Questions About Financing New Vehicles

rjbpa · February 2005

Does anyone know the ramifications of paying off a loan with BMWFS within a month? Here is the senario - to close an OTD deal quickly you agree to finance through BMWFS. After a week or two you have moved money around and have good funds to pay off the loan. Will the lender charge a penalty? If the dealer has marked up the rate (typical at BMW dealers), will they have a chargeback?

jb_turner · February 2005

Why dont you ask the lender if there is an early payoff penalty?

danf1 · February 2005

Typically if you payoff within 90 days, the dealer will get charged back. I would recommend telling the dealer that you intend to do this. If they still mark up the rate it is their problem to deal with. Read the back of the contract. There will be a section regarding prepayment where any penalties will be spelled out for you.

suv4 · February 2005

i'm going to purchase a new vehicle.

if i'm trying to lower the bottom line price & monthly payment, does it make sense to put a couple of thousand dollars cash down ? A banker told me not to because it was money going right into the dealers pocket.

lionvoice · February 2005

So, I'm getting ready to pick up my car tomorrow when it occured to me that I might have to pay the tax upfront. I've never bought new and as such the experience is completely new to me. Does Illinois allow the financing of sales tax? On the documentation I saw at the dealer, it just had everything spelled out as various lines, they asked what I wanted to put down, but never said that the taxes and such would be due upfront. The dealer is checking to see which bank (my credit union or theirs) will get me the best rate, but again...no words were spoken about the sales tax. Appreciate your help!

dbauer · February 2005

its ALWAYS smart to put money down on a finance contract.

your banker may be talkin g about a lease, which i agree with. if you are getting a conventional loan, put as much money down as you can afford.

if you are leasing, put as little down as possible.

dbauer · February 2005

it is usually understood that taxes are included. if they are not collected, then they cant give you the car.

i always recommend that people pay taxes upfront...there is no logical reason to pay interest on taxes.

just ask them.

grandtotal · February 2005

i always recommend that people pay taxes upfront...there is no logical reason to pay interest on taxes.

Why is that? Aren't the taxes just a part of the cost of buying the car? Isn't that a bit like saying always pay for the tires up front? What am I missing?

dbauer · February 2005

no, taxes arent "part of the cost of the car". they are a part of paying for the gov't.

people have gotten so used to the "nothing down" financing, that they forget to take into account the taxes they paid when they are $3000 hooked in a 3 year old car. the taxes on a $25k car plus the added accrued interest over a couple years can make up a HUGE chunk of that figure.

anonymousposts · February 2005

gregjohnson: The body shop I was referring to is Classic located on Cobb Parkway in Marietta. They do a lot of work for high end dealers. Another good choice is Nalley Acura in Marietta. We have had cars repaired at both places and were very satisfied with both.

snoopy: I doubt you saved $5000. Dealer retail on Edmunds for a reasonably equipped (auto, roof, leather, BOSE) Maxima SE with 45,000 miles is $14,000.

CarMan@Edmunds · February 2005

Hi suv4. Unless you are taking advantage of a special low financing rate that is being offered on the vehicle that you want, i.e. 0%, 1.9%, etc..., it is definitely in your best interest to make a down payment when financing your new car or truck. Not putting any money down forces you to pay more interest and will most likely result in you being upside down, meaning owing more money than it is worth on the open market, on your new vehicle for some time. I find it strange that a banker would tell you not to make any sort of down payment. The dealer that you purchase your new vehicle from will get its money regardless of how large a down payment you make. In fact, the less money you put down, the more dealers make if they arrange financing for you.

Car_man
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CarMan@Edmunds · February 2005

Hello lionvoice. I am not personally all that familiar with Illinois' sales tax policy for financed vehicles, but you may be able to find out more informaiton on this subject by visiting one of the following sites: CyberDrive Illinois and Illinois Department of Revenue.

Car_man
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gregjohnson · February 2005

Anonymousposts: Thanks for the pointer, it's the first thing that went right all day...

-Greg

anonymousposts · February 2005

Should we even ask why you are in need of a collision shop ... or is it still too painful?

yarski · February 2005

What do the major auto companies (i.e Chrysler) consider a minimum credit score when financing through them to qualify for dealer discounts and incentives?

danf1 · February 2005

Most of my lenders require 640+ for prime lending. Of course, interest rate, term, and advance will vary depending on your score.

gohonda1 · February 2005

I am attempting to finance through Honda Finance for my brand new 2005 Honda Accord. They say I have been approved at the low 2.9% APR, but have told me that I need to supply 6 personal references when I go to pick up my car. Everyone I have talked to has said that seems very excessive and in most cases they have never had to give out personal references for a loan before. Normally I'd have no problem walking away and getting my financing from somewhere else, but they are giving me 2.9% which is so much lower than I can get anywhere else. Has anyone ever heard of personal references being required for a car loan before??? Thanks.

gregjohnson · February 2005

You absolutely may, in fact I'm thrilled you did - Sorry it took so long to get back with you, I've been slammed trying to educate myself enough to fix this situation.

Basically, a friend borrowed my 2001 Camry Solara Convertible to meet their son 100 miles away in the ER. (He picked a fight with a boxer & her engine isn't so strong after she let the oil get 4 qts low...)

So far, so good. Now, as anyone in the Southeast knows, Atlantans have a God-given mandate to drive no less than 80 miles an hour. (School zones excepted, the cops are REALLY touchy about that). Atlantans also know in their heart of hearts that Yankees are sissys, and that they couldn't possibly know what they are doing. Ergo, snow and ice can't be that big a deal, right Vern? (This despite the regular-as-clockwork coverage of roadway mayhem at the first snowfall.) Three weeks back, we had the first and last ice storm of the season.

Naturally, this front hits as my friend returns from the ER at midnight. I wasn't there, but she says she was riding in the middle lane at her customary 50mph. She also says she was getting passed on both sides... very credible for GA 400, a.k.a "the Atlanta Autobahn". This is when "something" happened - she doesn't know what, but someone hit her and pushed her into the median. This amnesia is annoying, but consistent with my personal collision experience and none of the other 8 drives involved in this fiasco can remember enough to determine what happened either, so it's hard to blame her.

I'm willing to take responsibility for my own driving, so I carry only liability. She's financing, so she has collision, maybe comprehensive. (She throws her policy papers away & her company won't give me the policy). My carrier denied liability, hers sat on it until I got around to asking for their attorney's address. I was, and may yet, sue everyone involved - GA small claims goes to $15k)

Yesterday, I sent Georgia Farm Bureau an invoice for $18,000 - hard damages of $4k-5k, DV of $6-10k, & the difference in my time & costs. Asking market on this vehicle appears to be $20k, & I offered to settle for that, even though it means I'm out a good work-week of time and effort. If they see this as a tort claim (Which is what I see it as), they'll cut a check & we'll get on with life. If they see it as a contractual claim, we'll end up in small claims squabbling over the difference between the tort & contract theory prices (Ballpark $10,000)

Sorry to ramble so long, but I'm quite wrapped up in this at the moment...

-Greg

lemmer · February 2005

That sounds like an awful situation.

The accident clearly isn't her fault, but Atlantans know that going 50 on GA 400 puts you at a huge risk of being run over. In their defense, GA 400 is a fairly long, straight, flat, zillion lane controlled access road. If everyone wasn't talking on their cell phones and/or putting on makeup, 80 to 90 would be a safe speed.

dbauer · February 2005

all the time. every credit app. ive ever filled out has space for personal references. it is for skip tracing purposes.

if you plan on making all your payments on time, why on earth do you care?

kyfdx · February 2005

I think the issue was SIX references.. That seems a bit overboard.. I can't ever recall being asked for more than two.. and I've dealt with Honda Finance numerous times..

So, I agree.. giving references is normal... But, six of them?

gohonda1 · February 2005

"I think the issue was SIX references"

Yes, that was my main concern. Some references I understand (2 or 3) but 6 makes me think they are using my references for other purposes (eg. spam mail).

dbauer · February 2005

in some cases, when the approval is borderline, they will ask for more.

secondary companies never ask for less than 4 in my experience. FMCC asks for 4 up front, and asks for more if they approve a higher tier than you qualify for.

i would assume (i may be wrong) that he was on the bubble for 2.9% and they gave him the benefit of the doubt.

like i said...hes getting 2.9%...unless he is planning on NOT making payments, it shouldnt really matter.

gregjohnson · February 2005

Lemmer - You'll get no argument from me - I _like_ 400, and it _should_ be an autobahn - The road itself could handle 120mph+ easily if Americans had any lane discipline left.

My gripe is not the speed - I've criticized both my mother & GF for going too slow on 400 and metro area interstates. (Wether the boys in blue like it or not, the de facto minimum speed around here is 75. Any protests to the contrary are just propaganda for the speeding tax.)

My gripe is with the assumption that weather doesn't affect cars, and that if it does it must be some kind of design defect. I'm further chapped by the "I dunno" defense - they were driving like it was a June afternoon in weather every media outlet described as "treacherous", "highly dangerous", "hazardous".

Were they all careless? Negligent? Stupid? On crack? All of the above?

But, I digress. (I'll put my soap box away now)

-Have a great one

skittle1821 · March 2005

Hello...i have a question for anyone that can help me. I am a young car buyer (18 yrs old) very interested in buying a used toyota rav4 (2001) and am running into major difficulties. Because of personal circumstances my parents are not able to cosign for me on a car loan. I am able to put down about 2K on this car and was wondering if anyone knew of any banks that would finance me with very limited credit history. I have a job which pays about 24K - 26K and would be very responsible. Please help.

dbauer · March 2005

if you have no derrogatory credit, then go to a new vehicle. almost every manufacturer's lending arm has a first-time-buyer's program. i know for a fact that ford's is the most comprehensive, as they include leases. nissan offers the best rates on FTB out of all of them, but does not include leasing as part of their program.

at 18, you have plenty of time to get the car you want. for now, get what you CAN get, establish yourself, and move on in a couple years.

my personal recommendation would be to do a 2 year ford lease on a focus, ranger, or escape. once 2 years go by, you can pretty much get anything you want.

cadillacmike · March 2005

"in some cases, when the approval is borderline, they will ask for more.

secondary companies never ask for less than 4 in my experience. FMCC asks for 4 up front, and asks for more if they approve a higher tier than you qualify for. "

I can't even remember the last time I was asked for references on a car loan. Actually, I don't ever remember ever providing any at all. But then again, I'm a bit older and the missus & I have established credit with high "scores".

Kirstie_H · March 2005

FYI, we have a new topic about Credit Scores & Vehicle Financing

buck0086 · March 2005

I am looking to pay cash for a new SUV in the next few months if I can put the money together. I have a couple of questions related to this:

1) I've read in some forums mention that it's best not to put down too much cash. Is that a problem if you plan to pay for the entire car? Why do people say not to put too much cash down?

2) If I do pay cash for the car, I would like to charge it to my credit card and then completely pay off the balance. It's a rewards card so I would get something out of that. Do dealers view credit card payments to be cash or is it viewed differently.

Thanks for the help.

danf1 · March 2005

You are probably reading advice to not put money down on a lease. If you are financing, then put as much down as possible.

If you want to use a credit card to purchase, you will rule out many dealers. The credit card campanies charge the dealers a lot of money to accept that card which eats away at any profits on the new car. If you want the points, do a cash advance.

rodion3028 · March 2005

I bought a Lexus IS 300 under the business vehicle loan offer. I dint understand the contract at that time, I thought there would be only monthly repayment of AU$862, I dint see a final paymnet of AU$28,990 at the end of 5 years. And my friend dint tell me about it.

So what is the best thing for me to do considering I cannot pay this final payment at the end of the 5 years?

grandtotal · March 2005

If I were you I'd go back to the dealer for clarification on your options. It looks to me that the loan you selected is a loan with a balloon payment at the end. Assuming that you do not put excessive miles on the vehicle you should have a vehicle that is worth at least the balloon payment at 60 months. At that time you probably have two options:

1) Trade it in to the dealer and use what the dealer gives you to pay off the loan with maybe a little left over.

2) Take out a bank loan to pay off your existing loan.

onei · April 2005

I made a huge mistake. After catching 2-3 problems in the leasing / financing of a new Tacoma that I call deceptive sales tactics from the finance department, I fell for the "If you buy the security system we can get you this lower interest rate" sales tactic. The finance officer indicated "The bank will lower there rate because its a secured loan". Now I am regretting it. It appears as if this security system is no more than a glorified blinking light that has a couple window sensors. I am to embarrassed to say what I paid for it. Does anybody out there know if I have any recourse? The bank was Wells Fargo and the dealer was Larry Miller Toyota in Peoria, Az. Shouldn't my interest rate on a loan be based on my Credit Rating or did I really get taken. Please, positive responses only, I felt as if I've been beaten up enough already. Thanks.

rroyce10 · April 2005

....... **Shouldn't my interest rate on a loan be based on my Credit Rating or did I really get taken. Please, positive responses only, I felt as if I've been beaten up enough already. Thanks.** ....

Yep, most loans are based on your credit, not what extra's you're buying ... make an appointment with the GM and bring all the paperwork .. but if the contract has been "cashed" by the dealer, there's not much they can do except writing you a check as good faith ...... next time: pay attention ..............

Terry.

CarMan@Edmunds · April 2005

Hi onei. Unfortunately, you are right. It is illegal for a dealer to make an interest rate on a new or used vehicle contingent upon the purchase of an extended warranty or option. The first thing that I would do if I was in your situation is contact the person who you were dealing with at this dealership and tell them that you have done some research and realize that what they did is not right. If they refuse to work with you, escalate your complaint to the dealership sales manager or general manager. If that does not get any results, try to contact the dealership's owner. If all of these people refuse to work with you, you can always contact your state's attorney general as a last resort.

Car_man
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eharri3 · April 2005

Laugh hysterically at them over the phone, and tell them it is the funniest joke you have heard all day that they would call expecting you to pay good money to get a vehicle serviced there after the salesperson pulled such a sleazy tactic, and they will probably see you walk on water before they see your truck in their service bay. And PLEASE tell me you didn't already send in your survey.

eharri3 · April 2005

I've been paying extra in gradually larger amounts since my truck loan was taken out 10/31/03, to the point where I'm now paying more than double every month after my last raise. I have called Chrysler financial several times to verify that there's nothing in particular I have to do to specify that the extra goes to the principal, and they've told me several times that on their loans it happens automatically when you pay more than the minimum. I still can't help but be paranoid and think there's some fine print I haven't seen or some catch that they didnt mention and that I'll get this loan paid off in 36 months instead of 60 and then find out it didn't save me any money. Can anybody who has dealt with them verify that this is the way it works?

osubeav · April 2005

Usually your monthly statement will show how much went to interest and how much went to principal. It should also show the current balance, so you can check where you are.

As long as it was a simple interest loan, there shouldn't be any tricks. If it was a "Rule of 78's" loan, there isn't any advantage to paying early, but those kind of loans are rare anymore and illegal in quite a few states.

rroyce10 · April 2005

......... Just like extra mortgage payments .. you need to send separate checks, watch the monthly balances and be in touch with the billing department, cuz' they can make mistake ....

PS: extra payments, good job.!

Terry.

eharri3 · April 2005

PS: extra payments, good job.!

Thanks. I decided I don't like having a payment anymore so I'm planning to make it go away in 36 months instead of 60. Paying the minimum got boring cause it didn't seem to be going down fast enough.

onei · April 2005

Nope, oddly enough I did not get a survey. As a matter of fact I have received nothing from the manufacturer itself after nearly 45 days. Not even a "Thanks for buying a vehicle" note. I had written an email to the finance manager that was on duty that day indicating that I could in no way give excellents on a survey with regards to how I was treated with the financing. Its almost as if they told Toyota, don't send this guy a survey..... I have also written a letter to the GM with absolutely no response either. I think I'm screwed. I do appreciate everybody's responses back to me though. Thanks.

reuel3 · April 2005

Hi eharri3,

Having formerly worked as a manager for Chrysler Financial, I can tell you that as long as you are current on your payments, any additional amount you pay should automatically be applied to principal. Since it is a simple interest loan, the money you send in should be applied first to cover any interest that has accumulated since your last payment, then the rest toward your principal balance. Your statements should reflect that you are paid ahead, and you should be able to tell how many payments you have left based on the due date currently reflected on your account. If you have any doubts or concerns, you should have no trouble getting this information from the customer service line. Any customer service rep in that organization can tell you how many payments you have left and what you paid towards interest and principal for your last several payments (it only takes the press of one button after all). If you find that they have not applied it correctly, you can ask them to go back and fix it -- they do have the ability to re-post payments and apply the money according to your wishes. You should not have to send in separate checks.

Hope this helps!

reuel3
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bond007jb · April 2005

Hi,

I am planning on purchasing a 2002 M3 convertible from a private party and have the following options, looking for some recommendations:-

1. Pay Cash
2. Pay 50% Cash + Finance 50%

Finance options
1. Used car loan from my credit union
2. Use the Home Equity Line of Credit

Thanks in advance

kyfdx · April 2005

Normally, I advise against using the HELOC for car purchases, because the interest rates are variable, and we are in a rising interest rate environment. You can have the rate fixed on a certain amount, but this reduces the flexibility of the HELOC and the rate is usually a couple of points higher for the fixed option.

However, if you have the available cash to pay for the car, then there is nothing wrong with using the HELOC, as you can simply pay it off, if the rate rises too much.

Other than that, a loan from your credit union should suffice..

There is nothing wrong with paying cash, of course... especially if it is sitting in a money market or savings account earning minimal interest.. That decision would depend mainly on your personal finances.

regards,
kyfdx

cadillacmike · April 2005

Terry,

You do NOT need to send separate checks on mortgage payments, if you use the form / coupon book, whatever and indicate on the form / coupon, whatever that the additional amount is principal reduction. I do this all the time, then i watch next month's statement for verification.

If you don't get monthly statements (most coupon books don't have them), request a written amortization schedule from inception to date and you can check that.

dthomas1 · April 2005

We are considering trading in our 2003 Honda Odyssey for a 2005. The dealer said he will give us 21,000 on our trade-in leaving us with a balance of about 9k on the 2005 van. The dealer told us that PA sales tax is applied on the difference between the sales price and trade-in. We owe 14k on the 2003 van. The loan rate on the 2003 van is 4.9% which is probably the rate we will get for the new van on a 4 yr loan.

Is it best to just continue paying on the remainder of our current loan and finance the balance? How does our current loan effect the amount of PA sales tax we will pay? Thanks for any advice.

kyfdx · April 2005

Your loan balance has nothing to do with the sales tax.. If you pay on the difference, then you'll owe tax on the difference between sale price of the new van, and trade-in allowance on the old one ($9K, right?).

Also, you don't have a choice on your financing.. If you are trading in your current van, that loan must be paid off, and new financing obtained. IOW, you can't just keep paying on your old loan..

Really, there are two transactions.. You are selling them your old van for $21K, leaving you with $7K cash, after paying off the $14K loan balance..

Then you are buying a new van for $30K, and I assume, putting that $7K cash back in as a down payment... That will leave $23K as the amount you will need to finance on the new van...

regards,
kyfdx

jsalz · April 2005

Can an F&I guy offer you a higher rate than you qualify for? How can you demand that you get the best rate without knowing what their best rate is? How does Honda Fiancing work?

How do you know your loan is definitely approved and you can take the car home without having to worry?

CarMan@Edmunds · April 2005

Hello jsalz. F&I people at dealerships absolutely can offer consumers higher interest rates than they qualify for. In fact, in today's automotive marketplace where consumers are beating up dealers over every penny the marking-up of interest rates is a very important source of revenue for dealers. If you are interested in a Honda vehicle that does not currently have a special financing program available on it, the best way to finance it would be to go out on your own and get pre-approved to do so through a local bank, credit union, or through a bank that does business on-line. Getting pre-approved to finance the car or truck that you want serves two purposes. One, it gives you an idea of what sort of rate you can expect. Two, it often motivates dealers to beat the rate that you already have.

Car_man
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usmc_jeep · April 2005

Due to previous stupid credit habits, I wanted to have a co-signer on my new vehicle. I custom ordered a 2005 Jeep Wrangler. About a week after ordering the Jeep I filled out the credit app with my co-signer (who has no relation to me).

Yesterday I get the call that my Jeep is in and they are going to run the credit. 5 minutes later I get another call stating that my co-signer is invalid since they are not related to me and cannot be placed on the title. I am informed that I have to run the app myself.

Now, I qualified for the DiamlerChrysler Affiliate program (vehicle 1% below dealer invoice) as well as a $500 military service discount and the $750 Chrysler cash. Not sure if this is affecting the co-signing or not.....

I live in PA if it matters.

Thanks in advance to anyone who can help.

Semper Fi,

Mike

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