FINANCING YOUR CAR
 

Ok, want the staright poop from someone on the inside? find out what the best rates are right now, get advice on how to pay for your car, and what to be alert for when you talk to your dealer. I can also offer assistance on understanding your credit rating.

SEE ALSO WARRANTIES AND SERVICE CONTRACTS and CARS

WARRANTIES AND SERVICE CONTRACTS
 

Need advice about buying extra protection for your car?

see also CARS and FINANCING YOUR CAR

Do extended warranties ever actually "pay for themselves" or is it just another way to get money out of folks, because most failures tend to occur in the first year or so, aren't covered under the warranty, or occur after five to seven years (under average usage conditions)?

basically, wolf, it's insurance. I have seen people never need their warranty that they paid $1500 for, and i've seen a $4300 transmission job that cost the customer $420 for the warranty, and $100 for the deductible. I sold myself one for my 99 Laredo... already recouped half with a new driveshaft, and some seepage repairs. and i'm covered up to 100K miles bumper to bumper.

something on your mind, bruce? wtf?

Buy vs. Lease -- which is more affordable? I've been told that making a purchase is always better than a lease unless you drive a very short number of miles each day and plan on getting rid of the car quickly.

it depends on how you define more affordable. And, as you said, how you will use your car.

If you are a person that trades their car in for a new one every 3 or 4 years, you should lease. ESPECIALLY if you drive a lot of miles. just set the lease up to allow you the amount you actually drive, plus a little padding. The payment is almost always significantly lower on a lease, and at worst, you break even at the end and start over. I f you had bought the car with a 5 year loan, there's a good chance that you may still owe more than your car is worth in 3 -4 years, and have to carry "negative equity" into the next loan. this can creat a revolving effect that gets worse every time you trade in, and at some point, you reach the saturation point and become "burried". not to mention the trouble you'd be in if your car was totaled while you were in the red. always consider gap insurance when buying a new car. you don;t always need it, but it can save your ass if you do.

If you tend to keep your cars for 6+ years, you should probably buy it. Use the time that you don;t have a paymetn to save for your downstroke on the next car.

the BEST way to go is to buy a 2 year old used car with low miles that is in good shape. allow room in your budget for a warranty, and keep the car until it is paid off + 2 years to save for the next one.

So (not to get off topic) where do you find such cars & what is an appropriate price differential? I've heard that before (about late model used cars) and I considered something like that for our last purchase (we ended up with a 2002 Dodge Grand Caravan), but the prices I saw on 2000 and 1999 models did not seem enough lower than the prices on new ones to make it worthwhile.

typically you'll find them at same make new car dealers. the price diff will vary depending on the car.

example: a new 2004 sebring sedan list price is 21,000 +/- we bought a 2004 like equipped sebring sedan with 20,000 miles on it from a rental company for 11,300. sold it for 13, 500. customer saved $7500. we made $2200 . win win

2004 grand cherokee invoice 27,900, we traded back in for 19,500 with 5400 miles on it. that was a push on the trade too.

the general formula for a quick trade car goes like this:

like invoice amount
less current rebate amount
less holdback (3% of orig. msrp before shipping)
less $3000 for being titled
less mileage adjustment of 10-13c. per mile depending on class of vehicle. ( small cars less, large cars more)

IMO, the best financing on a car is cash. In addition to the low interest rate, it keeps the dealer from playing games with numbers to hide the true cost of the car.

The exceptions are when the manufacturer is running a subsidized leasing or financing deal, but even then it's tricky to keep from getting buried in numbers and paying too much.

And beware of open-end leases.

open ended leases don;t exist any more.

and you only paid too much if you paid over sticker. anything else is a discount. maybe you could have gotten a better discount, but that's entirely up to you.and yes, always negotioate the price seperately from the payments.

first negotiate the price
then the trade
then the rate vs. rebate options.

THEN the payment works itself out.


more on leasing later....

Probably a good thing. They should have at least required a gaming permit for those...

Sorry, Jim, I wasn't born yesterday. I know that with anything but the most popular cars (and Saturns), if I go in and offer sticker, the salesguy is going be telling stories about that "sucker" for weeks.

Just a joke , Jim.
Sorry you didn't get it. I'll go away.:)

So how many people pay over sticker?

h'yup. i'm just sayin that msrp means manufacturer's suggested retail price. if buying a jeep at sticker is being a sucker, how is it untrue when buying a saturn?

yeah, you'd be stupid to pay sticker price......everybody knows that. i'm merely commenting on the peer pressure that exists between us and our friends when we buy a car.

" hey, nice car!" almost invariably is followed by "did you get a good deal?"

you want to be able to say yes to that, don;t you?

i expect that MY job would be a lot less fun if we didn't negotiate things.....you should try it at your work.

"yeah, boss, i know you WANT the work done by 3, but the best i can do for you is 4:15." "i do really high quality work(selling value) and you just can't rush these things(taking tone of expert). sound fair?(sullivan nod)

"ok, try to have it done by 4 though." (so he's not making the last concession)

"4 it is. you won;t be sorry, sir" ( let him win)

Because Saturns aren't available new below sticker. So at least everyone's being equally taken.

I'm a computer programmer, so that sort of stuff happens all the time. Except that the first bid is usually at the insult level and provokes a shriek of laughter.

My boss: "Hey Matt, can you get that done by the end of the day, oh, and make sure you get it into [version] 3.5 and 3.7 too".

Me: "Ha! You're kidding, right? How about the end of the month, and the current version only?"

you're right. i didn't get it. and i overreacted. MY apologies.

no need to go away. i'll toughen up

So what the hell is undercoating anyway?

:)

So what the hell is undercoating anyway?

They still do undercoating? It wasn't even an option on the handful of car purchases "I've been in on" (helped out friends) and wasn't on my own.

Or is that just a Northern thing? That's the last time I remember it being pushed on someone. It was pushed as mandatory, or else the car would fall apart at high speed due to corrosion and kill all passengers aboard.

It's a sticky, tar like substance that keeps the water up against the bottom of your car so it will rust out quicker.

the best part about undercoating is that it costs us about $40 to apply it to your car, and we can usually get $199 for it. I have seriuos qualms about selling it, and typically put emphasis on teflon paint treatment and scotch guard interior protection when someone wants to "protect their investment" I think the only practical application for undercoating is for wranglers that will see beach use....and as bruce intimated, you have to be sure the undercarriage is absolutley dry and clean before you apply it. It DOES reduce road noise, but so does turning up the radio, or getting better tires.

I just bought a used car last night and completely avoided all of the haggling and burial in numbers. I got my financing before stepping onto a lot and made it clear that I wasn't interested in dealer financing. I don't know if I got a good deal, but I am happy with the car and the payments.

I hear all kinds of stories about buying cars, so it struck me as frightening to go out to a lot by myself and buy a car. I did it, though, and I think everything came out okay.

if you're happy, then you got a good deal.

the fuckers that pay invoice, and still insist that you're robbing them turn my stomach....

what kind of a car did you get?

An '87 Yugo GV

LEASING
 

Leasing


There are several factors that go into a lease calculation. the general theory is that you offset a portion of the vehicle;s value and pay the depreciated portion over a shorter term.

the way it works technically, is this:

you take the MSRP PLUS any package discounts that exist on the window sticker, and multiply by the residual percentage that the bank sets for the term and mileage requested.

ex:

Sticker Price: 30,000
package discount: 1,000
adj, msrp 31,000
residual 50%- 36 months, 12,000 mi. per yr
residual amt: 15,500

this sets one of the 3 major factors, the residual. at $15,500

the next factor is the "cap cost"

this is the negotiable portion, and should be negotiated seperately from payments.

cap cost is a result of the sale price less rebate or trade equity, plus the aquision fee if not paid "upfront"
ex:

sale price for the above vehicle: 28,000.
rebate -3,000
trade equity -1000
aqc fee +595(varies)
cap cost 24595


the 3rd factor is the money factor. this is like an interest rate.( they can be compared loosely by multiplying the money factor by 2400 ( .00335 X2400=8.04%)

so. you take the residual from the net cap cost and you have "depriciation"

ex 24,595
less 15,500
dep: 9,095
divide by term (36) = $252.64
that's one part of your payment

the other is the "rent charge"....which you get by multiplying the money factor by the sum of the residual and the net cap

ex: 24,595 + 15,500= 40,095 X .00335 = $134.32 this represents your monthly finance or rent charge

total base payment = $386.96
in PA, we tax the payment 9% =$34.83
total payment = $421.79 per month

this only leaves tags and the first payment due at delivery from the customer, so, in total, in this deal, you'd take about $570 out of your pocket, and have a payment of 421.79 for 35 more months, as you've already paid the 1st month. if you want to buy the car at the end, it's 15,500 plus any purchase option fee ( varies from bank to bank) and sales tax. If you just give it back, you will most likely owe a "disposition fee" and any charges for excess wear and tear.



that's how the math works.

knowing this, you can keep your dealer honest.

always always always negotiate each item seperately.

more in next post.....

negotiating your lease
 

Begin with an analysis of your driving habits. figure out how many miles you realistically drive in a year. be honest about it. you can base it on previous driving if you can remember the details, or you can calculate work driving and (on average) multiply that by 1.5 .

Next, decide what term you'd LIKE to go. 36 months, 39 months, 48 months ( don;t do 5 years....if you can't afford the 4 year lease on a car, you can;t afford the car)

once this has been determined, ask your salesman (before you negotiate the price) what the money factor ( and SAY money factor, not interest rate) is, and what the residual is. write it down. this way they can;t hide money in there later. they may try to push that question aside because there are different factors for every bank and term, but knowing what term you want, they should know what bank is going to be the best for your car, and they will know the factor if pressed.

then negotiate your price. 1-3% is a fair profit margin for both of you. don;t be an ass and get emotional. be prepared to leave and go elsewhere, and let that be known. politely. if you have a trade, withhold the info and don't allow an appraisal before you have agreed upon a price for the new car.

the trade.
before you come out, go to kbb.com. look up your car. answer objectively, and get the value for "good" and "fair" take the average of these two numbers. this should be your "watermark" more than that is a good number, less is bad. print these pages, and bring them along in case you need to refer to them.
If possible, do not tell the salesman or salesmanager what you want for the trade before he gives you a value. if the value is low, ask him to justify it by showing you comparable cars in his auction guide or the "Galves" auction guide.

once you have agreed on these two items, THEN, discuss cash. make sure they are giving you the total amount due at signing. and that all tax is included in these quotes. find out what the bank fee (acquisition fee) is.

this way, you have all of the pieces of the puzzle.
dealers CAN mark up the money factor, and the price. the residual cannot be manipulated for profit, nor are they negotiable, fyi.

if you have the time, check their math, if not, just ask the questions, and they will assume you know what the hell you are talking about, and probably not try anything cute.

during all of this, try to maintain a pleasant demeanor, as the relationship you have with your dealer can help you when you need it.

reviving an old thread
 

It has come to my attention that my credit union is now offering 85 and 96 month car loans.

Should I be outraged that they would do this kind of thing to their members or just shut up since I'm not buying a car right now?

Brian

would you be mad at the rope manufacturer if you witnessed a hanging?

possibly...depends on the situation.

It's just that this is a military CU and they're "nominally" on OUR side, not to rip us off, offer a little protection from the ripoffs out there etc.

After all, if they get a rep of being ripoffs, and the men and women of the armed forces pull out and go elsewhere, they're out of business.

Or so I like to believe.

well, what's the rate?

i have 3 banks that go 84 mos, and one that goes 96.

never did it though....72 is becoming more popular. cars cost more and last longer nowadays, but payments keep trying to stay the same. what else is left to give? term.

rates taken from the website
 

up to 36 mos. 2.90% -
37 to 48 mos. 4.90% -
49 to 60 mos. 5.50% -
61 to 72 mos. 5.90% $25,000 minimun sticker price required for vehicle loan of 61 to 72 months
73 to 84 mos. 5.90% $30,000 minimum sticker price required for vehicle loan of 73 to 84 months
85 to 96 mos. 5.90% $30,000 minimum sticker price required for vehicle loan of 85 to 96 months

brian, these are fixed rate loans. how can you be offended by those rates? and for the term, i'd say that's one hell of a credit union. .

I didn't say I was offended by the rates, only the terms.

And those are for new cars only.

I used their calculator on my last car to see what it would cost...
I'd wind up paying more than the purchase price with a longer term...I won't go over four years unless it's a Hummer...then I'll go to five.

Anything else and I can't afford that car...time to go to the "budget lot".


BTW, I'm kinda in the market for a pickup. Truck, Bruce.
I need a longbed, 4x4 pref, V8 also (I have hills and snow here)
and the extended cab would also be nice because I tend to schlep my dog along and I prefer that he not climb onto my lap when I'm driving, especially if it's a manual trans.

Let me know if you find something I can use (F150 or Ram are preferred, but not locked)

Brian

brian,

I just talked a girl out of financing for 96 months.
35,500 at 7.99% would have cost her $12.646.87 over the term just for the money.......meaning she''d repay 47646 ot borrow 35,500. at $501/mo

she's going to do 72 mos instead at $621........a mere $9291 finance charge.....


the fucked up thing is that she is trading a 2004 gr cherokee in on a 2004 gr cherokee.......the difference? she just got divorced, and doesnt want to drive the car she bought with her ex.......

didnt someone mention not making important decisions while emotional?

You shouldn't have. People need to pay the price for their decisions or they won't learn.

Did she even appreciate the effort?

That is fucked up. I can kind of understand where she's coming from, but then I'd think she's want to get a completely different MODEL of car, rather than just a different one of the same model.

I've got to ask, how much did she get for the tradein???

21000

Am I figuring this correctly? She's going to pay $56,000 for a Grand Cherokee?

TOTAL PRICE 39922.00
TOTAL TRADE 32000.00
WARR PREMIUM 770.00
TOTAL PAYOFF 31757.87
------------------------
AFTMKT PREM 0.00
TOT NET TRADE 242.13
APR 7.99 %
TOTAL FEES 95.25
TOTAL CASH 0.00
AMT FINANCED 36296.64
TOTAL TAXES 251.52
TOTAL REBATES 4500.00
FINANCE CHARGE 9506.88
-----------------------
TOTAL OF PYMTS 45803.52
GROSS PRICE 41038.77
TOTAL DOWN 4742.13
DEF PYMT PRICE 50545.65

I like you Jim, but I hate dealerships. I hate being screwed. I hate the game. I needed a shower after my latest experience. Ick.
Last thursday I paid $7000 cash for a 1997 Nissan Sentra with 52K miles. Ive never had a car loan. The carfax and 3 day lemon law checkup came out well so we'll keep her. This replaces a well loved 1989 Nissan Sentra with 156K miles.

Car prices boggle the mind.

well, warch, consider that I saved her 3000 in finance charge by talking sense to her. the bank would have hit her for 12k+ in finance......

TS is right to a degree...a fool and her money are lucky enough to get together in the first place. she made a bad decision based on emotional reasons. if we hadn't sold her a car, though, she would have gone down the street and gotten one from our competition. It is never a good idea to trade a new car in 6 months later. I did make sure she had gap insurance, and adequate warranty coverage while she is financing it.

sentra's are great, btw...as if you needed me to tell you. no reason you shouldnt get 200K out of it if you maintain it.

It's all a make believe world, so why worry. Just sign here and you can be cool too. After all, you are what you drive.:rolleyes:

If she works it right, the ex will be making the payments.

Jim, If I lived anywhere near you I would have sought you out for advice and assistance. You seem to be a rare and wonderful bird in the car market world, however.
Were asking $950 for our 1989 Sentra. its a runner. rust will kill it first.

i wish you would have, warch. although i may be in a different region, i can still offer advice about how much cars are worth, strategy to maximize your deal, etc.....

the reputation of car people is such that if you are not flawlessly honest, you are just like everyone else. giving the customer a true answer to their question tends to pay dividends with repeat and referral business. i some times get in trouble for advising a customer to stay in their car until conditions are more favorable to them. in fact, last week the owner brought a customer into my office who was 2 years into a 4 year lease, to answer some questions about her deal. she was on pace with her miles, liked her car, but had seen the shiny new red one. ........the owner had intended to try to trade her into it, but when he was out of the room, as i did not know his intent because he brought her in cold, i told her she should stay the course, and just extend her warranty to cover the gap she was coming up to. when the owner came back into my office, she says...." well, i think i'll follow jim's advice and stick with my current car for now."

oops....at that point, the look on his face let me know what his intent had been. I'm still hearing about that one. she'd better buy that warranty soon....... :eek: