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Upside Down Car Loan?

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Valued Contributor

Re: Upside Down Car Loan?


@RobertJ wrote:

... My thing was, why would I put any money down when I am getting free credit?  


There's no such thing as free credit from a car dealer. 

 

0% interest deals are offered in lieu of lower sales price. When a customer walks onto the lot the dealer sees four potential avenues of earning off that customer: sale of vehicle; financing of vehicle; trade-in; insurance sale.

 

It is naive to assume the dealer is willing to lose one profit opportunity without compensating for its loss in another.

Starting Score: (5/24/2018) -- FICO 08 EXP: 643; FICO 08 TU: 642; FICO 08 EQ: 677
Current Score (6/24/2019): FICO 08 EXP: 726; TU: 744; EQ: 700
2019 Goal Score: 800 across the board


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Message 11 of 14
Frequent Contributor

Re: Upside Down Car Loan?


@James_A wrote:

@RobertJ wrote:

... My thing was, why would I put any money down when I am getting free credit?  


There's no such thing as free credit from a car dealer. 

 

0% interest deals are offered in lieu of lower sales price. When a customer walks onto the lot the dealer sees four potential avenues of earning off that customer: sale of vehicle; financing of vehicle; trade-in; insurance sale.

 

It is naive to assume the dealer is willing to lose one profit opportunity without compensating for its loss in another.


Ford Credit offered the 0% which has nothing to do with the dealership's bottom line.  Please don't call me naive, as that's very rude.  Trust me, I got as good of a deal as possible on my Focus.  You don't know any of the particulars and aren't at all knowledgable on my car buying experience.  There was no trade in, and I saved $5k off the $26k MSRP.  I also negotiated my GAP down to the lowest they would take.  

 

This is the last I'll say on the subject.  The OP was asking how it's possible, and I laid it out.  We're going off the tracks now.  




Message 12 of 14
New Contributor

Re: Upside Down Car Loan?

1) Buy a desirable model- there are several models out there where a used vehicle is the same price as a new vehicle. 

2) Buy at a good time of year. My spouse bought a new Mustang GT for less than KBB and he's got a good $5000 in equity without paying any extra. 

3) Plan to drive your vehicle long enough where you aren't rolling your old loan into your new loan. 

4) Don't do Trade-ins. You lose price transparency and almost always could have sold your old car for more and gotten a better deal on a new one without the trade. 

 

I'm about $2000 underwater on my car because I had a trade-in that still had a loan balance. I also put nothing down on it which didn't help either. Unfortunately though, my old car was suddenly not drivable and had to be replaced in a panic. Obviously, buying a new car is more worthwhile if you drive it long enough to get a few years without a payment to save your next down payment. 

 

Starting Score: EQ 595, TU 538, EX 577
Current Score: EQ 642, TU 604, EX 641
Goal Score: 700


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Chapter 7 discharged 2/20/19
Message 13 of 14
New Member

Re: Upside Down Car Loan?

Get your loan outside the dealership. Dealers markup your loan and ancillary products by an average of $1800 - that's more profit than they make on selling the car. You can also spend the time you need to consider your options without the F&I manager pressuring you so you know you can actually afford the loan.

Message 14 of 14
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