topic Re: Wrapping my head around first ever auto loan... in Auto Loans

Wrapping my head around first ever auto loan...

recordaras — Sun, 23 Nov 2014 15:38:11 GMT

After almost four years of sharing a car with my husband it's time for me to finally get my own vehicle. I'm very new to the whole car buying process, having never owned a car previously, and I currently do not have any installment loans on my credit report, just credit cards.

I've spent the last couple of nights reading the threads on this subforum, but still have a couple of questions, namely:

USAA preapproved me for 2.5% APR for 36 months (that's after factoring in the auto pay and certified dealer discounts) - is it worth working with the dealership to see if they can beat that, or is that a decent rate for a first time buyer?
I plan on putting $7K down on a $16K car ($17.2K OTD price) - I could throw a couple more thousand down if I had to, but would that be a good idea?
Is there any general advice that you could give to someone who has never been through this before?
(This might be off topic on this forum, but can't hurt to ask) USAA offers gap insurance for $269 - is that a good price, and do I even need it if my down payment is close to 50%?

Thanks in advance! The whole process is a little terrifying, so I'm attempting to be as prepared as possible.

ETA:

My annual income is 55K before tax, I've been with my current employer for 2.5 years, and my DTI is very low, since I tend to pay off all my cards multiple times a month. No baddies, late payments, or anything like that.

Re: Wrapping my head around first ever auto loan...

Anonymous — Sun, 23 Nov 2014 18:10:09 GMT

@recordaras wrote:
After almost four years of sharing a car with my husband it's time for me to finally get my own vehicle. I'm very new to the whole car buying process, having never owned a car previously, and I currently do not have any installment loans on my credit report, just credit cards.
I've spent the last couple of nights reading the threads on this subforum, but still have a couple of questions, namely:

USAA preapproved me for 2.5% APR for 36 months (that's after factoring in the auto pay and certified dealer discounts) - is it worth working with the dealership to see if they can beat that, or is that a decent rate for a first time buyer?
I plan on putting $7K down on a $16K car ($17.2K OTD price) - I could throw a couple more thousand down if I had to, but would that be a good idea?
Is there any general advice that you could give to someone who has never been through this before?
(This might be off topic on this forum, but can't hurt to ask) USAA offers gap insurance for $269 - is that a good price, and do I even need it if my down payment is close to 50%?
Thanks in advance! The whole process is a little terrifying, so I'm attempting to be as prepared as possible.

ETA:
My annual income is 55K before tax, I've been with my current employer for 2.5 years, and my DTI is very low, since I tend to pay off all my cards multiple times a month. No baddies, late payments, or anything like that.

Some answers

1. Yes that's a good rate but that doesn't mean that you shouldn't ask the dealer if they can beat it. If not, you've the done right thing and already secured your own financing.

2. As long as the payments with the $7K down are affordable I'd recommend that you not put anymore money down. That's more than enough down on a $16K car.

3. Sounds like you're already doing the right things. If you've already picked out the vehicle you want just make sure you're getting a good price and go for it. Sometimes people make buying a car more stressful and difficult than it needs to be.

4. Don't buy the gap insurance.

Good luck and enjoy your car!

Re: Wrapping my head around first ever auto loan...

recordaras — Mon, 24 Nov 2014 18:24:29 GMT

Thank you for all the great advice! We already have a very decent offer ($600 under TrueCar), and now I'm in the stage of getting dealerships to beat each other's pricing.

By the way, today I received an email from USAA that said to give them a call from the dealership if we are offered a lower rate than the 2.5% that they have approved me for. Hopefully we'll be able to get something out of that as well!

Re: Wrapping my head around first ever auto loan...

Anonymous — Mon, 24 Nov 2014 19:20:51 GMT

@recordaras wrote:
Thank you for all the great advice! We already have a very decent offer ($600 under TrueCar), and now I'm in the stage of getting dealerships to beat each other's pricing.

By the way, today I received an email from USAA that said to give them a call from the dealership if we are offered a lower rate than the 2.5% that they have approved me for. Hopefully we'll be able to get something out of that as well!

Great to hear. My auto loan is thru USAA as is all my insurance. They are a great company.. Enjoy you new vehicle!

Re: Wrapping my head around first ever auto loan...

recordaras — Sun, 15 Feb 2015 12:30:47 GMT

Just wanted to thank everyone for the help and advice - the car buying process ended up taking much longer than I expected, but after two months of being "in transit", it's finally here!

We got a very good price ($15900 for an LX CVT), and went with USAA financing who initially approved me for 2.99% (before the auto payment and car buying discounts), but after a call lowered that to 2.72% (also before discounts, so it's actually 2.22%). The dealership was offering 1.99%, but the finance guy was unfortunately beyond sketchy (offering to sign a blank form, pulling my credit several times on delivery two months after the initial pulls even though specifically asked not to etc.) and we didn't want anything to do with him.

Re: Wrapping my head around first ever auto loan...

gdale6 — Sun, 15 Feb 2015 19:02:24 GMT

Grats on your new ride

Re: Wrapping my head around first ever auto loan...

Anonymous — Mon, 16 Feb 2015 08:37:19 GMT

If you are putting down 7k you don't need GAP insurance because there will be no gap between the fair market value and the amount you owe. Dealers and finance companied sell GAP insurance to folks that don't need it all the time, it is pure profit for them. I have a buddy who put 15k down on a truck and they sold him GAP, when I explained this issue to him he got his money back by cancelling the plan. If you don't put much down or get a car that has a history of big time depreciation than it makes sense but used cars have already taken that big hit.

Re: Wrapping my head around first ever auto loan...

dabrian — Tue, 17 Feb 2015 08:29:14 GMT

Congrats! !

Re: Wrapping my head around first ever auto loan...

SamsungHDTV — Thu, 19 Feb 2015 16:30:57 GMT

@recordaras wrote:
After almost four years of sharing a car with my husband it's time for me to finally get my own vehicle. I'm very new to the whole car buying process, having never owned a car previously, and I currently do not have any installment loans on my credit report, just credit cards.
I've spent the last couple of nights reading the threads on this subforum, but still have a couple of questions, namely:

USAA preapproved me for 2.5% APR for 36 months (that's after factoring in the auto pay and certified dealer discounts) - is it worth working with the dealership to see if they can beat that, or is that a decent rate for a first time buyer?
I plan on putting $7K down on a $16K car ($17.2K OTD price) - I could throw a couple more thousand down if I had to, but would that be a good idea?
Is there any general advice that you could give to someone who has never been through this before?
(This might be off topic on this forum, but can't hurt to ask) USAA offers gap insurance for $269 - is that a good price, and do I even need it if my down payment is close to 50%?
Thanks in advance! The whole process is a little terrifying, so I'm attempting to be as prepared as possible.

ETA:
My annual income is 55K before tax, I've been with my current employer for 2.5 years, and my DTI is very low, since I tend to pay off all my cards multiple times a month. No baddies, late payments, or anything like that.

First of all congrats on your new ride! Good job on doing your due diligence, you did amazing for a first time car buyer. Awesome rate 2.22%! I ran the numbers to your offer from the dealership, not much difference. To give you a comparison on how much money you were going to save if you took the 1.99% at $9000 loan amount after down payment, you would have saved a little over $30 if you took the full 36 months to pay it off. The monthly payment would have been < $1 difference.

As the other poster mentioned, you don't need GAP insurance. GAP insurance pays the difference on an upside down loan amount to what the car is worth if the car is totaled.

Example 1:

*Car ABC value = $10,000

*Car ABC Loan amount = $12,000 (upside down loan by $2000)

*Car ABC gets totaled, auto insurance pays you $10,000 (car value), and GAP pays the remaining which in this case is $2000.

Example 2:

*Your Car value = $16,000

*Your loan amount = $9,000

*Your car gets totaled, auto insurance pays you $16,000 (car value), and GAP would pay you nothing because there is no "gap" inbetween the loan amount.

Just wanted to show an illustration, in case others were wondering about whether you needed GAP. So when should you get GAP? If your interest rate is really HIGH, and you didn't put any down payment. Your loan will almost always go upside down.

Re: Wrapping my head around first ever auto loan...

recordaras — Thu, 19 Feb 2015 23:26:12 GMT

Thank you all! And especially for spelling everything like that, SamsungHDTV - that's super helpful, and I'm sure not only I but others as well will benefit from your detailed explanation.

Overall incredibly excited to be a car owner!