Did you recently take on (or consider) a loan of 84 months or longer on a car purchase?
A reporter would like to speak with you about your experience; please reach out to PR@Edmunds.com by 7/22 for details.
A reporter would like to speak with you about your experience; please reach out to PR@Edmunds.com by 7/22 for details.
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Car_Man
Smart Shoppers / FWI Co-Host
Car_Man
Smart Shoppers / FWI Co-Host
The finance rates that dealerships provide their customers will vary for several reasons. The main reason is the customers with good credit ratings will qualify for lower interest rates than those with poor credit.
I suggest that you wait and see what sort of interest rate the dealership that you are dealing with offers you. If it is not as good as the rate that your credit union quoted you, then say so and see if they are willing to beat your credit union's rate.
Car_Man
Smart Shoppers / FWI Co-Host
Car_Man
Smart Shoppers / FWI Co-Host
As I mentioned in the beginning of this post, I don't think that there is much that you can do to get out of your legally binding lease contract at this point. Chase probably does not care how much money you paid the dealership for your car, they will just want the money that you have agreed to pay them. I suggest that you make some phone calls prior to just dropping your car back off at the dealership. If I was in your situation I would try calling my local Department of Motor Vehicles and perhaps Chase themselves before I called my salesperson that I dealt with back. Good Luck, make sure to let us know how everything turns out.
Car_Man
Smart Shoppers / FWI Co-Host
Car_Man
Smart Shoppers / FWI Co-Host
My girlfriend and I are looking to lease a new VW Cabrio GLS manual transmission. We signed a piece of paper with dealership heading on it. The salesman did not sign. The paper had the price, miles allowed, and length of lease. I assumed the signing of the paper was a receipt for the $1000 we had put down and to say we were serious. They did not have the color we wanted, and subsequently found what we wanted elsewhere and did a swap or a trade or something. So the car is here. ARE WE LEGALLY BOUND TO BUY THIS CAR NOW? And if so, at the price on the signed piece of paper or can we still haggle the price and some fees? I did get a faxed copy of the finance agreement today (which we have not signed), and it looks a little different than the original paper we signed. For instance, the down payment is more (from $837 to $951). The total is more (from $23850 to $24490). I've heard I should not be paying original sticker price to lease anyways--what do you think is a fair price when the invoice is $21804 (with 6 disc changer)? Also not on the original piece of paper we signed- Acquisition fee: $490 Refundable security deposit: $400 Turn-in fee: $250. Are those fees I can get around? Also what is the "Depreciation and any Amortized Amounts" $13010 and "Rent Charge" $4523.19 all about? Sorry I jumped around so much, but as you can see, I am a bit confused. Thanks Car-Man in advance. Chris Van Timmeren
You definitely should not pay full MSRP for anything that you lease, unless its a vehicle that is in high demand or a Saturn or Mercedes-Benz. $24,490 sounds a little on the high side for this car, even though it is convertible season.
You will not be able to lease this car without paying the security deposit, acquisition fee, and termination fee. They are all legitimate charges that anyone who was leasing a VW would have to pay.
Car_Man
Smart Shoppers / FWI Co-Host
Car_Man
Smart Shoppers / FWI Co-Host
P.S. In the future if you feel as though you have to make a deposit on a vehicle, do so with your credit card. That way if you begin to have problems with the dealership and they won't refund your money you can often get your credit card company to reverse the charge.
Car_Man
Smart Shoppers / FWI Co-Host
Car_Man
Smart Shoppers / FWI Co-Host
Car_Man
Smart Shoppers / FWI Co-Host
I just ordered a 2000 Mercury Sable LS Premium through a dealer after negotiating what I thought was a really good deal on a car with lots of options- $21,388 including tax and tags. I did this by faxing my specifications to 24 dealers and inviting them to send me their best price.
All this time I have been quietly calculating my monthly payment amount based on the Edmunds info that I can get 3.9% rate on a Sable. Well, right after I signed the paper, I mentioned this and the salesman said that to get that rate they will have to "add back in any dealer incentives or cash from the manufacturer" so I will be financing a greater amount. That is, I cannot benefit from both the dealer incentive and the low finance rate.
Is this true?? Help!!
malissa
2)It is true that NOONE can predict what interest rates will do. There probably is a general feeling that interest rates are headed up, but a single report on a slower economy can change that in a minute. He ought to be able to make some sort of a projection however, even if its a worst case scenario. You just won't be able to hold him to it. It might ease your mind however.
You should go to additional dealers. Another might find what this one has not. Also, it sounds like you can agree on a price, its just the uncertainty of the financing 6 to 8 weeks from now that you fear. Find out if he'll accept earnest money (to make the order) that he gets to keep if you decide that, upon arrival, the financing terms are unacceptable to you and you walk away from the deal.
Car_man
Smart Shoppers / FWI Host
My questions are:
When should I go looking for the best deals. I've heard it is best to go around Aug-Sep since the 2001 will be on the lots and the left over 2000 will be hard to move.
Will I have problems leasing? I've had some credit problems during 95-96 due to divorce. I've paid off all the past debt and I am current on my new loans (R1 status).
If you are able to pay cash, and intend to keep the vehicle longer than 35 months (ie you WOULD make that "balloon" payment) then you're probably better off doing that.
The more complicated the loan is structured, the more likely the dealer wins. Pay cash.
It is very difficult for me to say what sort of interest rate you will be approved at. If you have had credit problems in the recent past it is very possible that you will not qualify for a bank's best interest rate. Assuming that your credit is in good shape now, you should be able to lease a vehicle though.
Car_Man
Smart Shoppers / FWI Co-Host
I couldn't make up my mind whether to lease or purchase. I figure what I'll do is try to lease now and if I can't I'll just go ahead and purchase. My credit union is pretty good about giving people second chances when it comes to loans. I just have to write a letter explaining my situation.
Anyhow, there was something else I wanted to ask you..... Am I calculating wrong or are SUVs pretty steep? It seems as if the minimum monthly payment for a SUV is around $400. I even went as low as 3.9% on a CR-V.
but am currently only 21 payments into a 60 month lease on a 98 explorer sport. A couple of the
toyota dealers in town are offering great deals
towards trade-ins. since my vehicle only has
18K miles on it, with half the warranty still remaining, I was hoping to have some chance of getting out of it. Any advice? My current payments are 381 per month.
Thanks for any help.
scott
Car_Man
Smart Shoppers / FWI Co-Host
Car_Man
Smart Shoppers / FWI Co-Host
dicker the total price of the truck, and instead went by monthly payment. After reading this entire forum, I could have easily gotten this thing for a lot less. Gas mileage is a killer though. It didnt matter when fuel was 80cents per gallon.
Scott
Furthermore, I suggest that you pay a visit to the bank that you normally do business with. It's usually a good idea to be pre-approved to finance the vehicle that you are interested in prior to meeting with a dealership's F & I Manager. That way you will already have a good idea of what sort of rate you will qualify for and also it often turns out that the dealership will be able to beat your pre-approved rate if they are motivated to do so.
Car_Man
Smart Shoppers / FWI Co-Host
I was interested in a Quest, but actually have changed mind and am now leaning toward Toyota Sienna or Honda Odyssey. Do you mean special financing like the ads say 0.9 percent or 3.9 percent, etc. I thought they required better credit than what I had.
Also, do you agree with Nissan finance manager that I will be able to refinance after a year for (much?) better rate (if I don't qualify for nice one) due to more experience and the high down payment, and do you know the answer to the credit report inquiry question?
Thanks again.
I would reiterate what Car_man has said. Before you visit another dealer, visit your bank or credit union and get pre-qualified for a loan. A pre-qual loan is basically a blank check valid for any amount up to whatever you are approved for. For the vehicle's you are interested in and the amount you intend to put down, I would suggest asking the bank/CU what terms you qualify for on a $25000 loan. Unless there is actually something negative in your credit report, I would be shocked if it was anything much higher than market (~8%). With a score of 688, you ought to qualify for standard rates (the score itself is meaningless and it depends on individual lenders as to what they will lend you, but yours is above average).
Do this before you visit another dealer and talk to their finance guy. If he starts blathering about rates as high as 13.5%, just tell him "Never mind. All I need is the out-the-door price since I have this here blank check!". He might then offer something better. He might not. But at least with a pre-qual you know what the worst finance terms you'll have are.
Yes, "special financing" means the below market rates (0.9, 1.9, 3.9% etc) you here in advertisements. Not too sure about multiple credit checks within 14 days counting a a single check. Is this meaningful to you for some reason?
I was concered about inquiries because the more inquiries you have on your credit report your score gets lowered. I guess because it is assumed you're being turned down and need to ask multiple sources and/or perhaps you are in "desperate need" of credit.
Actually, I spoke to customer service rep at Experian (credit reporting agency) today and posed the question to him. He said that the credit scores are personally configurable by credit grantors. So for example they may configure their credit score calculator to count multiple inquiries of a certain type within a certain as one inquiry. It is up to the individual in how they calculate the score, but in general multiple inquiries will likely lower your score.
The F & I manager's job is to make money for his dealership. This usually means that he will try to get you to sign a loan with the highest interest rate that he can without having you walk. This is especially true in today's marketplace where consumers constantly beat up dealerships on new vehicle prices. You really need to make sure that you are pre-approved to finance the vehicle that you decide to purchase prior to finalizing anything with the dealership that you are dealing with. Otherwise, you are at the finance manager's mercy.
Car_Man
Smart Shoppers / FWI Co-Host
Regarding you info about all queries in a 14 day period being consolidated as one: well, yes and no. But generally yes. Let me explain.
The vast majority of big name financial institutions assess the credit worthiness of consumers using what are called FICO (Fair Isaccs Co). This is a proprietary risk analysis model that some finance companies use as is and a few (real bigshots like Citigroup, Chase etc) modify to suit their own preferences.
What you have heard about "14 day reports being consolidated etc" is actually that the FICO credit score model uses this as one of the principles in evaluating your worthiness. And that is all that it means: that you FICO score is unaffected by whether you had 1 or 100 queries during a 14 day period, all of which must have correctly identified AUTO LOAN as the reason for the report.
Now if your institution either does not use the FICO scores (true for many small thrifts, credit unions etc.), or uses the score but still chooses to look at your credit report and give you discredit for multiple queries, that is perfectly legal.
So the 14 day thing is basically true in a somewhat limited context than widely believed.
Car_Man
Smart Shoppers / FWI Co-Host
Oh well, I'll try my credit union next. I've should've tried them first but he convinced me in trying them.
Car_Man
Smart Shoppers / FWI Co-Host
When you apply for credit, the lender pulls a credit report from a credit reporting agency (CRA). The credit report lists information about you from public documents and from other lenders you've done business with in the past.
The lender needs to evaluate how much of a credit risk you are so they can decide whether to lend you money, how much, and at what price (interest rate). Many (most?) lenders do this as follows: they take your credit report and run it through some "credit scoring formula" to come up with a score. Then they use this score as a major factor in their decision.
Anybody can get into the business of developing and selling credit scoring formulas. It so happens that Fair Isaac & Company, a California company, dominates this market. Most lenders who use a scoring formula use a FICO score.
Fair Isaac has a lot of behind-the-scenes information at their web site. Go to a search engine, look for "Fair Isaac", and then look around their web site.
Here are the five major classes of factors in one of Fair Isaac's formulas:
Past Payment History (35%): this includes bankruptcies, collections, past due items, amount and severity of late pays.
Amount of Credit Owing (30%): this includes how much $$$ you already owe on loans and revolving credit, as well as the number of different accounts you have balances on.
Length of Credit History (15%): how long you have had accounts. Longer is better.
New Credit (10%): newly opened accounts and inquiries for new accounts. This is where you get dinged for applying for credit. Note that customer-initiated inquiries (you order your own credit report) and promotional inquiries (all that pre-approved credit card junk mail) don't count.
Types of Credit (10%): home mortgage good; finance company bad.
Note that these factors and weighting are for just one of Fair Isaac's formulas. Fair Isaac has several different formulas (an auto lender cares more about whether you have an existing auto loan than a home mortgage lender would). There are several other companies besides Fair Isaac that sell credit scores. And finally, a lender is free to interpret your credit report with their own formula, or to put some humans in the loop and make decisions beyond simply looking at a FICO score.
(1) Fair Isaac has found that people who make few inquiries tend to have fewer payment problems than people who make many inquiries. So they build that into their formulas, and they will give you a lower score if you make lots of inquiries.
(2) "Consumer disclosure" inquiries do not count. If you obtain your own credit report, either by paying for it or by getting a free copy after you are turned down for credit, that doesn't make you a riskier borrower.
(3) "Promotional" inquiries do not count either. These are inquiries that credit card companies and insurance companies make without your consent (yes, they can obtain a limited credit history without your consent). You know you're the subject of promotional inquiries when you open your mailbox and it's got those junk mail credit card offers in it.
(4) "Shopping for a loan" inquiries do not count either. All home mortgage and auto loan inquiries in the immediate past 30 days don't count. Those inquiries don't make you a riskier borrower: they just mean you are shopping! (On the other hand, if you apply for a department store card or a bank credit card at the same time you are buying a car, that means you are borrowing a lot in one month and are riskier).
(5) "Shopping for a loan" also includes prior activity. If you have multiple mortgage and auto loan inquiries in a 14-day period that is older than a month, they count the same as one inquiry. Again, the theory here is that if you apply at 8 different places for car loans, you were likely shopping for one car, not 8 different cars.
As a previous poster said, the lender is not obligated to use a FICO formula, or any formula at all. They're entitled to look at your raw credit report and use whatever formula they want, or make up their own criteria, provided they stay away from certain legally forbidden factors such as race.
So here's how to work within the system: when you are shopping for a car, do not let anyone run a credit inquiry or credit report on you until you know what you want to buy!
Once the first inquiry is run, you have 14 days to run all the applications you want without getting dinged (they will be scored the same as one inquiry later).
If you can't get a deal done in 14 days, you have additional time: you have 30 days from the first inquiry to make all the applications you want without any of them showing up. But, a year from now, all those applications will show up as 2 or 3 "14 day periods" instead of 1.
So it's a little better for you to get the last inquiry made within 14 days of the first inquiry. And it's significantly better to get the last inquiry made within 30 days of the first inquiry!
Finally, inquiries are only 10% of your credit score anyways, and the credit reporting agencies keep track of inquiries for only two years.
If you are a person who enjoys getting a new vehicle every two or three years and only drives between 12,000 and 15,000 or so miles per year then leasing may be in your best interest. Certain vehicles have quite a bit of lease support available on them while others have absolutely none at all. The trick is to only lease vehicles with favorable terms. If you would like, I can tell you what sort of lease deals are available on the vehicles that you're interested in. All I need from you is a list of the cars or trucks that you are considering getting.
Car_Man
Smart Shoppers / FWI Co-Host
Car_Man
Smart Shoppers / FWI Co-Host