topic Re: How to use my leverage in Auto Loans

How to use my leverage

Anonymous — Wed, 02 Feb 2011 14:48:23 GMT

Hi all...first timer on the page. We are looking to buy new, and finance 25000 loan on a new Ford or Honda. Looking to spend roughly $30000 on car with 5000 down. Fico is 798, carry no balance on cards, in home for 15 yrs and combined income is 100,000+ per year. Not worried about getting approved but how to negotiate the rate. If they come at us with a 5.99 rate when they are offering .9 to "well qualified buyers"...how do I get to that?

Thanks

Re: How to use my leverage

Anonymous — Wed, 02 Feb 2011 17:26:24 GMT

@Anonymous wrote:
Hi all...first timer on the page. We are looking to buy new, and finance 25000 loan on a new Ford or Honda. Looking to spend roughly $30000 on car with 5000 down. Fico is 798, carry no balance on cards, in home for 15 yrs and combined income is 100,000+ per year. Not worried about getting approved but how to negotiate the rate. If they come at us with a 5.99 rate when they are offering .9 to "well qualified buyers"...how do I get to that?
Thanks

There will probably be not much of a rate to negotiate.

1- a "well qualified buyer" is a subvented rate. That is, in lieu of some or all of your rebates you get a discounted interest rate on the loan through the manufacturer financing arm.

That is not debateable- and usually if the ad does not specify the term of the qualified buyer rate in big letters, it is for a 36 month loan

And also, like a rebate/incentive, the qualified buyer rate is model and term specific. Longer the term the higher the rate. if the vehicle you want does not have a rate offered you are not getting it.

There are really no rates below 2.49%-2.99% that are occurring naturally in the wild of banks/credit unions. Rates lower simply do not pay the costs of the transaction.

2- In lieu of a subvented rate you get whatever normal bank financing rates through the banks they use are. I have no idea what those rate are, but you will probably see a rate that starts with a 2 or 3.

If you want to negotiate: bring your own best financing- that is get a preapproval or blank check financing from your financial institutions and see if the dealer can beat it.

There is no "getting to" the .9% rate unless it is an offered incentive on a model you are looking at for the term you are looking to finance.

DO UNDERSTAND SOMETHING:

Subvented interest rates may not be the best way to go, especially if you are putting down a substantial downpayment. You usually give up some if not all rebates to get the interest rate.

A 30,000 loan where you are putting down $5,000 and getting rebates of $5,000 and you are only financing for 36 months, may be a better deal total cost wise then a $5,000 down with taking .9% rate at 36 months.

Also, you stated you are looking to buy new and finance a $25,000 car loan and spend $30,000 on the car. remember to include taxes, title and fees (as well as rebates) into your expectations.

Re: How to use my leverage

Anonymous — Wed, 02 Feb 2011 17:37:21 GMT

Thank you for the great answer. I know we were frustrated on our last purchase (10 yrs ago) with the fact that Amer.Honda Finance offered us 5% on an Accord and 9% on an Odyssey. This time around I want to be better prepared to deal with those situations and your answers helps me understand that. Thanks again!

Re: How to use my leverage

Anonymous — Wed, 02 Feb 2011 21:13:57 GMT

@Anonymous wrote:
Thank you for the great answer. I know we were frustrated on our last purchase (10 yrs ago) with the fact that Amer.Honda Finance offered us 5% on an Accord and 9% on an Odyssey. This time around I want to be better prepared to deal with those situations and your answers helps me understand that. Thanks again!

Spreads are in my state capped, and at the same time also limited by the financial institution. No dealership gets to buy a rate at .9 and take 9% on it.

5% is a reasonable rate. When the credit meltdown happened a lot of people got that rate.

I have no idea what your scores/data looked like when you got your other cars, but there is that chance that maybe those are the rates you qualified for.

As always the easiest solution to interest rate concerns is to bring your own financing.

ETA:

And since you have not given supplemantary information on your last 2 cars-

Rate is determined by many things:

New car rates vs. used car.

One bank may simply be offering 4.9% as their best rate.

Rates are also set by risk: The longer your term, the higher the amount financed, and the spread of the LTV can also cause a rate to be artificially high.

There are people that got approved before the meltdown that simply, unless they cleaned their credit up would not qualify for a loan right now, all other things being equal.

Re: How to use my leverage

marty56 — Fri, 04 Feb 2011 18:41:52 GMT

Check a local CU. Many will offer you 60 days to make a purchase and in the long run you may save money by getting the car cheaper and or better options.