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Does this sound too good to be true??

deesown
Valued Member

Does this sound too good to be true??

our credit score is 655 and we went into  a toyota dealership yesterday and was quoted a prices for a 2009 Toyota Corrola S 4/ automatic with sports package. The invoice price was 17,560 and the MSVP WAS 19,450.
 
We negotiated a price of 18,000. Then they checked our credit and he told us we barly made it for their special promotional rates. He said they could offer us a promotional interest rate of either 0% for 3 years 1.9% for 48 months or 2.9% for 60 months.
 
We told him we where interested with the 2.9% and putting 5,000.00 as a down payment.
 
 He then said that our monthly payments would be 266.58   Total cost of the car with fees included would be 18,000.00.
 
My question is I thought with our credit score of 655 there was no way we would ever get that low of an interest rate being you needed steller credit to get it.  Im wondering if this deal is too good to be true or if we are getting hijacked in another department.
Message 1 of 8
7 REPLIES 7
CreditMizer
New Contributor

Re: Does this sound too good to be true??

Padded numbers.  Best game for a salesman. I made more money on splitting (charge higher APR and sell to bank for lower APR) and padding then I did on the actual car.  My pennance is explaining how it works.
 
You said total prices is $18K even (thats everything right, tax title, tags, processing fee).  The "out the door price".  If you were paying cash you could hand of $18K and walk away.
 
You said you put $5K down so thats $13K financed.
 
$13K financed @ 2.9% for 60 months = $233.  You were quoted $266.  It's called packing.  They packed $33 per month into the loan or $1584 over life of the loan.  You aren't paying $18K for car you are paying $19584.  How can they get away with it if the purchase order says $18K on the dot?  They get you to buy something else for reallly good deal. 
 
How?  So when you go the finance office and they can sell you rustproofing, undercoating, fabric protector, service contract, extended warranty, gap insurance, etc.  Everything in finance office is ripoff.  Let me say it one more time EVERYTHING in finance office is rip-off. Even if you wanted extended warranty or GAP insurance you could buy it anywhere else for half the price.  You likely can buy GAP insurance from the mob for less of a ripoff than what it is sold at dealerships.  Markup in finance office is usually 100%-300%.  Now most consumers have general idea that finance office bad deal so they use packing to hide it.
 
Here is an example: 
Finance guy explains some service contract for oil changes, tires, discounts etc.  You go "no way" (smart move) then the finance guy goes "what if I can get you a service contract for $299?  Hell new tires alone on this car are $300".  You wife remembers paying $349.86 for tires at Sears last year so your wife goes "Honey it sounds like good deal". You know in your gut it is a bad deal but for $300 it sounds like a good deal.   So you say yes.  Bingo you just bought a service contract for $1584+$300=$1884.  You don't notice it because your monhly payment "only" goes up $5.40 to $271.  Remember you thought your monthly payment was $266 so it going to $271 looks like only $300 was added to the cost. When in actuality it went up from $233 to $271 which is $38 or $1884 added to price.  Dealer laughs all the way to the bank as they pocket $1884 on a service contract worth maybe $500 (more like $200 because they tend to have massive restrictions on anything other than oil changes).  $1300 profit and salesman gets 25%.  Dealership could sell car at loss and still take you to the cleaners.
 
Here is the simple math. 
At 2.9% for 60 months loan should cost you $17.924 per $1000 financed.  For any other numbers use loan calculator at bankrate.com and put in loan amount of $1000.  One you have your price per $1000 you can determne anypayment for any price.  So if you finance $13,000 it would be $17.924 * $13,000 / $1,000 = $233.01.  Any other number and you are getting "packed".   Of course you need to look at the final number.  Total price including EVERYTHING (including trade in and paying off negative equity on old car) minus downpayment. 
Message 2 of 8
1111mel
Valued Contributor

Re: Does this sound too good to be true??

Other people with scores in the mid 600's have been able to get those promotional interest rates.

The only thing is where you state he said the total cost "with fees" would be $18,000. Obviously that is not correct. If you are purchasing the car @ $18K you have to add sales tax, title and doc fees to the cost which would probably put you close to $20K then minus your $5k down payment means you should be financing $15k or so.....
Mortgage Lenders Mid-Score 778 I AM A HOMEOWNER!!!!! 30 Year 5% Fixed Rate, closed on 3/18/09
Message 3 of 8
deesown
Valued Member

Re: Does this sound too good to be true??

No 18,000  is the total AFTER sales tax and all other fees.  This is in California
Message 4 of 8
1111mel
Valued Contributor

Re: Does this sound too good to be true??

$18K out the door financed??? If so you are paying $23K for the car....
 
$18K before your $5K down payment then your financing should be $13K........
 
 
 
 
Mortgage Lenders Mid-Score 778 I AM A HOMEOWNER!!!!! 30 Year 5% Fixed Rate, closed on 3/18/09
Message 5 of 8
CreditMizer
New Contributor

Re: Does this sound too good to be true??



1111mel wrote:
$18K out the door financed??? If so you are paying $23K for the car....
$18K before your $5K down payment then your financing should be $13K........

Either way the math is wrong.  2.9% for 60 months is $17.924 per $1000 financed.
If price is $18K even out the door - $5 down = $13K finances.
 
$13K financed = $233 / mo
$18K financed = $322/ mo
 
Price dealer quoted is $266 / mo = $14,840.44 financed = $19,850.44 total.

Either the dealer is "packing" or the salesman and OP aren't communicating clearly.
deesown:  When you check back with dealer look at the final price on purchase order.  The "bottom line" (after all fees, rebates, trade-in, negative equity, taxes, title, etc).  That is the price you are paying not what salesman says.  Subtract $5K for cash down payment.  That amount if the amount you are financing.
 
Financing will cost you $17.924 per month per $1000 PERIOD.  So take financed price / $1000 * $17.924 and that is what your monthy payments should be.  If they quote you anything else I would say no deal and report them to Toyota Finance Corp.
Message 6 of 8
atlastontheroad
Established Contributor

Re: Does this sound too good to be true??



CreditMizer wrote:
 
Financing will cost you $17.924 per month per $1000 PERIOD.  So take financed price / $1000 * $17.924 and that is what your monthy payments should be.  If they quote you anything else I would say no deal and report them to Toyota Finance Corp.

Call me lazy.  Too lazy to run the numbers, at least.  Off the top of your head, do you know the cost of financing at 4.99% per 1k for 24 or 36 months?
 
I'll answer my own based on calculations, does this sound right?
 
4.99% 2 year $43.87/thousand financed
4.99% 3 year $29.97/thousand financed
 
atlast...


Message Edited by atlastontheroad on 05-06-2008 10:07 PM
Ficos 2/17/08: TU 551 EQ 534 EX 587
Ficos 2/12/09 TU 695 EQ 715 EX 715
Fico...4/15/10....drumroll.....EQ 743
Message 7 of 8
CreditMizer
New Contributor

Re: Does this sound too good to be true??


@atlastontheroad wrote:
... does this sound right?
4.99% 2 year $43.87/thousand financed
4.99% 3 year $29.97/thousand financed




Exactly right.

Message Edited by CreditMizer on 05-06-2008 08:05 PM
Message 8 of 8
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