Questions About Financing New Vehicles

snakeweasel · May 2006

First off does she have a job right now? If so then she will have a better chance. Does she have a bank account? If so I would advise going to that bank first to see what they have to say.

If she has a source of income that shows she can make the payments she should be able to get a loan. Remember that no credit history is not the same as bad credit history, everyone starts out with no credit history.

Yes it is possible with 50% down for her to get the loan, provided she can convince the lender that she can make the payments.

snakeweasel · May 2006

Ok I will bite seeing this is your first and only post after just starting your account. My advice is don't buy the car. Its way to much for your salary and those things cost a small fortune to maintain.

stickguy · May 2006

My recommendation, based on the facts you laid out, is to buy a car for about 8-9K, for cash, and forget about the financing, since it sounds like she won't always be able to make the payments.

You can get plenty of car for that money if you shop wisely.

madtaper · May 2006

Sorry if this has been discussed before, but I can't find it.

I bought a car today and I'm financing it thru my bank. The bank financing will take a few days so the dealer offered me a "hold" contract. He told me that I could drive the car away today and I had a certain amount of time to get my financing in order. Once I got the check from my bank I could give it to the dealership and they would rip up the hold contract. I never heard of such a thing. It sounded fishy to me, so I refused to sign and told him when I returned with the check from my bank I would take the car. Needless to say they weren't happy that I wasn't driving the car away today.

Does anyone know anything about this type of arrangement or where I could find info on it? I've never driven a car off a dealer lot without paying anything, so it smells like a scam to me.

Thanks.

biancar · May 2006

No, most likely not a scam. When I bought my car just a few weeks ago, I wrote them a personal check for half the price, and said I would get financing for the remainder. My credit union had much better finance rates than the dealer could offer. They went on-line to my credit union's site, verified their current rates, checked my credit (over 800) and knew I would get the lowest available rates.

So I drove off with the car, after giving them a check which they hadn't cashed yet, and I signed a promise to get financing within 3 days. No problem.

I don't know about the not paying anything at all idea. Won't you be making a down payment of some sort?

It might be risky to leave your current car there as a trade-in, if that's what you're using as your down payment, because it *could* get sold and it's *possible* your credit might not be approved, and then you'd be SOL and without a car. So I wouldn't do that.

But if they're just waiting a few days for payment, and your credit is good, and you know the bank financing will come through, then it's all good, you shouldn't have any problems.

kyfdx · May 2006

I did the same thing.... Bought a car a couple of hours away from home, on my way back from vacation..

I wrote them a "bad" check, that didn't have the funds available in the account (yet). I filled out a credit application with Honda Finance, in case the check bounced... When the check cleared, they tore up the finance contract...

If I had wanted to come back in a few days with the money, I'm certain I could have... but, I really didn't want to...

1) My deal could have changed.. they could sell the car to someone else, etc, etc...

2) It was just a hassle to get someone to bring me back, two hours away, when I was already there..

The reason why the dealer wants you to take the car right away?

You might get home and get buyer's remorse... The wife might say, "Are you nuts? We don't need a new car!!".

So... you can see where there might be reasons to take delivery right away on both sides... They want to close the deal.. A car taken home generally guarantees that.. From your viewpoint, you might want to make sure that your entire deal is written in stone, and that nothing changes when you come back in a few days..

Despite all that... nothing wrong with waiting to take delivery until you have the funds in hand, if that is what you want to do..

regards,
kyfdx
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bobst · May 2006

Madtaper, I think you absolutely did the right thing!

You didn't understand what a "hold contract" was, so you didn't go for it. I think that cautious attitude will serve you well for the rest of your life and will help you from getting suckered into things that are too good to be true.

Maybe the "hold contract" would have been OK. Maybe not.

Doing things your way meant that you did without your new car for a couple days. Big deal. That's what you felt comfortable doing, so that is what you should have done.

biancar · May 2006

Even though I did it differently, I agree with bobst. Anytime you don't quite understand what the dealer is suggesting, don't do it.

Anyway, do you have your car now?

madtaper · May 2006

Hey all,

Thanks for the replies. Believe it or not I think it ended up working in my favor by holding off. And yes, you're absolutely right about "buyers remorse" but the real reason is the dealer needs to turn over his inventory. They get bonuses/discounts/incentives from the manufacturers the faster they turn over cars and also the salesman mentioned to me that he had to "make his numbers".

Anyway...I actually work for a bank, so as an employee benefit I can get discounted rates that usually cannot be beat. As an aside...I'm sure you're aware in the banking industry, nothing gets paid out until all the paperwork is finalized so that's why I was paranoid about driving their brand new car off of the lot without paying a penny. Well, when I returned the next day they actually offered me a finance deal that was .10% lower than what my employer gave me. Granted, it's only about $10/month, but over 60 months that's $600.

So, unknowingly I actually forced their hand into giving me a good financing deal. Pretty funny, huh?

biancar · May 2006

Great story!

You did well for yourself. What rate did you get? My credit union offers 4.49 and I thought that was pretty good.

Hope you're enjoying your car now - you've earned it!

wingnut59 · June 2006

A dealer hold contract is simply a way to obligate you if you don't bring back a check promptly. Dealers do this to have you commit instead of having second toughts or going elsewhere to shop. In fairness to the dealer, they also do this since they are basically giving you a car with no obligation without one. I would do as you do did however and not take the car until you have a check in hand. Too often these contracts get processed then you can have unnecessary headaches getting the issue resolved. I would strongly suggest to any buyer you not sign a hold contract.

The dealer is upset becasue they obviously want you to commit to buying the car then and there.

raj916 · June 2006

that is what many said about my Ducati 916 before I purchased it.In its high tech complicatedness.. there is an overwhelming amount of simplicity. The bike has been the most reliable piece of machinery I have ever owned. IT hasn't ever stranded me.. and I have been the only person who has ever worked on it. I am a liscened Ducati tech..though I do not work for shops anymore. I have worked on manydomestic and foreign cars too.. new and classics.

Wel, I didn't buy that car..the contract seemed to unrealiastic.. and too stupidly priced for something that started at$140k. SO I moved on to the next car they offered me.. that i suddenty qualify for.. but didnt a week ealier .. it was the same price also.. same make and model too. Rediculous. How is it that one week they are ready signme into 2500 a month.. but cant sign me into less?
So anyway, they do they contract.. and it comes out close tomy needs in payments of $1739monthly, for 59 months.. and a baloon to keep it of $30k. I was going to put 58k down to cover my 13k of negatie equity .. which is also bs considering one car has only 7500miles on it. and the other is somewhat rare, perfect, with 30k on it. Well, their final figure onthe contract comes to $190k. I pull out a pen and a calculator. I work it forwards, backwards and sideways... and never get to their $190k somehow. I get $1739 x 12months x 5yrs = $104,340 + $30k balloon = $134,340. $58k - $13k in neg. equity = $45k. then $140k for car - $45k = $95k right > $95k Financed. Add TTL, I still can never come up with $190k. Oh, this all arranged by TransWorld LEasing. They fought with me for 3 days over the numbers-- I finally said, I am done. then they started calling my refrences from my credit app.. to get them to convince me to buy the car. Is this not funny? The numbers of course never made since to anyone on that sheet either.

grandtotal · June 2006

Actually those numbers make sense to me. The only part missing is the interest rate. I calculate that to be 12.23% then all the other numbers work. To summarise:

Cap Cost = $95000
Residual = $30000
Int Rate = 12.23%
Number of Monthly payments = 59

Monthly payment = $1739.

Should you do it? I wouldn't.

snakeweasel · June 2006

No they don't make sense, remember that he has other cars in the equation and we know little about them. Anyway I am a little suspicious about this poster.

grandtotal · June 2006

All we need to know about the other car involved is that he has $13K of negative equity and is making a $58K downpayment, $45K of which is going to capital cost reduction. What don't you understand?

snakeweasel · June 2006

Didn't he say there are two cars involved? what about the other?

grandtotal · June 2006

You are correct, two cars to trade in, total negative equity = $13K. So given that I stand by my original comment. I'm not particularly suspicious of this poster, I really couldn't care one way or the other, I just tried to answer his question. Personally I would not be buying a car expected to depreciate from $140K to $30K in 59 months, but if he wants to, then go ahead.

snakeweasel · June 2006

Ok if its 13K for both the numbers still don't add up.

grandtotal · June 2006

In what way. Be specific, I'm trying to understand why you say that.

snakeweasel · June 2006

Well he mentions $1,739/month payments for 59 months with a $30,000 balloon payment. At a 8% discount rate that comes to a loan of just under $105,000. Add $58,000 cash less the $13,000 negative equity and you ave a deal worth $150,000. Yet he is saying the contract states $190,000 and the car is priced at $140,000 and the total sum of all the payments are $177,601.

Something isn't right.

british_rover · June 2006

I haven't really been following this so maybe this was mentioned somewhere else.

Did you take into account the tax on the new car? Is that 140,000 with tax or without? If it is without then he is not paying tax on whatever his total trade allowance is which might make up some of the differance.

snakeweasel · June 2006

That is something that could bring the $140K car to the $150K range presuming no relief due to the trade in allowance, but it still doesn't explain the $190K that he says is on the contract.

If it is without then he is not paying tax on whatever his total trade allowance is which might make up some of the differance.

Taxes on trade in allowances vary from state to state, here in Illinois the taxes would be on the purchase price less the trade in value. IIRC this guy is in Florida and I am not sure how they would handle that.

So that makes this the fly in the ointment as we don't know if there is a tax benefit with the trade ins and what that benefit would be.

grandtotal · June 2006

The original poster said that the contract did not specify an interest rate. You are just assuming 8% (unless I missed something). Given the poster's unusual financial situation I'm not surprised they may be trying to charge him 12+% in which case the numbers do at least "add up".

That being said, the taxes explanation works for me too.

I have a feeling that this is a deal which is never going to happen anyway.

qbrozen · June 2006

But its kind of a lease contract, right? So that $190k could include all financing costs, acquisition fee, bank fees, etc, etc.

As grand said, if the finance rate is high enough, you can hit $190.

oops... grand beat me to it with the last post.

snakeweasel · June 2006

Yes I was inputting a figure that I thought was the best possible senerio. He did not give a figure and I picked one out for illustrative purposes.

I'm not surprised they may be trying to charge him 12+% in which case the numbers do at least "add up".

No if they are charging him 12% then the figures go further off. Giving a $1,739 monthly payment for 59 months and a $30K balloon payment at the end the loan amount at 12% is almost $11K less than at 8%.

Using the information he provided at 8% the price of the car is just under $150K but at 12% its just under $139K. So at 8% it will work for a car costing $140K (but his contract gives $190K total), but there is no way you can buy the car at those payments and price at 12%.

But you are right he may not be able to swing 8% and thats why I think the numbers just are not right.

snakeweasel · June 2006

But its kind of a lease contract, right? So that $190k could include all financing costs, acquisition fee, bank fees, etc, etc.

Well he did say $1,739 for 59 months which equals $102,601, plus the $30,000 balloon payment, plus his $58,000 cash less the $13,000 negative equity. That comes to $177,601, so where is the other $12,399?

As grand said, if the finance rate is high enough, you can hit $190.

The only way that you can get to $190K with an increased finance rate is to either increase the term, increase the balloon payment or increase the monthly payment. If the finance rate increases and all those stay the same the price of the car must go down.

qbrozen · June 2006

easy. Add back in the $13k negative equity.
The $190 is the topline deal. He is paying $190k.
102,601+30k+58k = $190,601.

The rest of the math would follow. It doesn't matter what happens with the money, he still has to give them $190k. They then, in turn, pay off his loans.

snakeweasel · June 2006

I guess if you want to look at it that way it could come up to a little over the $190K mark, but thats is playing games with the figures because they are not getting $190K.

qbrozen · June 2006

I don't see how that is playing games.
He owes them $190k for the deal. What is so tough about that?

They aren't KEEPING $190k, no. They need to pay off his cars. But they can't do that unless they get the money from him. Hence, he pays them $190k and they pay the finance companies.

snakeweasel · June 2006

Actually he owes them 140K for the deal, the rest is owed to others. Anyway, what paperwork would show everything? I know you have the sales paperwork that shows the price of the car and the truth in lending paperwork that shows the total cost of the loan. But is there something that adds everything up like that. Thats why it doesn't make sense to me.

qbrozen · June 2006

Actually he owes them 140K for the deal, the rest is owed to others.

But THEY are paying off his previous notes. This is why he owes the money to the dealer. This is why, when trading in vehicles, you sign a power of attorney that gives the dealer to pay off your notes for you.

Try to look at it from the other side. What if the paperwork DIDN'T include all the numbers? How would the dealer get their money from the buyer after they go and pay off his notes? Just take his word for it? It has to be accounted for somewhere somehow in that paperwork.

The paperwork I have from a deal I just did at a Honda dealer a couple of weeks ago has everything added into the top number, including the negative equity. The works down from there, taking off my down payment, etc. Elsewhere in the paperwork, you can find the price of the new car, value of trade, amount owed on old loan, fees, tax, etc, etc, etc.

dylaninal · June 2006

---I am in this situation---owe $18,000 on a 2005 vehicle---paying 7.4% interest rate---the car needs Approximately $1000 worth of repairs. I can get a new vehicle at 0% interest for about the same monthly payment. I have been paying on this loan for 1 1/2 years---it is a 5 year loan. My question is---it is wise to eat the negative equity, get the new car at 0% interest and have 1 1/2 years added back to my payments? Or, should I pay for the repairs and continue to pay the monthly payments?
Thanks for any help

:confuse:

grandtotal · June 2006

How much negative equity are you talking about? I'm guessing quite a bit.

I suspect you know the answer to this question, but just don't want to ride around in a damaged (but repaired) car. You'll have to get it repaired before you trade it in anyway. So, why not spend the money, have it repaired and then see how you feel about it in 3 months. My guess is that you'll see the sense of not funding all that negative equity. But, hey, it's your money.

dylaninal · June 2006

No, not that much negative equity----the trade in value would be $2000 less. If I sold it outright I could get more than I owe---according to the blue book value. And, the repairs are maintainance type things---new tires and a driver belt----thanks for your help!

snakeweasel · June 2006

Just remember that a car loses value the instant it is driven off the lot. That means that if you roll over any negative equity and make no down payment you immediately get deeper into the hole. My advice is that unless you can put a downpayment that is equal to what you are upside down plus 15% of the price of the new car plus TTL don't do it because you will just be getting deeper into the hole.

A few questions to consider, what repairs are needed on the car? Are they what you would expect (I really can't see $1,000 in maintence on a 1-2 year old car), or is it something that may rear its ugly little head again? If it will be a one time repair keep the car and make 5+ years of payments (the last 1.5+ of which you pay to yourself to save up a nice downpayment on a new car down the line).

Another question is are you sure you can get the 0% financing? Usually thats reserved for people with a 10 billion FICO score, no existing credit who are returning customers who are willing to put up their first born male child as collateral (yes that is an exaggeration but you get my drift).

qbrozen · June 2006

What happens 18 months from now when you need to do those repairs on your new car?

grandtotal · June 2006

My bad assumption that it was accident damage. I'm not sure it changes my thinking though. If you are so little upside down after only 18 months you either bought something that holds it's value very well, had a short loan or made a large downpayment. If it's the latter then that money is already gone it just makes the last 18 months very expensive for you. If you buy new again you are putting yourself in that very expensive stage again only this time you will not have the cushion of a large downpayment (quite the reverse, you have to pay off your negative equity). I'm sure it seems attractive to have a new car (who doesn't like that?) but it's not a smart decision financially, at least I don't think so.

qbrozen · June 2006

I really can't see $1,000 in maintence on a 1-2 year old car

I'm with you on this one .... but I can easily see a dealer telling someone they need to spend $1k. $600 on tires and an overinflated 30k mile service schedule could hit that number easy. Heck, throw in a set of brakes and you could be well over $1k. Of course, you and I know its BS and a good consumer could do what needs to be done for far less, but we're in the minority.

dylaninal · June 2006

Thanks---I was thinking it would be better to get rid of the car and get a 0 % interest rate---the dealership doesn't reveal everything one needs to know and I am very green when it comes to financing-----as you can see I am sure!

Thanks again for all help----

kyfdx · June 2006

It seems that you think you'll save money financing a new car at 0% vs. your current car at 7.4%.. Probably not..

That 0% financing is usually in lieu of a rebate, that you would otherwise be entitled to.. In other words, it is a false savings.. You'll be paying more for the car than it is worth, just to get 0% financing..

I say keep what you have... you'll be many dollars ahead in the long run...

regards,
kyfdx

grandtotal · June 2006

If you're credit is good you could attempt to re-finance the car, though interest rates are rising and you may not be able to do much better. Bear in mind that the 0% interest rate, if you qualify for it, comes at the expense of some discount on the price of the car.

dylaninal · June 2006

tks----seems like a consensus to keep the current car!!! I'll cancel my appointment with the dealership now!!!! And, also I'll check to see if i can get the repairs done elsewhere---

qbrozen · June 2006

Would you care to share this list of repairs with us?

I'd also like to know what you are driving and how many miles it has.

anewcarbuyer · June 2006

I'm ready to buy a new car and have excellent credit scores. I also plan to finance the vehicle for 3 years at Nissan's low 2.0% rate. I'd like to know if it's a good idea to buy now while I'm employed for more than 5 years or wait a month until I started working for this new company?

dylaninal · June 2006

Don't mind sharing at all---and would appreciate any suggestions you might have---

It is a 2005 Town and Country Mini-van---35,000 miles. It needs a driver belt, brakes, throttle plate is sticking-(so I assume it needs cleaning), the injectors need cleaning, and the brake fluid needs flushing.

british_rover · June 2006

Hmh brake fluid needs flushing seems fishy as you should be bleeding the brakes when you do the brakes anyway and that should be included as part of the service.

If they are charging you for a brake job and a brake flush at the same time they may be double dipping.

biancar · June 2006

If you have excellent credit (above 750 FICO) that has been established for several years, it won't matter that much if you buy now or buy after you switch jobs, as long as your salary remains about the same.

Just check that you're not giving up a good price on the car in order to get that 2% financing. Be sure to negotiate the price first, and then discuss the financig issues.

qbrozen · June 2006

I agree with BR, the flush seems fishy and unnecessary.

If the throttle plate is actually sticking, I would think that should be covered under warranty.

What the heck is a driver belt? A drive belt? What does that even mean anymore? I guess maybe to "drive" the accessories? In any case, no belt should be worn after 35k miles, and, if it is, something is wrong with the car and, once again, it should be covered under warranty.

Injector cleaning? Nothing but snake oil. Does the van run ok? Have you been having any problems with rough idling or hesitation when accelerating? If the answers to these questions are "no" then nothing needs to be cleaned.

So I'm pretty sure, if you even truly need them, the only thing on the last that is for real is the brakes. I would take the van to a Midas or some such place and get a 2nd opinion and quote on replacing the pads.

british_rover · June 2006

Actually 35,000 miles is the normal recommended replacement interval for most belts. At that time I would give them a very through inspection and look for glazing, cracking, missing ribs and elasticity. If the belt seemed ago with very little glazing normal cracks in the ribs (rib cracks can be solved by getting a pollycog belt that has pre cut sections to improve flex. I would always replace belts with polycogs as they last much longer) no missing chunks of ribs and the belt is still taught then I would not replace it.

I would however check it again at around the 45,000 mile mark as it will probably need replacing then.

Keep in mind the above only applies to serpentine belts and traditional V-Belts are different. Now did the dealership do all of the above? With a tech working on flat rate and just going be a menu system probably not. I would get a second opinion at an independent shop and see what they say.

The throttle plate sticking and fuel injection cleaner could be related to the injection cleaning. Carbon deposits on the throttle blade could be causing a sticking issue. That would most likely be considered normal maintence and not part of the warranty.

They do sell more advanced fuel injection cleaners that require some sort of vacuum injection system but in general the kind you can buy in the store works fine.

My advice buy a bottle of the stuff and put it in your gas tank next time you fill up with gas. Put it in before you fill up and get some good gas not necessarily high test but buy gas from a station that has a lot of turn over with high quality gas.

If you have even a tiny amount of mechanical ability( I.E. you can turn a screw driver and spray an aerosol can) then you can clean the throttle blade. Buy a can of fuel injection spray cleaner, make sure you get the one for fuel injected cars not carbureted cars, and just follow the instructions on the can. Most of the time it is remove air intake hose, spray can at throttle opening with a rag under it to catch excess fluid, reinstall air intake hose and start vehicle.

Again an independent shop could do all of that as well for probably much less then the dealer is charging.

Dropping a bottle of fuel injection cleaner into the car every other oil change is not a bad habit to form. It will help reduce carbon deposits in the combustion chamber and keep dirt and junk off the tips of the fuel injectors.

qbrozen · June 2006

Bad enough carbon buildup to cause problems at just 35k miles? I'm not buying it.

Belt at 35k? I haven't had to do a replacement that soon since driving beaters from the 1970s.

I'm trying to find a usable service schedule for a T&C online, but no such luck. The only one I found doesn't even mention the drive belt.

I also tried looking up my Honda for the heck of it. Also no mention of replacing the drive belt, only inspecting it.

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