!
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.
Starting Score: FICO: 587 EX, 594 EQ, 632 TU, 2/15/12; USAA FAKO: 525 EX, 541 EQ, 525 TU, 2/15/12
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.
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.
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??
myFICO is the consumer division of FICO. Since its introduction 20 years ago, the FICO® Score has become a global standard for measuring credit risk in the banking, mortgage, credit card, auto and retail industries. 90 of the top 100 largest U.S. financial institutions use the FICO Score to make consumer credit decisions.
>> About myFICO
