topic Re: Approval process at dealership in Auto Loans

Approval process at dealership

babbles — Thu, 15 Mar 2012 14:08:46 GMT

Just for my own knowledge, when the dealer runs your credit and sends your application to various banks and comes back with an approval at the best rate for you, how concrete are those payments? Since you are signing your paperwork in Finance, I always thought the numbers were pretty concrete since you are signing a contract that shows the lender, interest rate, payments, and due date? Anyone have any past experience with SunTrust? Thanks.

Re: Approval process at dealership

HoldingOntoHope — Thu, 15 Mar 2012 18:16:18 GMT

Once you sign the contract and they fund the loan based on those terms it is as concrete as you can get. What you may have read in these forums is that some people have had luck with refusing the terms and threatening to not sign the deal. Sometimes the dealer has "MYSTERIOUSLY" found better loan terms. A lot of it depends on your credit profile.

If you post some info about your current credit specifications like FICO scores, age of credit and any negative information some of the more experienced posters on here can give you an idea of what interest rates you should qualify for on new and used purchase. Remember that used car interest rates are generally going to be higher than new car rates. And down payment amounts can influence the rate you may be offered also.

Re: Approval process at dealership

my25reasons — Thu, 15 Mar 2012 19:04:38 GMT

Just like holding said. The math is concrete. You are signing a contract, both parties are agreeing on.

I have my finance paperwork (the paperwork handed to me IN the dealership the day I bought my car) here and it breaks down the payment schedule like this:

The payment schedule will be ___ installments of $___ ea, monthly begining ___ (Usually the following month).

it also states "NO COOLING OFF PERIOD. State law does not provide for a cooling off or cancellation period for this sale. After you sign this contract, you may only cancel it if the seller agrees of for legal cause. You cannont cancel this contract simply because you change your mind."

Hope that covers your question!

Re: Approval process at dealership

babbles — Thu, 15 Mar 2012 21:44:17 GMT

Thanks for the info. My score was 773 when the dealership pulled it Saturday. Sent it to Honda, crestone?, BOA, and Suntrust. BOA was the best that night @ 5.94%. When I went back Monday morning he had gotten a reply back from Suntrust that said 3.04%. I went with that and signed the contract for that percentage rate and the projected payments with the rate also. It was conditional because they had to speak with me because of my fraud alert. Also, my DTI is high because of rental properties so It seems like I get the high end of good rates. USAA gave me the high end of a good rate @ 3.75% but the contract I signed at the dealership with Suntrust stated 3.04%. Hope this won't change.

Re: Approval process at dealership

jimbo831 — Fri, 16 Mar 2012 16:14:25 GMT

Also, keep in mind most dealers will tack on additional interest for themselves. For example, if you are offered a loan at 5% interest, there is a good chance the finance company is getting say 3% while the dealer is taking 2%. Because of this, you can negotiate interest rates, just like the cost of the car. That is how dealers "find" better interest rates when you don't like the terms you are offered. They just lower their cut.

Re: Approval process at dealership

babbles — Fri, 16 Mar 2012 16:18:46 GMT

Wow! Did not know this? So ironically it dropped to 3.04% because maybe they lowered their cut? I definitely was not going with 5.9% Wow! Thanks for that knowledge!

Re: Approval process at dealership

jimbo831 — Fri, 16 Mar 2012 16:22:37 GMT

babbles wrote:
Wow! Did not know this? So ironically it dropped to 3.04% because maybe they lowered their cut? I definitely was not going with 5.9% Wow! Thanks for that knowledge!

I only just learned this recently here. Wish I'd have known it in January when we bought our car at 16.5%! I'm sure I could have got it lowered. All good though as my CU refinanced me down to 2.49% anyway.

Re: Approval process at dealership

teenastie — Fri, 16 Mar 2012 16:25:07 GMT

babbles wrote:
Wow! Did not know this? So ironically it dropped to 3.04% because maybe they lowered their cut? I definitely was not going with 5.9% Wow! Thanks for that knowledge!

Was this for a pre-owned vehicle? I believe honda offers a 1.9% rate for 60 months. Which only requires a 720 Auto enhanced beason (EQ) for new purchases...

Re: Approval process at dealership

trumpet-205 — Fri, 16 Mar 2012 19:21:56 GMT

OP, have you consider securing a loan from bank/CU rather than at dealership? It would be better 99.99%.

Re: Approval process at dealership

babbles — Fri, 16 Mar 2012 19:32:37 GMT

I definitely favor USAA but their rate was 3.49-3.75 on 72 month terms. Honda's special A.P.R. applied to 60 month terms and I preferred 72 months. The vehicle is new BTW.

Re: Approval process at dealership

trumpet-205 — Fri, 16 Mar 2012 19:34:11 GMT

Keep in mind advertised APR applies to those with excellent credit. You are not guaranteed to have that offer. Have you talk to local CU?

Re: Approval process at dealership

babbles — Fri, 16 Mar 2012 19:54:22 GMT

I am a member with NFCU but rarely use them but utilize USAA mostly. NFCU never offers me the lowest rate even though my scores are above 750. My DTI is too high for them.

Re: Approval process at dealership

teenastie — Fri, 16 Mar 2012 20:04:32 GMT

3.04% for 72 months from a bank that is not selling you the car is stellar! They aren't making much off of you on the back end :smileywink:!

Re: Approval process at dealership

trumpet-205 — Fri, 16 Mar 2012 20:14:02 GMT

Keep in mind by securing a loan from bank/CU instead of dealership, you have more power in negotiating out of door price. Also I would recommend email sales person at dealership to request a quote + online research on invoice price rather than walk into a dealership having little knowledge about the price.The difference in price can be huge.

Also auto loan typically uses auto-enhanced credit score (focus more on auto loan, less on credit card). Which means if you don't have history in auto loan (or less perfect history), your score can be lower.

Re: Approval process at dealership

jimbo831 — Fri, 16 Mar 2012 23:45:13 GMT

trumpet-205 wrote:
Keep in mind by securing a loan from bank/CU instead of dealership, you have more power in negotiating out of door price. Also I would recommend email sales person at dealership to request a quote + online research on invoice price rather than walk into a dealership having little knowledge about the price.The difference in price can be huge.

Also auto loan typically uses auto-enhanced credit score (focus more on auto loan, less on credit card). Which means if you don't have history in auto loan (or less perfect history), your score can be lower.

My understanding is just the opposite. Dealers make money on financing the car as well (they get a cut from the finance company). Because of this they should be able to give a lower price on the car, because they will make more on the back end.

The idea that you save money by paying cash or with your own financing is a wive's tale. It is usually the opposite. However, you can often get a better interest rate, which makes it worth it to go elsewhere sometimes.

The best bet is to come in the to dealer with a good financing offer and give the dealer an opportunity to beat it.

Re: Approval process at dealership

trumpet-205 — Sat, 17 Mar 2012 00:02:59 GMT

jimbo831 wrote:
trumpet-205 wrote:
Keep in mind by securing a loan from bank/CU instead of dealership, you have more power in negotiating out of door price. Also I would recommend email sales person at dealership to request a quote + online research on invoice price rather than walk into a dealership having little knowledge about the price.The difference in price can be huge.

Also auto loan typically uses auto-enhanced credit score (focus more on auto loan, less on credit card). Which means if you don't have history in auto loan (or less perfect history), your score can be lower.
My understanding is just the opposite. Dealers make money on financing the car as well (they get a cut from the finance company). Because of this they should be able to give a lower price on the car, because they will make more on the back end.

The idea that you save money by paying cash or with your own financing is a wive's tale. It is usually the opposite. However, you can often get a better interest rate, which makes it worth it to go elsewhere sometimes.

The best bet is to come in the to dealer with a good financing offer and give the dealer an opportunity to beat it.

Overall, you are still paying more through loans vs paying it off using cash. You can somewhat minimize it by placing lump sum of money through saving (or investment with risk) during loan, but you are still paying extra. You may think you are getting a better price through dealership loan, but you are not. My dad always paid cash on his auto purchase. Every time dealership tried to offer him low interest APR (~ 1.79%) loan , but always comes up costing more than paying cash when factor in all the interest. With auto loan, you simply have lower principal. Plus with loan, it may be possible in the long run you are paying money that has greater monetary value (deflation).

Not saying auto loan is a bad thing, but most of the time cash is better than loan.

Re: Approval process at dealership

jimbo831 — Sat, 17 Mar 2012 00:06:53 GMT

trumpet-205 wrote:
jimbo831 wrote:
trumpet-205 wrote:
Keep in mind by securing a loan from bank/CU instead of dealership, you have more power in negotiating out of door price. Also I would recommend email sales person at dealership to request a quote + online research on invoice price rather than walk into a dealership having little knowledge about the price.The difference in price can be huge.

Also auto loan typically uses auto-enhanced credit score (focus more on auto loan, less on credit card). Which means if you don't have history in auto loan (or less perfect history), your score can be lower.
My understanding is just the opposite. Dealers make money on financing the car as well (they get a cut from the finance company). Because of this they should be able to give a lower price on the car, because they will make more on the back end.

The idea that you save money by paying cash or with your own financing is a wive's tale. It is usually the opposite. However, you can often get a better interest rate, which makes it worth it to go elsewhere sometimes.

The best bet is to come in the to dealer with a good financing offer and give the dealer an opportunity to beat it.
Overall, you are still paying more through loans vs paying it off using cash. You can somewhat minimize it by placing lump sum of money through saving (or investment with risk) during loan, but you are still paying extra. You may think you are getting a better price through dealership loan, but you are not. My dad always paid cash on his auto purchase. Every time dealership tried to offer him low interest APR (~ 1.79%) loan , but always comes up costing more than paying cash when factor in all the interest. With auto loan, you simply have lower principal. Plus with loan, it may be possible in the long run you are paying money that has greater monetary value (deflation).

Not saying auto loan is a bad thing, but most of the time cash is better than loan.

I completely agree. Paying cash will usually be less over the long run. I was more referring to bringing in outside financing. The dealers will usually offer a lower price if you are using their financing than if you come with your own. Obviously this might be offset by a higher APR and not every dealer will do this.

That said, cash is king. If I could buy a car cash, I probably would. Not right now, because I want the installment loan on my credit. Someday when I have a mortgage though, I would love to outright buy a car.

Re: Approval process at dealership

pipeguy — Sat, 17 Mar 2012 01:23:53 GMT

trumpet-205 wrote:
Overall, you are still paying more through loans vs paying it off using cash. You can somewhat minimize it by placing lump sum of money through saving (or investment with risk) during loan, but you are still paying extra. You may think you are getting a better price through dealership loan, but you are not. My dad always paid cash on his auto purchase. Every time dealership tried to offer him low interest APR (~ 1.79%) loan , but always comes up costing more than paying cash when factor in all the interest. With auto loan, you simply have lower principal. Plus with loan, it may be possible in the long run you are paying money that has greater monetary value (deflation).
Not saying auto loan is a bad thing, but most of the time cash is better than loan.

Of course this is true as far as the total over all price paid (principle + interest), however most people don't have $20,000 to $40,000 sitting around to buy a car, especially if doing so will drain all or most of any cash reserves.

I've always found that showing up at a dealer with a bank loan preapproved is the best way to get the best deal. My last car (used car July 2011) I had a Capital One preapproval in hand and the dealer beat it by .76 percent and the Cap-1 loan was at a good rate. The previous vehicle (new vehicle) was an Acura in August 2006 and I had a preapproval through PenFed which the dealer tried to beat but couldn't. I don't really care if its "Bubba's cheap car loans" out of Jackass Flats, UT that carries my loans, my plan is to get the best (lowest) deal for financing. On this same note, some of the larger CU's offer great financing such as PenFed at 1.99% for 60 months, many times this is a better deal than the 00% financing offered by manufacturer special financing when you give up a rebate (either or, not both).

Example: $2500 rebate - $25,000 loan.

0.00% note for 60 months = $25000 @ 416.67 a month.

1.99% note for 60 months = $ 26,285 @438.08 a month (1,285 interest vs 2500 rebate).

The key here is do the car deal (firm price) first before any financing - treat financing as a completely different deal and work it to your advantage.

Re: Approval process at dealership

jimbo831 — Sat, 17 Mar 2012 00:28:49 GMT

pipeguy wrote:
trumpet-205 wrote:
Overall, you are still paying more through loans vs paying it off using cash. You can somewhat minimize it by placing lump sum of money through saving (or investment with risk) during loan, but you are still paying extra. You may think you are getting a better price through dealership loan, but you are not. My dad always paid cash on his auto purchase. Every time dealership tried to offer him low interest APR (~ 1.79%) loan , but always comes up costing more than paying cash when factor in all the interest. With auto loan, you simply have lower principal. Plus with loan, it may be possible in the long run you are paying money that has greater monetary value (deflation).
Not saying auto loan is a bad thing, but most of the time cash is better than loan.
Of course this is true as far as the total over all price paid (principle + interest), however most people don't have $20,000 to $40,000 sitting around to buy a car, especially if doing so will drain all or most of any cash reserves.

I've always found that showing up at a dealer with a bank loan preapproved is the best way to get the best deal. My last car (used car July 2011) I had a Capital One preapproval in hand and the dealer beat it by .76 percent and the Cap-1 loan was at a good rate. The previous vehicle new vehicle was an Acura in August 2006 and I had a preapproval through PenFed which the dealer tried to beat but couldn't. I don't really care if its "Bubba's cheap car loans" out of Jackass Flats, UT that carries my loans, by plan is to get the best (lowest) deal for financing. On this same note, some of the larger CU's offer great financing such as PenFed at 1.99% for 60 months, many times this is a better deal than the 00% financing offered by manufacturer special financing when you give up a rebate (either or, not both).

Example: $2500 rebate - $25,000 loan.

0.00% note for 60 months = $25000 @ 416.67 a month.
1.99% note for 60 months = $ 26,285 @438.08 a month (1,285 interest vs 2500 rebate).
The key here is do the car deal (firm price) first before any financing - treat financing as a completely different deal and work it to your advantage.

Great points all around. I know the PSECU website has a calculator to figure out if taking the rebate and their 2.49% might be better than a 0% promo rate.

Personally, I may even consider taking a slightly higher rate with my credit union in the future if given a choice. They offerred me a great right with average credit and a credit card. Since credit unions emphasize a more personal relationship, I would definitely consider treating them the same and staying loyal for a slightly higher rate. I also hope to consider them in the future for a mortgage as well.

Re: Approval process at dealership

babbles — Sat, 17 Mar 2012 13:39:22 GMT

Yep, just like I figured NFCU came back with a rate of 4.49% this morning. Just thought I try anyway. Although my credit history and scores are great, my DTI is high to qualify for the low end of the best rates. Darn! They use everything against you it seems; If your scores are high and history good (which is what they want) then we can still use DTI against you! :) Well, I have rental homes on me, so I am going to be high!! My auto history indicates that not only do I buy new vehicles very frequently but my payment history is outstanding and especially with NFCU!! What the heck do they want??