Questions About Financing New Vehicles

fahnesto · February 1999

I will be taking delivery of my 1999 GLS Alero Coupe in about 4 weeks. My question is how does GMAC financing decide whether to give the 3.9% finance rate on a 48 month loan. This is a fantastic interest rate they are advertising and of course I would be delighted to get it, I don't see why I should have any problems considering I have outstanding credit. Any feedback would be welcomed.

CarMan@Edmunds · February 1999

Fahnesto, you need to talk to your dealer about this special financing program. As long as your credit is in pretty good shape you should be eligible. It's a great deal. Where else can you get an interest rate that's as low as 3.9%?

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fahnesto · February 1999

Thanks car man, you can bet if they try to deny me
that rate I will become angry woman in the dealership. I guess I'm still skeptical that it's a ploy to get us to purchase and once we have they will attempt some sort of bs that they just can't give that interest rate. I will be asking them to prove to me via my credit report why they would be unable to give me that rate.

dhoff · February 1999

One piece of advice I have for you if you are worried about getting the low interest rate is to have the purchase agreement written up "Subject to 3.9% financing rate for xx months".

There will be a line on the purchase agreement to write any contingencies in by hand. When the salesperson is writing it, have them write it in.

This is what I did when I bought a Mercury Tracer a few years back when they offered a 1.9% rate. If your credit history is good, I wouldn't be worried about being approved.

Good luck.

CarMan@Edmunds · February 1999

Good advice, dhoff.

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mattsooy · February 1999

i have a question regarding financing:

does your down payment have any influence over the intrest rate you will be approved?

I have a fairly sizeable amount of money loosely tied into stock options that are pulling in a fixed intrest rate that is negligibly higher than the current intrest rate offered on my new car loan. I would like to negotiate down my intrest rate so that I can still use my stocks to make money at a higher rate than I'm spending it on car payments.

CarMan@Edmunds · February 1999

Mattsooy, the amount of money that you finance can definitely have an influence on your interest rate. The exact policy on this matter will vary from bank to bank. You need to speak with the specific company that you are interested in financing with to find out their stance on this subject.

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bobbycho · February 1999

Great site!!

Here's my story:
--5 years at my current job
--earn $26k/year
--disastrous credit (bankruptcy, and still not current on other stuff)
--want to buy a new car (stop laughing!)
--no money to put down (please stop laughing)

my wife is just getting back to work after a couple of years out (medical), so our joint income will look more like $38/year.

after reading several posts here, it appears that financing is hopeless.

Is it?

I can join the credit union at work, and wife's out-of-state parents can co-sign (they have sparkling credit).

Think that could get me a reasonable (less than 16%) car loan?

While I'm here, how much car can I afford? I'd love a Malibu, Stratus, Breeze, or Corolla (about $16k equipped).

Thanks in advance for taking the time to deal with a deadbeat like me!!

CarMan@Edmunds · February 1999

Bobbycho, I don't think that it will be impossible for you to get a loan although it's hard for me to tell exactly. Having a someone co-sign your loan will definitely help. Even if you are able to secure financing expect to pay a very high interest rate. Rather than purchasing a new car, you may be better off purchasing used. A Honda Civic that's a couple of years old will make a nice car and save you money that you can use to repair your bad credit while you're at it.

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tiggerdano1 · February 1999

My wife and I are looking at borrowing about 20K for our new car. My wife makes almost $50K a year and I bring in another 12K working part-time. And while we do have a very clean credit history and only a rent paymnet of $700 a month we were turned down for a loan by Peoplefirst finance presumably because we both have only been at our current jobs for around a year.
Is Peoplefirst a "tighter" lender than others? Or should we expect similar reaction to loan requests? Should we look into getting a co-signer?
Thanks in advance

CarMan@Edmunds · February 1999

Tiggerdano1, I personally would think that a combined income of $62,000 would be enough to warrant lending you $20,000. Perhaps they were concerned that neither of you have been at your current positions for a very long time. I have not heard that Peoplefirst is any tougher than other lending institutions. One possible solution to your problem is to get someone to co-sign your loan. Perhaps one of your parents would be willing to do this for you. This will certainly help your chances of being approved. If you would rather not have a co-signer, then perhaps you should wait or consider a less expensive vehicle. By waiting, both you and your wife will have been at your jobs for a longer period of time. Furthermore, you will have some time to save more money to use as a down payment.

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tournee · February 1999

I have a question concerning the types of loans offered by car dealers .vs. banks. Suppose I take out a loan for $20,000 at 8% for 3 years. If I pay the loan back immediately (within a day or two) then I should not pay hardly any interest fees. This is typically how bank loans work.
Many car dealer loans would require me to pay back the 8% interest on the 3 years regardless of how soon I paid the $20,000 back.
What is the terminology used for these two types of loans? I have seen the terms "traditional loan", "simple interest rate" loan and "no penalties" used in various instances but I have not seen a good definition of these terms and so I am not sure what to look for. Thanks in advance for an explanation.

newbuyer6 · March 1999

Has anyone out there in cyberland had any experience with the most recent auto manufacturer financing/ rebate from dodge on the dodge stratus and dodge quad cab truck? Edmonds says there is 3.9 financing for 48-60 months on both of these models. Dealers don't acknowledge this on the quad cab. Also, any experience with gmac on pontiac grand am financing would be appreciated.

zim2 · March 1999

Does anyone know what % you can get through the dealers on a 60 mo. loan? They always advertise 24, 36 & 48 mo. loans and usually have great rates. Am I to assume that there is a big jump when you get a 60 mo. loan? Will I get a better deal through People's First Finance? Hope to be in a 99 Montana in the very near future.

CarMan@Edmunds · March 1999

Zimmer, manufacturers do frequently offer special financing rates for 60 month terms, but these rates are usually not as low as the 24, 36, & 48 mo. interest rates will be. I believe that Pontiac currently has special finance rates of 0.9% from 24 - 36 months, 2.9% for 48 months, and 3.9% for 60 months on the 1999 Montana. 3.9% should be a much better rate than you will be able to find at an outside lending institution.

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ral2167 · March 1999

if you have to go with 60 month financing..the vehicle is too expensive for you...get a car loan for 48 months max (preferably 36)...is this a valid opinion i wonder?? i think it is, but i am open for others to give an opinion

ladyblue · March 1999

ral2167:

Hmmmm....makes sense if you have that kind of cash to lay out every month. I agree that it is more cost-effective to go with a shorter term, because you would be saving on interest. However, if you know you will be keeping the vehicle for a long time and are on a tight budget, then I see nothing wrong with going for a long-term, low-payment loan.

bblaha · March 1999

Your opinion/statement might stir up a hornet's nest. There are sure to be some who would argue that if you have to borrow ANY money, you can't afford the car.

The real problem with borrowing money for a long period of time is the increasing likelyhood of being upside down on the car the first few years you have it.

Despite Ladyblue's contention, there is no way to KNOW how long you will be keeping a vehicle (that Miata you bought and were going to keep until the wheels fell off might have turned into a bad decision 2 years later when you get married and start having children). You do not know you will keep the vehicle for a long time, merely that you intend to. Having to trade in an upside down vehicle on a "tight budget" because your intentions change really compounds the problem.

Loading up on long term debt for depreciating assets is why we've had record numbers of bankrupcies in each of the last several years.

My $0.02 worth.

ral2167 · March 1999

that was my point exactly..5 year car loans are "scary"-- seems to me that if you have to take out a 5 year loan, you might best lower your sights and look for a more affordable car. but i'm not one to start a ruckus here

arlene2 · March 1999

watchout - I recently bought a new explorer, I customed ordered my vehicle through autobytel, I had an agreement with the dealership through presidents day I would get finance through Ford Motor co for 2.9% 60 mos, well the dealer drew up the papers and we sign and walked away with our new car. Well few days later we recd ford welcome to the family package complete with loan number and coupon, then a few days after that we recd a call from the dealer say they commited to the wrong term and percentage rate and Ford refuse to finance, - We feel we have signed agreement and should not have renegogiate this. We very happy and content with our purchased. moral .....read the fine print and above all review the paperwork before departing the dealership. Make sure you are completely satified. We are still awaiting answer as to where the dealership stands. PS always get legal advice if just not sure what your rights are.

xalw · March 1999

Been reading all of your posts. Thanks for the info. I'm seriously considering buying a '99 Ford Windstar at the end of March. Part of the reason I like the windstar is the possibility of 0.9% for 48 months. Offer expires on 4/1/99. That's like paying no interest! My question is, has anyone had good/bad luck with this? Seems too good to be true! Will the sales mgr pull the "oh, I can't give it to you for that rate" stunt? I plan to go in, be strong and say "I want this van for xx price at 0.9 and if you can agree to that, I'll buy it today".

I have excellent credit. How long does approval for dlr. financing take? Is it within the same day that you walk into the dealer and want the car or does it take a couple of days? I need to time this so that I can take advantage of it being the end of the month, and all.
thanks.

msellow · March 1999

In most cases, your local credit union will beat the dealer financing rate. Since you have good credit, they'll be falling over themselves to loan you the money. One thing to remember, in a dealer financed loan, you pay the interest first, then the prinicpal. Credit unions and banks (if you go directly to the bank) will use a simple interest formula that will enable you to pay more principal sooner during the loan.

xalw · March 1999

msellow,
but I'd be quite surprised if my CU could match/beat 0.9%, wouldn't you?

CarMan@Edmunds · March 1999

Xalw, there's no way that any credit union or bank can compete with many of the special financing offers that manufacturers have on their vehicles. .9% is an excellent rate! You should not have any trouble qualifying for it either, as long as your credit is in good shape like you mentioned. Don't worry about dealerships using this rate to lure in unsuspecting customers and then not giving it to them. This is a manufacturer sponsored program and it has nothing to do with the specific dealership that you shop at. I can't imagine that running your credit application will take more than a day.

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bblaha · March 1999

I just bought a Windstar, in part because of the APR (wasn't likely to get that kind of deal from Honda for a new Odyssey). We received our payment coupon booklet from Ford Credit about a week after purchasing the car.

In order to protect yourself (I doubt you'll need it if your credit is excellent), make the purchase contingent upon qualifying for the 0.9% rate. Have it written into the contract you sign. If they are reluctant, find another dealer!

Msellow is wrong. Our loan is simple interest calculated, with no penalty for prepayment. Of course, at 0.9% even if we stretch the payments out the full 48 months, its only a total of $358 (give or take) interest.

bblaha · March 1999

One more thing, check with the dealer (Car_man may also know) but I think the special financing applies at the time you take possession of the car not when all the paperwork at Ford Credit is complete. I think that if you drive the van off the lot on the 31st, but Ford does approve your loan until the 3rd or 4th (if it even takes that long) you still should get the special rate.

xalw · March 1999

Thank you both, Car Man and bblaha, very much.
In shopping around, I keep going back to Ford because of that unbelievable 0.9. I'm not worried about prepayment penalty since it's like borrowing their money for free. I don't want to pay it off any sooner! I get more interest on my CU checking acct for goodness sake!

The payments will be rough ($460/mo) since I'll put down as little as possible. I figure if I have to cut into savings account (earning 3%) a little each month, it'll be better than putting more down on the down payment. And yes, you're right, I've calculated that the interest over the life of the loan will total only about $400 for the options I've chosen. Can't beat that.

I was also crunching numbers on the Mercury Villager at 1.9% for 48 months, (price is about 1,000 less) but monthly payments at that rate would be about the same as the Ford and I feel like I'd be getting more car for the money with the Ford.

Another question for you folks:
I'm also in the process of refinancing my home. Everything for that will be done deal around April 5. (I started the refi beginning of March) Is there any chance that when Ford goes to open up financing, run credit check, etc. that that would raise a red flag to my mortgage lender and stop my refi in its tracks when they see that all of a sudden I'm going to have an ugly 460/mo car payment?

warburgchi · March 1999

I am a potential new car buyer. Wondering if anybody can give me some advice on how much to save at the start when I walk in to the dealership . The car I want is the 328is. Assuming I want a fully loaded car, how much should I have upfront?
I plan to finance the car. Is 10k enough?
Let me know, guys.

CarMan@Edmunds · March 1999

Warburgchi, the required down payment for your loan will vary from bank to bank. Unless you are able to get an amazing interest rate like the ones that we were just writing about, you are better off putting as much money down as you can. The more money that you put down in the beginning, the less interest you will have to pay over the life of your loan. Furthermore, many captive finance companies occasionally have special offers that provide better interest rates to individuals who put down more money. I believe that Volvo Car Finance currently has such a system in effect in New York and New Jersey. Ten thousand dollars should definitely be enough money to put down, but if you have more money available you may want to think about increasing that amount.

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warburgchi · March 1999

All you BMW lovers out there...how much would it cost me to purchase a fully loaded 328is with all the features (navigation system + sports package) First time car buyer and I'm curious as to what the final figure will be (I'm thinking it will be near $37,000)

jmelchio · March 1999

Warburgchi:

You can get a good idea of what the going rate is by looking at the "BMW 3 Series" topic in the Sedans category (it's towards the end).

I just bought a 323i, and paid about 2000 over invoice. From reading the posts on the above topic, some people have been able to get as low as 1500 above invoice. It depends on the market that you are living in.

Hope this helps. Good luck. It's an awesome car !!!

guest4254 · March 1999

I'm looking to purchase a new vehicle within the next few months, and had this question about financing.

If I were to purchase a car that is not on the lot, and will take 6-8 weeks to deliver, would I have to commit to a finance plan at the time I order the vehicle, or when the vehicle comes in? I will need the vehicle soon, but figure I'll have more to put towards a down payment a month or two later when the car actually comes in.

CarMan@Edmunds · March 1999

Guest4254, I believe that you can place your order for the vehicle that you want and wait to arrange financing until it is delivered. Still, you want to make sure in advance that your credit is good enough that you will be able to find reasonable financing.

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ladyblue · March 1999

guest4254:

I recently ordered a vehicle, and I needed to be pre-approved for financing before the dealer would place the order. However, this was just to make sure that I would be able to qualify for my lease. I still had the option to shop around for better financing. Estimate how much you will have for a down payment at the time of delivery, and use that amount to calculate your loan. Even if you have been pre-approved for a certain amount, the loan can usually be rewritten right before paper-signing time.

mck · March 1999

I recently wanted to buy a Subaru Forrester. I could actually afford it and it every spec I found stated that it is a safe wonderful CAR. But when i went to insure the vehicle I found that the ins. ang. want quite the premium. This vehicle is rated safer than the Toyota Rav4 and the honda ?Suv. why is it so expensive to insure? any answers

nguyeneh · March 1999

Hi, I recently put a "non-refundable" deposit down on the delivery of a TL. At that point in time, I had been approved for a loan through auto-bytel. Unfortunately, I could not use the loan since I was not buying from an autobytel dealer. Instead, I put my deposit with another dealer and now I am having problems getting financing through carfinance.com and peoplefirst finance. Who knew it would be so hard to get financing even after someone else has already approved me!!

I want the car and figure I can afford the monthly payments for it (I'm putting $10000 down and trying to finance $21,000), but apparently these financing companies didn't think so since they rejected my loan app. I guess never having had a car loan (always paid cash on used cars) and not owning my home has actually hurt my chances.

My question is: are dealerships generally easier to get financing through? I figure I would take the financing through them and try to refinance through a lower rate later.

Also, peoplefirst told me that I couldn't have my dad cosign that it had to be someone like a spouse/significant other/fiance (I'm not married but am living with someone). Is that true??

Thanks in advance!

CarMan@Edmunds · March 1999

Nguyeneh, it is usually a good idea to be preapproved for financing before you visit your dealership. This way you have a benchmark that you can ask them to beat. Surprisingly, the often can do so. Have you tried getting a loan through a local bank or a credit union? You may have better luck at one of these institutions. I don't have any specific numbers to back this up, but I have a theory that it may be at least a little easier to get approved for financing through a dealership. Manufacturers' captive finance companies have a vested interest in approving your loan. If they don't then there is a chance that their parent company will lose out on a sale. I don't see why you can't have your father co-sign a loan with you. Lending institutions all probably have different rules on this subject. If you finance elsewhere, there's a good chance that your father will be allowed to co-sign with you. Good Luck.

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KCRam · March 1999

mck,

The Forrester is officially a truck, SUV to be specific - the Outback models are cars. You got hit with a truck surcharge on your insurance. The safest way to check whether you have a truck or a car is to look at the EPA fuel economy guide. They are broken down by government vehicle definitions, and those definitions are what the insurance companies use.

eve1 · March 1999

I am also very new at this, so I hope you all can bear with me. After reading most of the comments I have decided that I am definetly discouraged! I had a bankruptcy 5 1/2 years ago, and I'm still paying the price. I have had disaster after disaster happen and I'm losing my wife to cancer. I have a 1995 cougar that is a lemon and I recently lost a 2 yr. battle with Ford over it! It is falling apart and is killing me financially. My wife can only sit and drive two kinds of vehicles, therefore even if I could get financing she can't sit or drive them. I pay 16% to Ford and it is impossible to get ahead, yet we need areliable car. I work in Chicago, and I live 25 miles outside of the city, so reliablity is of the utmost importance! Is it futile? Or can something be worked out somehow? I have to get rid of this vehicle before it breaks totally and then I can;t even trade it in. I know I will have to pay high interest, but nobody will finance me. Help!

KCRam · March 1999

Is there a relative nearby who is wiling to co-sign for you? That may be your only chance. Your ability to repay will determine what anyone will lend you until the bankruptcy has met its timeline. A cosigner at least says somebody with good credit will cover for you in case of a problem.

Sorry to hear about your wife - hopefully, medical science will keep her around a lot longer

eve1 · March 1999

We don't have any relatives that speak to us much less co-sign for us. We left the catholic church many many years ago and that left everyone feeling towards us like we were lepers! Even places like general finance & beneficial finance wanted a c0-signer and fairly good credit. I told them did they really think that anyone who had fairly good credit or a co-signer would really take out a loan with them? I'll probalby go before my wife, because I'll die from frustration and stress! So sorry everyone I'm just temporarily out of my mind! Don't mean to sound off about my personal problems on all of you! Please let this message self-destruct ASAP!! Thank you all!

tgxam · March 1999

Sorry to jump in but I just caught part of the story, any way my point is this If you are looking to finance a car conventional, why especially in this case. have you tried to do a 24 month lease with a double or triple security deposit ? what this does is tell the lender that hey hold my money for 2 years interest free and if something should happen the bank is in whats called an equity position and they (the lender) is not exposed to a 60 month term and your not getting killed by an interest rate. granted there is a money factor but a dealer needs to sell a car and get it off the floor plan. second if you think you drive too many miles for a lease, your wrong that car is going to depreciate faster than the loan would be paid off. third if you go to someone that will lease through Ford credit, primus or mazda american credit then a good F&I manager should be able to secure the lease. Thats what I use to do for a living in Detroit. Don't give up they can get it done it comes down to how motivated they are. You see the fact in the finacial world is that Ford Credit will "Buy Deep" ask any F&I manager or indirect lender.

shawnmalone · April 1999

I've read almost 200 posts in this topic dating from March of 98 and don't see where anyone has asked this question before:

My CU will approve me for a 6.95 percent simple interest loan, no prepayment penalty, but the fine print says they can call the note due at any time and repossess the car if I can't pay off the entire loan right away. The clerk at the CU says this is a routine provision in all new car loans, that they never exercise their right to take the car, and that nobody will ever approve a car loan without this provision.

Has anyone run across this before?

dawne · April 1999

If the dealer obtained financing for me, My car was already ordered but I found financing at a better rate, can I go with the financing i just found instead?

CarMan@Edmunds · April 1999

Dawne, I guess that this depends upon what sort of contract you have already signed, if any. If you haven't signed anything that binds you to financing through them then I don't see any reason why you can't go with a different lending institution. This is why it is a good idea to have some sort of preapproved financing before you begin negotiating with the dealership. By doing so, it often turns out that dealerships will try to beat your current rate.

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dawne · April 1999

Car_Man - Thanks for the reply. I don't think I signed anything that would bind me with them. I just filled out a loan application. I called the dealer & spoke with the salesman today, he didn't suggest that there would be any problem. I told him I had found my own financing. Will find out tomorrow.

shawnmalone · April 1999

Car Man -

Did you miss my post #199 above? My credit union offers me a car loan, 6.95 percent simple interest, no pre-payment penalty... sounds OK, huh?

But there's a provision in the fine print that troubles me. It says that at any time, the CU can demand I repay the entire loan at once. If I can't do it, they can repossess the car.

Is this a routine provision in all car loans, or is my CU insisting on something unusual?

Thank you......Shawn

rooster3 · April 1999

Car Man,

Thanks for your insights.Hoping you can help me out on this financing scenario.

Invoice (incl $575 destination, $95 p&h, $350 "preparation")= $28,221

Dealer wouldn't budge from $28,771 ($500 above invoice)
* TX Saab has a "balloon payment" assistance of $3,500
* $4,000 cash down

Total (incl tax, etc) = $22,821

Dealers final offer based on 7.84% financing = $370 for 35 months
$15,312 residual

My math is a little rusty but think I can get a better deal. I offered $22,000 flat and he refused.

Thanks for taking a look at this scenario. Any thoughts you have would be greatly appreciated.

ladyblue · April 1999

shawnmalone:

I know you're waiting to hear from Car Man, but I can tell you that, yes, the wording is pretty standard on all loan applications. Even my credit cards have that disclaimer in the fine print. It's usually their way of protecting themselves against people who default on loans. As long as you make your payments on time, there's nothing to worry about. You'd have a pretty strong case against them if they repossessed your car while you were making timely payments.

shawnmalone · April 1999

I had never heard of that before.

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