What is Digg?44 Comments
- TalkingCrow, on 10/12/2007, -1/+9Buried... this is grossly inaccurate on a few counts:
-Dealership Cons: loans are often front-loaded (payments are made up of more interest in the beginning of the loan than toward the end -- that's bad if you think you may be paying the loan off early.)
Not true, 99% of car dealership financing sources are standard banks (the same ones we use for our checking and savings accounts) and will write you a simple interest loan. Interest is generally calculated the same through a credit union, bank, or any other institution.
-Bank or credit union Pros: no sales pitch for add-ons; often can tell you if you're paying too much for a car;
False. Most banks and credit unions have a finance department now, and will attempt to upsell you on products just like the dealership will. Why would an independent finance source miss a chance to make money? And banks and credit unions typically have no clue how much a car is worth. All they do is go online to nada.com or kbb.com and get a number to seem informed. Same as we can.
-Home equity loan: Pros: You can deduct some of the interest from your taxes; competitive rates Cons: You're tying your car to your home (may be risky)
This is ONLY a Con. DO NOT finance a DEPRECIATING asset (a car) with an APPRECIATING asset (your home!). Simple math on that one...
-Extended Warranties:
The info the article provides here is also not correct. Dealerships are the only ones who offer FACTORY backed warranties. Do not buy an extended warranty from an independent company. It's a waste of money. If you drive a lot of miles, and see a value, buy a factory backed one from the dealer. DO negotiate the price though.
-Spot delivery: Many of us have never heard of spot delivery. What happens is that the dealer takes your down payment, tells you the amount that your monthly payments will be, and sends you home in the car. What hasn't happened is a final contract.
This is not correct. A dealer MUST put you on a bank contract, lest they be audited by their bank in the interim. Most dealers want to sign you once, and never have to re-do paperwork.
A good 50% of this article would have been correct about fifteen years ago... the auto industry is so heavily regulated now, there's very little chance of getting majorly ripped off if you visit a large, reputable franchised dealer. Stay away from the "Mom & Pop" stores... those are where the danger still is. - bamafun, on 10/12/2007, -1/+7good info now we just need a special post on how women can deal with car salesmen and not get taken lol
- aslave2thegrind, on 10/12/2007, -0/+4I worked in two "ma and pop" stores and YES...a HELL of a lot of money can be made at the F&I desk if you have the right person working there (someone without a soul works best...)
- Cerebral, on 10/12/2007, -0/+2You are an idioit. Not everyone can just fork over $10k on a pre-owned car. Hell most cannot fork over $2k for a car, that's why they finance. Besides that you get into the used car cost over time vs. new car cost over time debate and that's not even taking insurance costs into effect considering some older cars don't come with "safety innovations" that can often lead to savings on your insurance etc.
The fact is that our nation(for the most part) live paycheck to paycheck and in debt. Financing is a must. - starexplorer, on 10/12/2007, -0/+2excellent, i just got tangled in this mess about 2 weeks ago.
- robinandrews, on 10/12/2007, -0/+2I am getting ready to buy a new car and found this article to be very helpful.
- diggface5000, on 10/12/2007, -0/+2To the negative comments about credit unions:
I previously worked in one and I can tell you there are many advantages to taking your loan from one.
1. There is no definite cut-off. For example, the local Sun Trust and BOA will deny any loans if you are under 610. No exceptions. At the credit union the loan officer isn't answering to stock holders and has more empowerment to push the loan through.
2. If you are unable to make payment, the credit union is much more likely to work with you to alter your payment plan. I've seen people required to pay $50/paycheck and they do not get their cars repossessed. Maybe this can happen at a small community bank, but I don't see it happening at the larger ones. The rules are the same for everyone, no matter what hardships they endure.
So, if you have excellent credit- no, a credit union may not be any better than another loan service. But if you have no credit or are rebuilding credit then it's probably in your best interest to seek out a nonprofit credit union rather than a for-profit bank. - inactive, on 10/12/2007, -0/+2I worked for a major bank in the auto financing department for years. There's important info missing from the article that's not common knowledge.
Banks issue what's called dealer rates. For the bank I worked for, there was a dealer rate scale that had 5 interest rates that changed on a monthly basis. The higher the rate the dealer could get you to sign at, the more of a kick back from the bank he would get. For example, The lowest interest rate would pay the dealer zero% of the finance charge, the highest would pay 10%.
This dealer program serves two purposes. One, it helped the bank compete for the dealers financing business. Two, it gives the dealer more wiggle room on the rate. Of course he's going to try and get you to sign at a higher rate. When you don't, he pretends to go back to the bank and negotiate the rate. He actually doesn't do that. He just works within the dealer rate scale. You think you're getting a better rate when actually, you may be getting the 3rd tier on the dealer rate (not the lowest but certainly not the highest). You walk away thinking you've won, the dealer is getting a bonus from the bank, and the bank is getting more interest from you than they would have if you were to come straight into the bank and skip going through the dealership.
Don't ever let the dealer handle your financing. - Lownin, on 10/12/2007, -0/+2TalkingCrow is actually quite correct in everything. I'm not an expert, but I used to work for a call center that handled customer service calls for a very large acceptance corporation. The financing plan was calculated the same there as my credit union. Also, I cannot count the amount of people screwed over by small dealerships that weren't under the same scrutiny as the larger chains. I'm not sure on why that is, but I saw a lot of people get screwed over.
- inactive, on 10/12/2007, -0/+1Does anyone ever get a good deal on a car purchase; say the manufacturer! Depreciation is a auto killer and the trade in is never worth anything against what you put into it.
- inactive, on 10/12/2007, -0/+1Great info...
- brufleth, on 10/12/2007, -0/+1Big name lots stand to lose the most and their very existence usually means they've been around a while. Also, read reviews of dealerships, some places are known for pushy sales people and some aren't.
- howtogyfpi, on 10/12/2007, -0/+1Some things are really out of wack in this, but the general principles are good. Stay away, if you can, from the dealership loans.
- Otto, on 10/12/2007, -0/+1Well, I've always gotten better rates by getting my vehicles financed online first. It's quick, simple, and easy. Last time I did it through eloan.com and got three offers a week later. Gave me a *lot* more leverage when I bought the car, since to the dealership, I was just cutting them a check for it.
- Cerebral, on 10/12/2007, -0/+1Yes please... I have no idea what it is.
- brufleth, on 10/12/2007, -0/+1For people with good credit it is definitely worth checking with your bank about auto financing. I'm going to be getting a new car in the next six months probably and just happened to notice I was pre-approved for an auto loan through my bank. I went through the application process up until the final step to see what sort of APR I could get. Come to find out it is much better than any dealership is going to get me through their banks and I'd be making the payment to my bank instead of the dealership's bank which I'd prefer anyway.
- Cerebral, on 10/12/2007, -0/+1For all of you on here that do not know... the automotive industry and how money flows throughout is very confusing and complex. You simply cannot fathom how much money is all "back-end" and how, no matter what you are actually getting a good deal save for the interest rate you get.
If you were to purchase all the parts of the automobile and put it together yourself it would cost WAY more than what you pay at the dealership.
Many people find it hard to swallow that the price they see on the "invoice" is actually what the dealership paid the manufacturer for the car. This is because they always sell the car below that. All the money is on the back-end. It's a strange business. - breezyflight, on 10/12/2007, -1/+1Yeah, the auto industry is so heavily regulated, but stay away from the eeeeevil "Mom and Pop" stores, because they can't ever be reputable. Meanwhile all those big giant corporate car lots are so down home, aren't they? They'd never DREAM of ripping people off, would they?
FUD at its finest. LOL - youareanidiot, on 10/12/2007, -0/+0and you have to be good at paperwork, too. Oh, sorry those are the same things.
- youareanidiot, on 10/12/2007, -0/+0Pics or it didn't happen! Seriously, this is BS and not even remotely close to how it actually works. There are buy rates and sell rates and the dealer is usually paid a portion of the 'spread'.
- cliffzdude, on 10/12/2007, -1/+1Regulated? That varies from state to state, and last I heard the USA had something like 50 of 'em. If the car ads in your state makes sense, you may live in a consumer friendly state. If they don't make sense, if they seem impossible, they are and you live in a state like mine where you can assume the most "reputable" dealers will try to schlock you out of every ***** penny they can. Many still try to write rule of 78 loans vs. simple interest. The article is spot on, just too ***** long. Page views anybody?
- Silverbird, on 10/12/2007, -1/+1The best financing deal? Don't. Car financing is for idiots.
Save your money, pay cash for a nearly-new car that some idiot has already driven off the lot and taken the depreciation hit. Don't buy unless you have the cash to pay for it.
Living debt free works. Resist the urge to buy a bunch of meaningless crap, save 25% of your income into a decent mutual fund and you'll have more money than you know what to do with. Stay away from car dealers and credit cards and you've got a good chance of winning. - youareanidiot, on 10/12/2007, -0/+0Is that so? Why don't you explain the right to offset to these fine folks?
- youareanidiot, on 10/12/2007, -0/+0The right to offset is a clause, commonly included in CU auto finance copntracts, that sways that if you are late on your payment they can sieze any other assets you may have with the CU to make the payment. So if your mortgage and your car are with the same CU and something tragic happens and you are late on a car payment, they COULD....
- youareanidiot, on 10/12/2007, -0/+0You remind me of those ESPN commercials, you know the ones where the guy was talking sports OUT OF HIS ASS.
- altamiraweb, on 07/18/2008, -0/+0Yes, nice info
http://www.limos-event.com/ - astretch, on 06/12/2008, -0/+0I think that everyone looking for any type of financing should get their homework done before making any deals. Many people simply go to dealership and look for financial advice and don't realize that sales people are there to close the deal and not provide financial advice.
http://www.astretchout.com - youareanidiot, on 10/12/2007, -0/+0All right just because the truth will set you free...
The real ins and outs and do's and dont' of financing a car from someone with 7 years in the business.
Banks aggressively solicit dealer business. Dealers are allowed to mark-up rates and make what is referred to as reserve. The reserve is usually limited by state law and the bank, my state is 2.5%. The halcyon days of 10 point reserves are GONE. The dealer deserves to make SOME money in handling all the aspects of the loan for you. Consider that you are paying for convenience. The Business Manager will offer you products such as warranty coverage, environmental protection and several insurance products. Get all the info THEN make a decision. None of these products are in and of themselves good or bad. They only have value (positive or negative) relative to your need/desire. Do pay close attention to the part about GAP insurance unless you are financing less than 80% of the value of the car!! I have seen too many people owe thousands on a car that has been totalled. Don't forget to negotiate.
Credit Unions also aggressively solicit dealer business. Read the contract. Know what rights and responsiblities the lender (CU) and borrower (You) have. Some CU loans are awesome (USAA (if you are a member)), some suck. Don't make generalizations.
Do your research. Know rates, pricing, etc.
Do negotiate.
Do RTFC, reat the ...contract.
Do assess your unique situation and decide what is best based on your needs, capabilities, budget and desires.
Do find a dealership/salesperson you like and enter into any transactions with the goal of building a long-term relationship.
Do make sure they have the same goals. Look for long-term employees who stay in one place for 5+ years. If everyone at the dealership has been there less than a year, what does that tell you?
Do expect the dealer to make a fair profit. Would you work for free?
Do find a car that you want, that fits your needs and budget. Then do apply everything you knew as a 4 year old about how to get what you want.
Do realize that any dealer/salesperson with a long-term view wants exactly the same thing you do.
Do understand that there is always a WIN-WIN and that it is always better for everyone than a WIN-LOSE.
Do not accept blanket statements from someone who sells advertising to companies who sell the products you are researching.
Do not assume you know more than the dealer does about his business. I can't tell you the number of times I had people in front of me who wanted to buy a car but thought they knew everything about what we had invested in the car and what we should sell it to them for. Guess what, they didn't get the car they wanted. Who lost out, me or them? I still sold what I needed to and paid my bills. My livelihood does not depend on your ONE car deal.
In general I would say...
Don't pay cash for a car unless its not enough money for you to miss. If you got 20G's to drop on a ride chances are you could put that capital to work earning more money for you. A car will never earn you money. If that 20G's is only a months salary to you - well then no big deal. Write the reader! An example: My YTD return on my 401k is just over 16%. The cost of money on my lease is just over 6%. Did I come out ahead?
My main point: Any one (any article) making broad generalizations and telling you to make $20,000 decisions based on them does not have your best interest at heart. - prs123prs, on 12/20/2008, -0/+0What about this?
http://www.youtube.com/watch?v=6ZMwKwiQtI4 - pteam, on 03/02/2008, -0/+0Yep I definately have to agree with the financing part. http://www.hummerviplimo.com http://www.limosofnewyork.com http://www.limosofnewyork.com http://www.firstclasslimos.net http://www.hopkinslimousine.com http://www.limosnationwide.com
- prs123prs, on 12/19/2008, -0/+0I know when I bought my car that they tried to do the switch-a-roo. This probably will help me avoid this in the future.
http://www.paidresearchsurveys.net - Otto, on 10/18/2007, -1/+1It's better than dealer-financing, not bank financing. It *is* bank financing.
When you're dealing with a bank that has a special setup with a dealership (basically you're going to the bank through a dealership), then the dealer gets kickbacks based on how high your percentage rate is. So they're not motivated to give you the best deal.
When you're paying straight cash and not having to deal with their financing department at all, it puts the dealer at a disadvantage in bargaining, since they can't give you a lower interest rate as leverage.
Admittedly, going to another bank for pre-financing and then going to the dealer armed with that is the same thing, it's just easier to do online and compare bank rates via offers. - pteam, on 10/22/2007, -0/+0I hear you can finance rims and other car accessories like from http://www.20inchchromerims.com , http://www.newcoolcars.com , http://www.sweethotcars.com it just depends on where you get them from
- stressfree7, on 02/06/2008, -0/+0Car dealers are now nothing more than loan sharks
http://www.stressfreetrading.com - youareanidiot, on 10/12/2007, -3/+2This article should be called "how we make ***** up and then post it to the web and sell advertising", the same as any other site purporting to educate
consumers about buying a car or making any other major purchase. I love supposedly impartial web sites that tell you it is best to get financing from on on line source and on the same page sell advertising to on line sources. *****!~
To expand on the above comment:
re: dealership financing - cons- not competitive. This is absolute bull. Dealership financing (most often from a factory backed financial institution) is in most cases 100 to 150 basis points lower than your local bank. Manufacturers loan money to sell cars, banks loan money to make money.
cons- front loaded - All auto loans are simple interest by law in most states.
I love all the people that refi'd their house and used the cash to buy a car. Nothing quite beats paying juice on that nice new minivan for 30 years. Oh wait you're gonna refi again later or move, make that 50 years. Nice move!
Extended Warranties - There are a lot of companies that have gone completely under lately leaving those who bought warranties on line or from their CU holding a worthless hunk of paper. Buy only from the manufacturer or the MAJOR players here (Fidelity Warranty Svcs or Resource Automotive).
Rust protection IS a good idea if you live in someplace like MN, If you're rolling around the Valley of the Sun it's probably not such a good buy. Most of the cars are built for all 50 states. Most rust protection sold by dealerships will offer a better rust warranty than the factory does. - youareanidiot, on 10/12/2007, -1/+0All banks just 'cut the dealership a check'. What is your point?
- cliffzdude, on 10/12/2007, -2/+1Edit time ran out.
Add-ons? Banks and credit unions don't sell rustproofing, or fabric protection, so the point in the article is still valid. The REAL point is shop for your money, you shop for a gallon of gas, why not for a loan? Only an idiot will take a dealership's finance rate, unless its a factory backed incentive as being their "best" rate. I've bought several cars by shopping for rates, and having the dealership match the rate, and they STILL have back-end left over. Hey, it makes them more $$$ and I'm even, its a win-win.
Spot delivery takes place every day in my state, deep down in the contract it says that the deal is "pending approved financing". I've been spot delivered on every car purchase I've made, even those where I was pre-approved by the factory credit company. Its fine with me as I don't trade in a car, so if they pull ***** then I give them the car back. Lovely.
I think Talking Crow speaks for his state, which sound like a GREAT place to buy a car. But in the states I've lived in and bought cars, and helped others buy cars in the past 2-3 years, the article is still right on. - diggerphelps, on 10/12/2007, -2/+1Zip Car, Flex Car, City Car Share + my moto and bicycle, FTW.
- breezyflight, on 10/12/2007, -2/+0Here's how it works:
You buy a car. You start making payments. You lose your job. Some guy named "Clem" breaks all the light lenses on your corporate commute-pod with a tire iron and drags it down the driveway with an iron hook. Your credit is destroyed. You are back to driving the 1978 Nova.
Total cost: $38,175, or approximately $6,000 for every month you got to drive the car.
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