I was thinking Nth was to the 9th time. I did not know it was to the 4th. Thanks Bblaha, its nice to know someone out there can remember this stuff. I was actually thinking it was a more simple formula like Intrest*Rate*Time=Payment or something to that effect.
Example:A $20,000 loan at 6% APR for 36 months. A)Multiply 6% X $10,000 (since on average the loan balance will be $10,000 during the life of the loan). This is the interest for 1 year.
B)Multiply by 3 (Total life of loan).
C) Add this to the $20,000 loan. This is total interest and principal.)
D) Divide by 36 months, equals approximate monthly payment.
This less intimidating approach can be used right in the F&I office, without a spreadsheet or calculator, and the answer should be within 2 bucks of the formula.
The formula I gave is identical to what financial calculators (both online and actual) use.
The approach you offer is a good approximation, but only an approximation. The longer the loan period and the higher the interest rate, the less accurate it becomes and it will always under predict what the actual payment size is. So don't use it to argue that the F&I person is doing something wrong.
To illustrate:
$20000 at 6% for 3 yrs. Approx solution = $605.56 Actual amount = $608.44 ($2.88 over)
$20000 at 8% for 3 yrs. Approx solution = $622.22 Actual amount = $626.73 ($4.51 over)
$20000 at 6% for 6 yrs Approx Solution = $327.78 Actual amount = $331.46 ($3.68 over)
Mortgage: $150,000 at 8% for 30 years Approx solution = $916.67 Actual solution = $1100.65 (lots more than approx)
it's useful to learn this is only an approximation. Glad to learn its limitations. Still, it helps give me a ball-park figure, a kind of "reality check" to see if I can afford the deal.
Absolutely. Its a very good approximation when the numbers are small (small loan amount, small interest rate, small loan period). If you're good at math, you can almost do the calculation in your head.
Thanks for the formula I am getting lazy in my old age and use Excel exclusively.
Passed all my finance courses with straight A’s.
A few years after college I was asked on a job interview for the formula. I scribbled it out on some paper.
The guy says this would work but it’s not in the standard banking format. I had used PA for Payment Amount, L for loan amount, IR for interest rate. There was a key at the bottom so he knew what everything stood for.
My answer was "I am not trying to be a banker. Not the proper interview answer.
If I were asked to do it again today I would have to think about it. You’re supposed to get smarter as you get older or is it wiser.
In any event:
I set up an excel spreadsheet and using a matrix format that has various loan amounts going down the left column and various interest rates going across the top row. I then set-up a formula using the (=PMT) function that feeds off of each different row and each different column to calculate the car payment (copy the formula to populate the rest of the matrix).
I added some other functionality to make analysis easier.
The term of the loan is set once and can be changed so payments for 3,4, or 5-year loans can be calculated.
I am sure that most people have this already if not its fairly simple to set-up.
I generally use a spreadsheet too. I have a similar chart, only I use interest rates across the top and number of years going down the left column. It then calculates the payment for an entered loan amount (usually I just use $1000 loan amount, so the payment calculated is the payment for each $1000 borrowed)
I was just answering a question. I happen to know how to derive it (financial equations are easy once you have a good grasp on dealing with series summations) so that even if I forget it, it doesn't take me long to figure out what the terms are and where they go.
I'm in graduate engineering and have never had a course in finance. Maybe you can help me understand something.
I tend to view, mathematically, assets as positive values and debts as negative values. So for example, suppose I want to know what a loan balance will be after making a certain number of payments. When entering numbers into a calculator, I would give the loan amount as a negative number (its a debt) and the payment as a positive value (its an asset that reduces the debt). After specifying the number of payments made, I ask for the future value.
It spits back a positive number (assume the payments were not enough to pay off the loan). Why is this? It ought to be, to my way of thinking, a negative number still, since there is still a debt. I'm in the habit of just changing the sign...
What is the reasoning for the sign convention that is used?
Basically, a loan balance does not affect cash flow therefore it is a positive instead of a negative. Actual Payments are detriments against cash flow and thus are treated as negative’s.
Therefore if you input the loan as a positive and the payment as a negative you should receive the expected sign on your result. Its Friday so hopefully I got this part correct.
I have the proof and will try and post it Monday.
If you cannot rest without an explanation of this conundrum see the excel help for PV.
The formula is there. It’s locked so you cannot copy and paste it or I would have done it.
I recently purchased a car, in California, and have a question about the sales tax. The dealer included the destination charge, document preparation fee, dealer advertising fee and fuel/admin charge as a total cash price of the vehicle. Then tax was calculated based on the total amount.
My question is, shouldn't I be taxed on just the vehicle?
Now that I read what you wrote, I do recall having it explained to me once before. Taking out a loan is money coming in (positive amount). In order to pay off the loan you either make payments (negative amount since money is going out) or pay off the balance (also negative since money is going out).
I can't say I'm particularly fond of the cash flow point of view, at least with respect to personal finance. Anything that increases your net worth should be a positive value while anything that subtracts from it should be negative. I wish I could go in and reprogram my calculator to change the sign on the "future value" amount...
The reason you have been taxed on the items you mention is because those are considered taxable "services rendered" in connection with the purchase and delivery of your new car. It doesn't seem fair on the surface, but without these services, your car is sitting at the factory.
kcram Co-Host - Smart Shopper & FWI Conferences edmunds.com Town Hall
I should have said the loan has a positive effect on cash flow and no effect on net worth. You have a loan but you also have the cash or presumably some other asset that you purchased.
That’s what you get for posting late on a Friday.
Reprogram the calculator? Why? Everyone knows that Debit means left and Credit means right. Lol.
I work with engineers all the time and they are by far better mathematicians over accounting/finance people however, we developed an accounting system that at times is counter intuitive to throw the engineers off and make us look smart. We also developed a tax system that no one person completely understands.
Sales Tax:
I think it is unfair to charge sales tax on advertising expense and services. But Ca. has one of the most aggressive taxing systems in the country. Check out Sept. 11 issue of Bussiness week Ca. rated as one of the worst for taxes in the country.
I should have said the loan has a positive effect on cash flow and no effect on net worth.
Until you use the loan to purchase something that depreciates and drive it off the lot. Since everything I own and spend money on (outside of investments) tends to either get consumed or depreciate, I, for my own personal self, ignore those when calculating net worth. If nothing else, it gives a worst case scenario.
I agree. I was talking about net worth just upon purchase of an item and before delivery is accepted.
I genrally only consider cash, investments, and home value less related liabilities in the net worth statements for personal use, however, when going for a home mortgage banks will ask for the FMV of furniture, art work and cars less related consumer debt.
Those low financing rates are not what they seem to be. I financed a 2000 ford windstar last week with the "advertised" 3.9% 48mo financing. I had estimated my payments to be around $563/mo using edmunds loan calculator. When the dealer finance guy hit me with a figure more like $589/mo I almost popped a blood vessel. I was told this was an insurance cost associated with the loan that FMCC tacks on. So in reality the 3.9% turned into more like 6.1% for me. VERY DECEPTIVE!
timel0rd: I think I would have walked away. The dealer may have been trying to slip something extra in but the financing side certainly isn't fraudulant.
I happen to be financing a 1999 Windstar for 48 months at 0.9%. My actual payment is $0.15 (15 cents) more than what a "financial calculator" says it should be.
Even THAT difference can be explained easily enough. Payment calculators assume the first payment is made exactly 1 month after the loan is received. It generally takes longer than that for the creditor to do the paperwork and mail out payment coupons or bills, while leaving enough time for the debter to make the payment. Hence there is often a little extra interest that accumulates the first month. In my case, we bought our van in early to mid February, but the 1st payment wasn't due until the end of March. Therefore there's an extra 1/2 to 2/3 of a month's interest that accumulates, resulting in the extra 15 cents added to the payment.
Timel0rd, that "insurance cost" excuse sounds very strange to me as well. I have never heard that Ford Motor Credit adds such a change on to consumers' finance payments. I suggest that you take a very close look at the papers that you signed to make sure that you are being the exact price for this vehicle and interest rate that you were led to believe that you were getting. Something definitely does not add up here.
I went back to the dealer finance guy to see why my 3.9% monthly payment was more like 6.1%. The SOB told me that the added $ was for credit life & credit disability. What he did NOT tell me was that this was optional. Needless to say I told him that I didn't want either and had them re-write the contract. Unbelievable.
Timel0rd, I am glad to see that you figured out why your payments were so high. That was pretty shady for the dealership to add the insurance to your payments without fully explaining what they were doing. It is a good thing that you paid such close attention to what was going on and thought to relate your story to others. Enjoy your new ride!
I believe the practice of tucking in extra credit insurance, without explaining or offering it, is widespread. I experienced it and I have heard many people had also been had, mostly without knowing it. Like you did, I went back to the dealer and pointed their dirty trick in no polite way.
AcuraGRL, given the fact that Honda only had a special financing program in effect on its 2000 Accord I think that 8.5% is a pretty good interest rate.
I bought a new '99 Escort about a year ago. I like it, I have less than 16,000 miles, no accidents, car in close to excellent shape. With the great deals that Oldsmobile is offering, I am considering buying a 2000 Alero.
Will my financial institution look negatively at this? What does 0.0% financing means? Sounds better than what I am currently paying..smile
I RECENTLY TRADED IN A 1998 NISSAN 4X4 AND 5,000.00, FOR A NEW FORD RANGER 08-20-00
FOR A 8.9% LOAN THRU A LOCAL CREDIT UNION, THE FORD DEALER IN( VANCOUVER,WASHINGTON STATE).
ON 9-12-00 THE FORD DEALER SAID THE CREDIT UNION DENIED MY LOAN, YET THEY NEVER SUBMITTED THE LOAN, AND SAID COME IN AND MAKE THE FIRST PAYMENT, (THREE WEEKS EARLY) AND SIGN NEW PAPER WORK, I SAID NO, SO THEY SAID, WE WILL SEND SOME ONE TO YOUR HOME, SO ON 9-13-00, A MAN FROM THE DEALER SHOWS UP, AND I TELL HIM TO LEAVE THE PAPERWORK HERE,
I SIGN THE PAPERWORK AND DATE IT ALL 9-14-00 AND THEN RETURN IT TO THE DEALER, FORD MOTOR CREDIT, OF TIGARD ORE. DECLINES MY CREDIT ON 9-19-00 , IN WRITING, I RECEIVED THE DENIED LOAN NOTICE ON 9-25-00 BY MAIL. I CALL FORD MOTOR CREDIT AND THEY SAY, IF, I DO NOT GO TO THE DEALER AND ACCEPT THE COUNTER OFFER THERE IS NO LOAN, SO I RETURN THE TRUCK AFTER FIVE WEEKS, OF NO PLATES , NO PAYMENT BOOK, NO LOAN??? THE DEALERSHIP TELLS ME TO LEAVE THE LOT , BECAUSE I RETURNED THE TRUCK, AFTER ADVICE FROM THE WA, STATE AGO OFFICE>I LATER FIND THEY SENT A CREDIT APPLICATION ON 9-20-00 TO THE BANK OF AMERICA N.A.( LEASE APPLICATION ) WITHOUT MY PERMISSION OR SIGNATURE, WELL I RETURNED THE TRUCK ON 9-27-00 AND THE LOAN FAIRY????? SOME HOW ON 10-6-00 FORD MOTOR CREDIT ENTERED MY LOAN ON THE SYSTEM, TWO DAYS AFTER THE FIRST PAYMENT WAS TO BE MADE, ON A DENIED LOAN APPLICATION, TEN DAYS AFTER I RETURNED THE TRUCK, HA HA, AND THE LOAN THEY SAY WAS APPROVED ON 8-20-00 A SUNDAY, THE DAY A GAVE THEM A CHECK FOR 8.9% FINANCING, YET THIS LOAN IS 9.25% ON A LOAN THAT WAS DENIED, ON 9-19-00, AND TO THIS DATE I HAVE NO TRUCK AND THEY REFUSE TO RETURN MY DOWNPAYMENT AND TRAD-IN VEHICLE>>
Wanted to submit my experience to help those as I was helped. I just purchased a new Honda CRV. I had little credit, just a credit card for 3 1/2 years, but a pretty high salary. After reading the info here I attempted to get approved for a loan before dealing with the dealership. Tried 2 online sources. Peoplefirst.com turned me down, saying would not grant first time car loans in the absence of substantial credit. Eloan.com gave me a rate of 9.23%, which I thought was pretty good considering. The dealership said could not beat it by much if at all given my credit, so I went with eloan to prevent another inquiry to credit. Just wanted to share my experience.
Jan28, if you only purchased your current vehicle a year ago there is a good chance that you will be upside down on it if you try to trade it in at this point. Being upside down essentially means that you will owe more money than your car is actually worth. If this is the case, you will have to actually pay money out of your own pocket or roll additional money over into the loan for your new car. You need to figure out if the amount of money that you save by taking advantage of the 0.0% financing or the 3.9% financing plus the rebate is enough to offset the hit that you will probably take by selling your Escort so soon.
As far as these financing programs are concerned, they are very good deals. The 0.0% financing, is basically what it sounds like. You can finance a new Alero for up to 60 months (in the Northeastern United States) without having to pay any interest at all.
Last week my wife and I bought a new car, a mid-size 2000 Buick Regal. We bought it October 6 and/or 7: signed papers Friday, October 6, but the car was delivered next day.
We financed it through GMAC. GM/GMAC offers very good incentives this October: 0% for 60 months. This is even better than the $2000 GM rebate.
When we signed, the finance person at dealer said that with such a good loan GMAC requires the credit insurance. Or, at least this is how both my wife and I understood him (we are not good in spoken English).
We had a lot of work last week and I had read the papers only yesterday. Turned to be, they are clearly saying that GM does not require the insurance. It is completely optional.
Now the question:
We would like to cancel the insurance. But do not know, if we can do this. Is any cool-out period exist?
We understand that it is mostly our fault: we signed the papers, without even reading them, to say nothing about understanding.
On the other hand, the GM offer came suddenly, and we did not saw the papers before signing. And we had no time to understand this paperwork at dealership. We had at most 30 minutes to sign all papers at our way to work. For comparison, it took me about 4 hours at leisure yesterday, to read through all small print and to make the calculations. I did it at home, and using computer.
We feel somewhat ashamed to be so dumb. But this Buick is our first new car. We had no experience in buying cars. Nor even serious second-hand knowledge: we immigrated to USA only 4.5 years ago.
And, the most important, we did not expected such a thing from a reputable dealer.
Hi yurakm. You are correct, GMAC definitely does not require you to take out an insurance policy just because you finance your new car through them. It sounds to me as though the F & I salesperson that you dealt with at your dealership lead you to believe this so that he or she could make additional profit off of your deal. This sort of thing happens all of the time. I suggest that you go back to the person who sold you this policy and cancel your policy as soon as possible. You should be able to get out of it without too much trouble.
Jeep offered 0.9% financing on 2001 Jeep Grand Cherokees as of November. I ordered a car, gave a $500 deposit, and was told later by the dealer that the financing I ultimately receive will be what is offered at the time of delivery. Sounds like I really don't "buy" the car until it is delivered and therefore take a chance with any currently offered factory incentives. Is that correct? I would really appreciate your comments. Thanks.
Hi. I'd like to share my experience with a dealership finance manager. It might help someone, especially the first time car buyers.
Before buying my first car, I did all my homework: read "Don't Get Taken Every Time" by Remar Sutton, which is informative, entertaining & reads almost like a horror novel (tee hee) - it also has chapters on financing. I also researched pricing with the Edmunds Car Buying Guide. I made an offer on a new car and it was accepted. We started the paper work when the sales manager came in, apologized and said a mistake had been made and they would need another $1,000.00 or they would lose money on the car. The sales manager briefly waved the invoice around and claimed they paid more for the car than I offered. I had a male friend with me. We started to leave and the sales manager followed us out to the patio where he and my friend proceeded to get into a huge verbal argument. All business stopped at this dealership. People on the lot were watching us and people inside the building were standing up in the cubicals, watching us through the windows. It was pretty bad. It looked like these two were going to start swinging at each other any moment. I don't like confrontation and wanted to get out of there right away, so we left. We were literally driving off the lot when the sales manager ran after our car and pounded on the windows. He said they would go ahead and sacrifice the car at my price because, afterall, it was their mistake and they wanted to be fair.
Then they sent me to the finance manager. I was pre-approved by my bank, but the finance mgr had loan papers ready for me at a rate much higher than my bank. The conversation went something like this:
It was late afternoon on a Saturday.
Me: But I'm getting a loan from my bank.
FM: This is just a "backup" loan in case your loan falls through on Monday.
Me: But these look like regular loan papers. They don't say anything about "backup". I don't think I should sign these.
FM: It's just a "backup". We have to protect ourselves in case you don't get your loan, and we can't let you drive the car off the lot unless you sign these papers.
Me: Then, I'll just come back Monday evening with a check from my bank and pick up the car then.
FM: Oh no! We want you to enjoy the car over the weekend. We'll go ahead and trust that you'll get your loan.
I gave them a down payment and drove my new car home. I called the bank first thing Monday morning. The loan officer called me back and said she wouldn't be able to process my loan because the finance mgr refused to give her the information she needed about the car. I think the finance mgr was trying to make me lose my loan so I would finance with them.
I called the Arizona Auto Dealers' Association who called a public relations mgr at the dealership, who told the finance mgr to cooperate with my bank. The loan officer called me that afternoon and said everything was fine. She said she couldn't disclose information from the dealer but she wanted me to know I got a really good deal on the car. (BTW, I wasn't playing a game or trying to cheat the dealer, I was just an informed consumer trying to buy a decent car at a fair price that I could afford.)
So...first time buyers...do your homework, be very wary, scrutinize all paper work, and know who to call for help if the dealer dig deeps into their bag of tricks.
Hi car_man. I have 6 months ot go on a 36 month lease at $399.89 on my existing 4x4 Laredo. I'm looking to get a good deal on a 2k Laredo/Limited since it's the end of the year. Is there more incentive for dealers to negotiate (early termination, price break, etc.) with me at the end of the year? My dealer says I'd be better off finishing the lease ans then come back and talk. Also, based on a MSRP of a demo w/ 4k miles of $37k, What should be a fair price to settle on before talking buying/leasing? Thanks.
Mp19fan, any time that we approach the end of the model year dealerships will be anxious to unload their left over vehicles in order to make room for newer models. Additionally, most manufacturers provide enhanced year-end clearance incentives to help their dealers sell left-over vehicles. Still, I have to agree with the individual who you spoke with at the dealership. There really is not any advantage to trying to get out of your existing lease a few months early. Doing so will only hinder your ability to negotiate, because it will likely add the expense of your final lease payments to the deal that either you or your new dealership will have to absorb.
I personally am not a big fan of demo vehicles. I say this because from my perspective, dealerships are usually not willing to provide a large enough discount on demos to justify purchasing what essentially is a low-mileage new vehicle over a brand new one. I feel as though you should only buy a demo vehicle if you are able to negotiate a significant discount over an equivalent new one.
Almost two weeks ago I just a new Honda...traded in my old one and financed through the dealer.
They have not yet paid off my loan on my trade in...but the trade in is for sale on their lot. Is it unusual for them to wait this long?
Also, I've read about scams where they offer you a financing package and then two weeks later call you to say that they couldn't get the financing and want more money down, etc. Has this happened to any of you? It's been 13 days...and my paperwork (this is California) says that they have 10 days in which to find financing or ask for the car back. Does this mean I am safe from this scam yet? I love the new car...and everything went well at the dealer...but now I am nervous.
I haven't received the payment book yet or heard from whoever the lender might be.
I am looking to buy a new car in SoCal in the next month and have a finance question. I am originally from CA, but have been living in Australia for the past eight years. We own a house here and have excellent credit history, cards, etc. We are jsut about to move to San Diego.
I had a fine credit history before I left, but have been away for awhile. My wife is Australian and so has very little US Credit history.
We have investment assets and strong income through family business...my question is:
Will we be able to obtain finance fairly easy based on tax return showing CA income/assets, etc or will it be difficult to do coming from overseas?
This is a very interesting situation. If the new car is in your name, there shouldn't be much problem, since you can show consistent, albeit light, use of credit in the last 8 years. Your spouse may have problems if she tries to finance in her name only, being an Australian citizen - unless the credit you already have (cards, mortgage, etc.) is also in her name, then she would likely be considered "new" to US credit, and would likely require a co-signer and/or receive higher interest rates.
If you discover problems getting traditional automotive financing, you may want to consider a home equity loan or a personal loan against your assets. This may help you to re-establish US credit for future use.
kcram Co-Host - Smart Shopper & FWI Conferences edmunds.com Town Hall
Here's a question for the board: I will be purchasing a new Xterra sometime soon... next three months. I would like to put down as much as possible to keep my payments low, here is my question. After the deal is negotiated, will I be able to have time to sell my car privately? What if I order the X? Does it always come in on time? I need my car for transportation, but would like to get top dollar if I could. I'd appreciate any info on this aspect of the deal.
The dealership is going to want to be paid in full for the Xterra that they sell you when you take delivery of the car. If you really want to sell your car on your own it is easiest to completely pay for your new vehicle and then take your time selling your old one. Of course many people need to use the money that they get for their old vehicle to pay for their new one and this is not an option. If this is the case, you can advertise your new vehicle right around the time that you want to purchase your new Xterra and then tell any potential buyers that you will need a day or two to take care of your new vehicle transaction.
well, let's say that i find the x I want at the dealer, and we haggle a price and all... can I "take delivery" a week later? Or, if they don't have my X and I order one, and, again, go through all the price haggling, is there a set date to "take delivery"? Or am I just waiting for a phone call. The last time I bought a car, I just traded mine in, and we did the whole process in one day, so this is the part I'm unsure of.
Yes, theoretically you can negotiate a price on a particular vehicle with a dealership and then take delivery at a later date. However, unless you have a signed contract stating the exact vehicle and the price that you are going to pay for it, there is nothing stopping anyone at the dealership from reneging on your verbal agreement if they get a better offer.
If you order a new vehicle just how you want it equipped, the dealership may be able to provide you with an approximate delivery date. However, ordered vehicles almost never have a specific delivery date and often are delivered to dealerships much later than they were promised.
I was approved yesterday for a new vehicle loan with my bank (USAA) with either a fixed rate of 9.35% or a variable rate of 8.65%. I chose the variable rate and I'm wondering if I made the right decesion. Can anyone comment on this for me?
In regards to the rates mentioned, I thought these both were pretty good considering my past credit history. During the last 4 years I have had perfect credit, but before that I was pretty bad when it came to paying bills, real bad in fact!
I'm going to be putting down about $14K on a new 2001 Nissan Pathfinder LE w/ AWD, so I'll be financing around $19K or so at the above mentioned rates.
So, did I mkae a wise move in choosing the variable rate? Or should I see if I can change to the fixed?
Comments
B)Multiply by 3 (Total life of loan).
C) Add this to the $20,000 loan. This is total interest and principal.)
D) Divide by 36 months, equals approximate monthly payment.
This less intimidating approach can be used right in the F&I office, without a spreadsheet or calculator, and the answer should be within 2 bucks of the formula.
What do you think?
Melech
Melech
The approach you offer is a good approximation, but only an approximation. The longer the loan period and the higher the interest rate, the less accurate it becomes and it will always under predict what the actual payment size is. So don't use it to argue that the F&I person is doing something wrong.
To illustrate:
$20000 at 6% for 3 yrs.
Approx solution = $605.56
Actual amount = $608.44 ($2.88 over)
$20000 at 8% for 3 yrs.
Approx solution = $622.22
Actual amount = $626.73 ($4.51 over)
$20000 at 6% for 6 yrs
Approx Solution = $327.78
Actual amount = $331.46 ($3.68 over)
Mortgage: $150,000 at 8% for 30 years
Approx solution = $916.67
Actual solution = $1100.65 (lots more than approx)
Melech
Thanks for the formula I am getting lazy in my old age and use Excel exclusively.
Passed all my finance courses with straight A’s.
A few years after college I was asked on a job interview for the formula. I scribbled it out on some paper.
The guy says this would work but it’s not in the standard banking format. I had used PA for Payment Amount, L for loan amount, IR for interest rate. There was a key at the bottom so he knew what everything stood for.
My answer was "I am not trying to be a banker. Not the proper interview answer.
If I were asked to do it again today I would have to think about it. You’re supposed to get smarter as you get older or is it wiser.
In any event:
I set up an excel spreadsheet and using a matrix format that has various loan amounts going down the left column and various interest rates going across the top row. I then set-up a formula using the (=PMT) function that feeds off of each different row and each different column to calculate the car payment (copy the formula to populate the rest of the matrix).
I added some other functionality to make analysis easier.
The term of the loan is set once and can be changed so payments for 3,4, or 5-year loans can be calculated.
I am sure that most people have this already if not its fairly simple to set-up.
I was just answering a question. I happen to know how to derive it (financial equations are easy once you have a good grasp on dealing with series summations) so that even if I forget it, it doesn't take me long to figure out what the terms are and where they go.
I'm in graduate engineering and have never had a course in finance. Maybe you can help me understand something.
I tend to view, mathematically, assets as positive values and debts as negative values. So for example, suppose I want to know what a loan balance will be after making a certain number of payments. When entering numbers into a calculator, I would give the loan amount as a negative number (its a debt) and the payment as a positive value (its an asset that reduces the debt). After specifying the number of payments made, I ask for the future value.
It spits back a positive number (assume the payments were not enough to pay off the loan). Why is this? It ought to be, to my way of thinking, a negative number still, since there is still a debt. I'm in the habit of just changing the sign...
What is the reasoning for the sign convention that is used?
Therefore if you input the loan as a positive and the payment as a negative you should receive the expected sign on your result. Its Friday so hopefully I got this part correct.
I have the proof and will try and post it Monday.
If you cannot rest without an explanation of this conundrum see the excel help for PV.
The formula is there. It’s locked so you cannot copy and paste it or I would have done it.
Rams 44
49’ers 21
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My question is, shouldn't I be taxed on just the vehicle?
I can't say I'm particularly fond of the cash flow point of view, at least with respect to personal finance. Anything that increases your net worth should be a positive value while anything that subtracts from it should be negative. I wish I could go in and reprogram my calculator to change the sign on the "future value" amount...
The reason you have been taxed on the items you mention is because those are considered taxable "services rendered" in connection with the purchase and delivery of your new car. It doesn't seem fair on the surface, but without these services, your car is sitting at the factory.
kcram
Co-Host - Smart Shopper & FWI Conferences
edmunds.com Town Hall
I should have said the loan has a positive effect on cash flow and no effect on net worth. You have a loan but you also have the cash or presumably some other asset that you purchased.
That’s what you get for posting late on a Friday.
Reprogram the calculator? Why? Everyone knows that Debit means left and Credit means right. Lol.
I work with engineers all the time and they are by far better mathematicians over accounting/finance people however, we developed an accounting system that at times is counter intuitive to throw the engineers off and make us look smart. We also developed a tax system that no one person completely understands.
Sales Tax:
I think it is unfair to charge sales tax on advertising expense and services. But Ca. has one of the most aggressive taxing systems in the country. Check out Sept. 11 issue of Bussiness week Ca. rated as one of the worst for taxes in the country.
I should have said the loan has a positive effect on cash flow and no effect on net worth.
Until you use the loan to purchase something that depreciates and drive it off the lot. Since everything I own and spend money on (outside of investments) tends to either get consumed or depreciate, I, for my own personal self, ignore those when calculating net worth. If nothing else, it gives a worst case scenario.
I genrally only consider cash, investments, and home value less related liabilities in the net worth statements for personal use, however, when going for a home mortgage banks will ask for the FMV of furniture, art work and cars less related consumer debt.
with the "advertised" 3.9% 48mo financing. I had
estimated my payments to be around $563/mo using
edmunds loan calculator. When the dealer finance guy hit me with a figure more like $589/mo I almost popped a blood vessel. I was told this was an insurance cost associated with the loan that FMCC tacks on. So in reality the 3.9% turned into more like 6.1% for me. VERY DECEPTIVE!
I think I would have walked away. The dealer may have been trying to slip something extra in but the financing side certainly isn't fraudulant.
I happen to be financing a 1999 Windstar for 48 months at 0.9%. My actual payment is $0.15 (15 cents) more than what a "financial calculator" says it should be.
Even THAT difference can be explained easily enough. Payment calculators assume the first payment is made exactly 1 month after the loan is received. It generally takes longer than that for the creditor to do the paperwork and mail out payment coupons or bills, while leaving enough time for the debter to make the payment. Hence there is often a little extra interest that accumulates the first month. In my case, we bought our van in early to mid February, but the 1st payment wasn't due until the end of March. Therefore there's an extra 1/2 to 2/3 of a month's interest that accumulates, resulting in the extra 15 cents added to the payment.
Car_Man
Smart Shoppers / FWI Co-Host
credit disability. What he did NOT tell me was that this was optional. Needless to say I told
him that I didn't want either and had them re-write the contract. Unbelievable.
Car_Man
Smart Shoppers / FWI Co-Host
For you, that's around $1250 saved over 4 years.
Car_Man
Smart Shoppers / FWI Co-Host
Will my financial institution look negatively at this? What does 0.0% financing means? Sounds better than what I am currently paying..smile
Or, what about the rebate plus 3.9 % financing?
FOR A 8.9% LOAN THRU A LOCAL CREDIT UNION,
THE FORD DEALER IN( VANCOUVER,WASHINGTON STATE).
ON 9-12-00 THE FORD DEALER SAID THE CREDIT UNION DENIED MY LOAN, YET THEY NEVER SUBMITTED THE LOAN, AND SAID COME IN AND MAKE THE FIRST PAYMENT,
(THREE WEEKS EARLY) AND SIGN NEW PAPER WORK, I
SAID NO,
SO THEY SAID, WE WILL SEND SOME ONE TO YOUR HOME,
SO ON 9-13-00, A MAN FROM THE DEALER SHOWS UP,
AND I TELL HIM TO LEAVE THE PAPERWORK HERE,
I SIGN THE PAPERWORK AND DATE IT ALL 9-14-00
AND THEN RETURN IT TO THE DEALER, FORD MOTOR CREDIT, OF TIGARD ORE. DECLINES MY CREDIT ON 9-19-00 , IN WRITING, I RECEIVED THE DENIED LOAN NOTICE ON 9-25-00 BY MAIL. I CALL FORD MOTOR CREDIT AND THEY SAY, IF, I DO NOT GO TO THE DEALER AND ACCEPT THE COUNTER OFFER THERE IS NO LOAN,
SO I RETURN THE TRUCK AFTER FIVE WEEKS, OF NO PLATES , NO PAYMENT BOOK, NO LOAN???
THE DEALERSHIP TELLS ME TO LEAVE THE LOT , BECAUSE I RETURNED THE TRUCK, AFTER ADVICE FROM THE WA, STATE AGO OFFICE>I LATER FIND THEY SENT A CREDIT APPLICATION ON 9-20-00 TO THE BANK OF AMERICA N.A.( LEASE APPLICATION )
WITHOUT MY PERMISSION OR SIGNATURE,
WELL I RETURNED THE TRUCK ON 9-27-00
AND THE LOAN FAIRY????? SOME HOW ON 10-6-00
FORD MOTOR CREDIT ENTERED MY LOAN ON THE SYSTEM, TWO DAYS AFTER THE FIRST PAYMENT WAS TO BE MADE, ON A DENIED LOAN
APPLICATION, TEN DAYS AFTER I RETURNED THE TRUCK,
HA HA, AND THE LOAN THEY SAY WAS APPROVED ON 8-20-00
A SUNDAY, THE DAY A GAVE THEM A CHECK FOR 8.9% FINANCING, YET THIS LOAN IS 9.25% ON A LOAN
THAT WAS DENIED, ON 9-19-00,
AND TO THIS DATE I HAVE NO TRUCK AND THEY REFUSE TO RETURN MY DOWNPAYMENT AND TRAD-IN VEHICLE>>
I NEED A LAWYER FOR CHEAP ?????? HELP, OR ??LOL
As far as these financing programs are concerned, they are very good deals. The 0.0% financing, is basically what it sounds like. You can finance a new Alero for up to 60 months (in the Northeastern United States) without having to pay any interest at all.
Car_Man
Smart Shoppers / FWI Co-Host
We financed it through GMAC. GM/GMAC offers very good incentives this October: 0% for 60 months. This is even better than the $2000 GM rebate.
When we signed, the finance person at dealer said that with such a good loan GMAC requires the credit insurance. Or, at least this is how both my wife and I understood him (we are not good in spoken English).
We had a lot of work last week and I had read the papers only yesterday. Turned to be, they are clearly saying that GM does not require the insurance. It is completely optional.
Now the question:
We would like to cancel the insurance. But do not know, if we can do this. Is any cool-out period exist?
We understand that it is mostly our fault: we signed the papers, without even reading them, to say nothing about understanding.
On the other hand, the GM offer came suddenly, and we did not saw the papers before signing. And we had no time to understand this paperwork at dealership. We had at most 30 minutes to sign all papers at our way to work. For comparison, it took me about 4 hours at leisure yesterday, to read through all small print and to make the calculations. I did it at home, and using computer.
We feel somewhat ashamed to be so dumb. But this Buick is our first new car. We had no experience in buying cars. Nor even serious second-hand knowledge: we immigrated to USA only 4.5 years ago.
And, the most important, we did not expected such a thing from a reputable dealer.
Car_Man
Smart Shoppers / FWI Co-Host
I will be at the dealership this Monday.
http://townhall-talk.edmunds.com/engaged/edmund.cgi?&f=0&c=Sedans&t=3748&q=483
Jim
Before buying my first car, I did all my homework: read "Don't Get Taken Every Time" by Remar Sutton, which is informative, entertaining & reads almost like a horror novel (tee hee) - it also has chapters on financing. I also researched pricing with the Edmunds Car Buying Guide. I made an offer on a new car and it was accepted. We started the paper work when the sales manager came in, apologized and said a mistake had been made and they would need another $1,000.00 or they would lose money on the car. The sales manager briefly waved the invoice around and claimed they paid more for the car than I offered. I had a male friend with me. We started to leave and the sales manager followed us out to the patio where he and my friend proceeded to get into a huge verbal argument. All business stopped at this dealership. People on the lot were watching us and people inside the building were standing up in the cubicals, watching us through the windows. It was pretty bad. It looked like these two were going to start swinging at each other any moment. I don't like confrontation and wanted to get out of there right away, so we left. We were literally driving off the lot when the sales manager ran after our car and pounded on the windows. He said they would go ahead and sacrifice the car at my price because, afterall, it was their mistake and they wanted to be fair.
Then they sent me to the finance manager. I was pre-approved by my bank, but the finance mgr had loan papers ready for me at a rate much higher than my bank. The conversation went something like this:
It was late afternoon on a Saturday.
Me: But I'm getting a loan from my bank.
FM: This is just a "backup" loan in case your loan falls through on Monday.
Me: But these look like regular loan papers. They don't say anything about "backup". I don't think I should sign these.
FM: It's just a "backup". We have to protect ourselves in case you don't get your loan, and we can't let you drive the car off the lot unless you sign these papers.
Me: Then, I'll just come back Monday evening with a check from my bank and pick up the car then.
FM: Oh no! We want you to enjoy the car over the weekend. We'll go ahead and trust that you'll get your loan.
I gave them a down payment and drove my new car home. I called the bank first thing Monday morning. The loan officer called me back and said she wouldn't be able to process my loan because the finance mgr refused to give her the information she needed about the car. I think the finance mgr was trying to make me lose my loan so I would finance with them.
I called the Arizona Auto Dealers' Association who called a public relations mgr at the dealership, who told the finance mgr to cooperate with my bank. The loan officer called me that afternoon and said everything was fine. She said she couldn't disclose information from the dealer but she wanted me to know I got a really good deal on the car. (BTW, I wasn't playing a game or trying to cheat the dealer, I was just an informed consumer trying to buy a decent car at a fair price that I could afford.)
So...first time buyers...do your homework, be very wary, scrutinize all paper work, and know who to call for help if the dealer dig deeps into their bag of tricks.
mtnshopper
I personally am not a big fan of demo vehicles. I say this because from my perspective, dealerships are usually not willing to provide a large enough discount on demos to justify purchasing what essentially is a low-mileage new vehicle over a brand new one. I feel as though you should only buy a demo vehicle if you are able to negotiate a significant discount over an equivalent new one.
Car_Man
Smart Shoppers / FWI Co-Host
They have not yet paid off my loan on my trade in...but the trade in is for sale on their lot. Is it unusual for them to wait this long?
Also, I've read about scams where they offer you a financing package and then two weeks later call you to say that they couldn't get the financing and want more money down, etc. Has this happened to any of you? It's been 13 days...and my paperwork (this is California) says that they have 10 days in which to find financing or ask for the car back. Does this mean I am safe from this scam yet? I love the new car...and everything went well at the dealer...but now I am nervous.
I haven't received the payment book yet or heard from whoever the lender might be.
Sincerely,
Nervous in CA
I had a fine credit history before I left, but have been away for awhile. My wife is Australian and so has very little US Credit history.
We have investment assets and strong income through family business...my question is:
Will we be able to obtain finance fairly easy based on tax return showing CA income/assets, etc or will it be difficult to do coming from overseas?
Many thanks,
Caleb
This is a very interesting situation. If the new car is in your name, there shouldn't be much problem, since you can show consistent, albeit light, use of credit in the last 8 years. Your spouse may have problems if she tries to finance in her name only, being an Australian citizen - unless the credit you already have (cards, mortgage, etc.) is also in her name, then she would likely be considered "new" to US credit, and would likely require a co-signer and/or receive higher interest rates.
If you discover problems getting traditional automotive financing, you may want to consider a home equity loan or a personal loan against your assets. This may help you to re-establish US credit for future use.
kcram
Co-Host - Smart Shopper & FWI Conferences
edmunds.com Town Hall
Thanks for the reply. We have a joint CMA account with Merrill Lynch and any loan we do will be in both names, so hopefully it will be fine.
Let you know how we go...
Caleb
three months. I would like to put down as much
as possible to keep my payments low, here is my
question. After the deal is negotiated, will I be
able to have time to sell my car privately? What if
I order the X? Does it always come in on time? I need my car for transportation, but would like to
get top dollar if I could. I'd appreciate any info
on this aspect of the deal.
Car_Man
Smart Shoppers / FWI Co-Host
dealer, and we haggle a price and all...
can I "take delivery" a week later? Or, if they
don't have my X and I order one, and, again, go
through all the price haggling, is there a set date
to "take delivery"? Or am I just waiting for a
phone call. The last time I bought a car, I just
traded mine in, and we did the whole process in
one day, so this is the part I'm unsure of.
If you order a new vehicle just how you want it equipped, the dealership may be able to provide you with an approximate delivery date. However, ordered vehicles almost never have a specific delivery date and often are delivered to dealerships much later than they were promised.
Car_Man
Smart Shoppers / FWI Co-Host
In regards to the rates mentioned, I thought these both were pretty good considering my past credit history. During the last 4 years I have had perfect credit, but before that I was pretty bad when it came to paying bills, real bad in fact!
I'm going to be putting down about $14K on a new 2001 Nissan Pathfinder LE w/ AWD, so I'll be financing around $19K or so at the above mentioned rates.
So, did I mkae a wise move in choosing the variable rate? Or should I see if I can change to the fixed?
Thanks in advance!
My apologies Car Man
I'll post this same message there.