else could help me? Will my disputes on the late payment blotches help my cause, even if they remain unresolved, or are they a deal-breaker?

kris007 · December 2004

Hi All,

My credit score is > 760 at all the credit bureaus. I am a recent graduate (its been 1 year since I graduated) doing a job for 1 year.I am willing to make a down payment around 30 %. Would I be able to get a loan of around 25K? If yes what interest rate can I expect to pay? There is a dealer financing available @ 1.9 and 2.9 % APR. Would I be able to qualify for this? Any suggestions/advice would be greatly appreciated.

Thanks in Advance,

KriS.

novacouple · December 2004

My local Honda dealers says he can finance me through Honda Finance at 9-10% even though I have a recently (4-months ago) discharged bankruptcy. The catch, I must put 30% down on the car. I do have enough cash (ok, cake) for the 30%. Some questions:

Can anyone confirm this or has anyone done this before?

Is the 30% on the purchase price or the "out the door price"

isellhondas · December 2004

Wow! I've never heard of this before!

A four month old banko????

Let us know if this happens!

black_tulip · December 2004

<<Aren't they required to report cash transactions above $10k? So from that standpoint, they have to get some of your info. >>

I think the law requires reporting if currency is involved,i.e. you show up with a stack of cash. If you are paying with a personal check then no reporting is necessary.

Kirstie_H · December 2004

Hi kris007, a big factor is how much you make in salary. I hate to ask you to disclose your earnings in a public forum, but if you make $25K a year, the answer is probably no. If you make more like $60K, probably yes.

kirstie_h

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andre1 · December 2004

What is the relationship between a FICO score and a Beacon score? The reason I ask is because I just had a less-than-pleasent experience at my Toyota dealer over these scores. I pulled my own credit report two weeks ago, and my score was over 700 (720 via Experian). When I went to finance my new Toyota, they pulled my credit and said my 'beacon' score was only 647. I basically told him he was full of @#$% since I had my credit reports right there. How can a 'beacon' score be so much less than a FICO score? Since I got such a low price on the car, I accused the dealer of 'fudging' the numbers to force me into a lower tier. I walked out in a huff and now I'm concerned every dealer is going to try this low-ball tactic. Does this so-called 'Beacon' score look at different factors than a 'FICO' score?

isellhondas · December 2004

A FICO score is the same thing as a Beacon score.

There are three major companies who report and your score will vary between the three.

That's a pretty big swing however. Usually not big of a difference.

kris007 · December 2004

Thanks a lot Kirstie. If at all how much I make matters then I should be able to qualify

for the dealer financing.

KriS

fordme · December 2004

i just bought a new 2005 mustang at a interst rate of 3.95%

and a week later the dealer is telling me that in order for me to keep the car i must sign a new agreement to pay 4.99% on the loan is that legal for them to change the contract,

dbauer · December 2004

sometimes, a lender reports to one credit bureau and not the 2 others. in my case, i have 2 scores within 5 points of each other, and one is 80 points less because of old debts that are still outstanding. this score is keeping me from buying a house, and im upset about it, but everything on it is valid.

if the items were on all 3, my scores would all be 80 points lower. send away for the report (probably TransUnion), and see what it shows. then you will be in a better position to make your transaction.

dbauer · December 2004

if the bank wont pay the contract at 3.95%, then they have the right, yes.

however...

ford has a 3.9% incentive rate on the mustang right now, and im pretty sure its nationwide. have them get you 3.9% for 60 months thru FMCC, and you dont have to change.

unless...

your contract is for more than 60 months. in that case, 4.99 is a heckuva rate, and i wouldnt wory about the extra $1.75 a month.

rroyce10 · December 2004

....... Sounds like you didn't qualify for the special rate and the lender kicked the contract back ....

Believe me, it's not worth the dealers time, money or patience to "hold" the paper for a week, when they could have cashed the contract and had the money in the bank ...

Terry.

frustrated2 · December 2004

hello, looking at purchasing a vehicle and trying to decide whether to do 0.9% or 2,000 or so cash back. i was thinking if i did cash back i could pay more monthly and pay off in about 3-4 yrs. my brother states if i dont get an interest rate less than 4% then he suggested i dont take rebate but rather the 0.9%. any advise?? I am trying to get some rebate plus 0.9 on kia sorrento O5 EX AWD

kyfdx · December 2004

A lot depends on how much you are financing.. In fact, the whole calculation depends on the amount financed..

Now, if it comes out close either way, then there are many good reasons for taking the rebate instead...

So, how much are you financing?

CarMan@Edmunds · December 2004

Hi frustrated2. Kyfdx took the words right out of my mouth. Whether it is better to take advantage of a manufacturers' special financing rates or cash incentives completely depends upon the price of the vehicle that you are getting, more specifically the amount of money that you are going to finance. If you are interested in a very expensive vehicle then 0% financing will save you a ton of money, assuming that you hold onto your vehicle until the end of your loan and do not trade it in early.

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steine13 · December 2004

"Now, if it comes out close either way, then there are many good reasons for taking the rebate instead... "

Agreed. And the calculation is not all that complicated.... on a 6% loan for $30,000, the cost to finance over 3,4 or 5 years is 1/2 the amount financed, or $15,000 multplied by 0.06 (interest rate), multiplied by the number of years.

That's a tad optimistic, since it does not take into account that in the early years, more goes towards interest than principal... so it depends on the rate and the life of the loan... so use 0.065 instead, and maybe 0.07 on a 6-year loan, and you'll be awfully close.

I should point out that the main benefit of a 0% loan comes in the first year...

-Mathias

rroyce10 · December 2004

....... Don't forget the most important thing "Length of time" or as Mathias would say: life of the loan .... even though the loan might be for 48 or 60 months, most folks are trying to trade their vehicles every 28 months, so keep that in mind .......

Terry.

CarMan@Edmunds · December 2004

That is a very good point, Terry. In order to realize the total savings that is provided with for instance 0% financing for 5 years, one has to actually hold on to the vehicle that they are financing for that long. The earlier one trades their car or truck in, the less they benefit from the low interest rate.

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steine13 · December 2004

It depends.

I bought a Sienna with 0% for 36 months.

Had I paid cash, I could have taken another $500 consumer rebate.

I worked out that the 0% was worth it if I kept the car for just one year... forgot what interest rate I based it on, probably 5% or so.

I'm entering the 3rd year of paying for it; the balance is down to $7, and the interest for the final year would be $180 or less, at five percent.

-Mathias

ts33 · December 2004

Kris,

When you say you are a recent graduate, is that from High school or college? You mentioned having a high FICO score but alot depends on your past credit that got you there. Is it all credit cards that the high credit limit is only a couple of grand. I look at credit report all day and although a 760 is a great score many other factors come into play. what is your overall debt compared to your income? Have you ever had a large loan before. Do you have at least 2 years of credit history? I would recommend you try at a credit union in your area they are more like to say yes if you or your parents have been members along time.

lee14 · January 2005

Hi,

I'm currently a college student and in need to get a new car(my car is dying). Anyways, since i'm a student, i only work part time (make about $15k a year) I'm planning on trading in my car and my parents are at overseas so I don't really have a cosigner. But they are willing to help me out with car payments and %20 down payment, excluding my trade in that is.

Will I be able to finance a car that cost $27k without a cosigner? Or can my parents at oversaes cosign the car??

co1 · January 2005

just purchased a 2005 honda suv. i got the 2.9% financing through amer. honda finance corp. i negotiated a very good purchase price -putting about $5,000 down, then made the mistake of chatting w/ the finance mgr. i mentioned i was going to get lojack since i sometimes park in some not-so-great areas of our city. the mgr said why spend so much money on lojack when you can get a brand new car if my new one is stolen. stupidly, i took, upon the mgr. recommendation a "total loss guarantee". i thought it was going to cost "only about $495" for the 5 year term of my financing... and add "about another $9 or $10 bucks" to my monthly payments. OOPS. i left the dealership (had a bad headcold, had to get back to bed) and when i got home realized that the negotiated price of the suv had gone up almost one thousand dollars! and the monthly payments up about $18. this "total loss guarantee" as explained to me by the mgr, would cover me (up to $5,000) the difference between the fair value assesment my insurance company would give me if my car was stolen or totaled, and the price to get a brand new suv of equivalent or greater value...again only up to a max of $5,000. isn't this gap insurance? i will end up paying over $1,000 for this "total loss insurance", ($185 per year at 2.9%) which, IF i incur a total loss will pay a max of $5,000. do the math, i really end up with $4,000. the honda suv i got depreciates very little any way... so i think this whole thing stinks. if i want, i can get GAP insurance online at a much lower rate. i don't even think GAP insurance is needed when financing and putting down 20% like i'm doing. i am seeing the finance mgr on monday (bought the suv friday) and i'm going to try to get rid of this back-end add-on. any one ever hear of this "total loss guarantee"? the mgr says it is NOT gap insurance. what do you think are my chances of me getting rid of this thing? too bad -i was otherwise really happy with the original salesperson i dealt with and was ready to sing the praises of my experience at this honda dealership.

joeduck · January 2005

Most dealers are offering incentives to finance through 'factory financing.' My question is where can I find info (or fine print) on then percentage of the total cost of the vehicle which must be financed to qualify for this incentive? For example, say a vehicle costs $20,000 and I put $10,000 down and finance the rest through the dealer to get the rebate. Would this be possible?

lee14 · January 2005

Hi,

MY QUESTION IS I have very little credit (student with part time job)and my dependants (cosigners) are at overseas, WHAT ARE MY OPTIONS TO GET A CAR LOAN?

Can my parents at overseas cosign my automobile loan application?

SOMEONE please answer my questions, I'm soo clueless..

dbauer · January 2005

as long as the dealership is patient, your parents can cosign. and no, you probably cant get anything by yourself with only $1200/mo. income.

have them fax a credit application to your folks, to establish a bank approval first...then they can use fedex, ups, or whatever they want to send the paperwork to them.

i do it all the time.

kyfdx · January 2005

Co-signer is overseas... I doubt that will help..

dbauer · January 2005

if the cosigner has a permanent address here in the states, its ok...but if they live permanently overseas, then you may have problems.

danf1 · January 2005

I'm sure that you could still use the low financing however, with that much money down if there is a rebate you should probably take that and finance conventionally. Your payment will probably be lower.

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