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Dustink
Valued Contributor

Re: Help. Problems with Negative Equity in Mercedes LEASE


@lionsfan20 wrote:

 It is so rare and so uncommon for the average person to go into a dealership and put down a huge downpayment unless their scores or income suck , and looking at the scores in your sig , I get why you keep giving that advice. It is so uncommon and in my opinion* financially stupid to ever put more than 5000 down for a car and essentially just give away money.If the car breaks down a month later , yes there are laws that protect you but wouldnt you rather have that 10000 downpayment sitting in your bank account then paying the lousy* 100 dollars you might save a month to keep it.

 

Yes , putting alot down means something to a bank because it's less they have to risk financing* but in reality , good score history of either auto or revolving loans and a decent income eliminates the need to do that. Only people who should consider your advice or those who have terrible credit and have shown an inability to pay their debt.

 

 


 

I would say 20% would be advisable for anyone. If no money is put down, then they become underwater with the loan. 20% is not huge, but yes it is generally over $5k. Sometimes, $5k will only cover TT&L.

 

For my auto loan, I used $8k in trade equity to cover 20% plus TT&L. I was given 0% for 36 months. Although, I came in with a  pre-approved of 120% LTV at 1.9% for 60 months.

 

You sound like a mortgage broker from 2006. Just because something is rare, doesn't mean it is a bad practice. The idea isn't to take your emergency fund and dump it on a vehicle. Instead the idea is to use money you have set aside for a down payment.

 

Many people make irrational and spontaneous car purchases, when really they should be making a decision that has been planned out. A plan that includes a down payment.

 

 

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Message 11 of 20
webhopper
Moderator Emeritus

Re: Help. Problems with Negative Equity in Mercedes LEASE

I also put down money although I went into the dealership with a 120% LTV blank check at 1.79% for 60 months in my hand.

I put down 3800 for the car and paid TTL out of pocket at the tag agency here in OK. DustinKs advice will keep you on solid financial footing with respect to autos... If a forum member determines that the advice doesn't fit their needs, then they are free to make the choices they feel are necessary.

Not everyone is conservative in their finances, however, as long as all discussions remain friendly, respectful, and supportive, then disagreeing parties can agree to disagree respectfully.

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Message 12 of 20
Dustink
Valued Contributor

Re: Help. Problems with Negative Equity in Mercedes LEASE

A problem that people come looking to this board to resolve is negative equity. 

 

It becomes a cycle, not putting money down on a loan. Then trading it in with a bit of negative equity. Then trading that one in with even more negative equity ect. ect. 

 

The cycle doesn't ever need to start. A down payment can fix all of that.

 

Once the cycle has set in. Most people have to carry out a vehicle loan or lease to term. A loan or lease with an unfavorably high payment on a vehicle they do not love. Sorry to OP that this is your case. At least the C250 isn't bad. You get good fuel mileage and a comfy car for its class Smiley Happy

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Message 13 of 20
Dustink
Valued Contributor

Re: Help. Problems with Negative Equity in Mercedes LEASE

There are some situations were a lower down payment might make sense. For example a 0% loan. You can obviously earn more interest on that money in savings. Just keep in mind that you might have to use those savings to cover negative equity if you want to get out of the vehicle before the end of the term.

Too many INQs & low AAoA so I'm off to tend the Garden.     Age:23    


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Message 14 of 20
lookitsma
Member

Re: Help. Problems with Negative Equity in Mercedes LEASE

I don't know how anyone can say its not advisable to put a decent down payment on a vehicle. A vehicle isn't the same as a credit card balance. You're talking about $20k-$30k in auto loans if you're not putting anything down. The interest on that sort of amount isn't something to neglect.

No one is saying use your rainy day fund to purchase the car either. You have to just be smart about it and make common sense decisions without over-extending yourself.

I'm in the market to buy a new vehicle myself. No way am I going to finance the whole car.

If you're worried about purchasing and having it break down, you're ridiculous. There are lemon laws and warranties on new vehicles.
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Message 15 of 20
lionsfan20
Regular Contributor

Re: Help. Problems with Negative Equity in Mercedes LEASE

So maybe that is where the misunderstanding is. Either Im misunderstanding you or I'm disagreeing. The part Im not sure is when you say huge. The guy above said 3800 downpayment in which the post was pointless based off of my rant. When you say huge , Im thinking like 8-10k or more. If you mean to say around 5k when you say huge than thats fine , but anything around 10k is where I think is bad advice ,not because it wouldnt help approval chances but simply because it's not smart financing with your money. There are better ways to invest than that. So with that , I would like to know what you mean when you say huge?

 

But I also want to say that if you look at every post youve every posted with auto threads , its always the same advice to put a huge downpayment which is why I made the post to begin with. For a select few that may be a good idea , but for most it is just not financially responsible , especially in this economy.

Message 16 of 20
Dustink
Valued Contributor

Re: Help. Problems with Negative Equity in Mercedes LEASE


@lionsfan20 wrote:

So maybe that is where the misunderstanding is. Either Im misunderstanding you or I'm disagreeing. The part Im not sure is when you say huge. The guy above said 3800 downpayment in which the post was pointless based off of my rant. When you say huge , Im thinking like 8-10k or more. If you mean to say around 5k when you say huge than thats fine , but anything around 10k is where I think is bad advice ,not because it wouldnt help approval chances but simply because it's not smart financing with your money. There are better ways to invest than that. So with that , I would like to know what you mean when you say huge?

 

But I also want to say that if you look at every post youve every posted with auto threads , its always the same advice to put a huge downpayment which is why I made the post to begin with. For a select few that may be a good idea , but for most it is just not financially responsible , especially in this economy.


I don't see how it wouldn't be financially responsible to put the money down if you've got it to put down. There are few places to put the money without risk to principle were you can earn a return higher than the rate on the auto loan. Even on a 1.79% loan for 60 month's. $30k vs $20k is an interest savings of $500. Why not save $500?  Yes there is a chance that you could have earned more than $500 with investments, but there is also a chance that you could have lost money. The down payment should not be effecting your normal investments anyways.

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Message 17 of 20
lionsfan20
Regular Contributor

Re: Help. Problems with Negative Equity in Mercedes LEASE

which was my point to begin with , you have the same advice for literally every single poster . The average person making 40-50k a year who wants to buy a car isnt gonna put 1/5th of there income down for the entire year on a car. And last I checked , 99% of people you are trying to help are not giving income so there is no way whether to know if your advise is good or not. So that gets me back to my main point , give advise based on each situationm , literally going into every thread and saying save a huge downpayment is just wrong considering the average income in america and the effect a downpayment like that will have on their lives.

 

Also , I think alot of the people who post here actually take advice literally and if they see people telling that the best way to get a car is to get a huge downpayment , they might feel demoralized in that they cant get a car or they might overcompensate and financially risk their future , so it's immoral to do the thing that your doing.

 

Remember , its like 17 dollars for every 1000 you finance so at 10k down versus 0 down , thats an extra 170 a month. Divide 10k by 170 and thats 58 months of paying an extra 170 versus paying 10k straight out. You could lose your job tommorow and all you gotta do is come up with an extra 170 a month , but thats still 10k in your pocket that you can use.

Message 18 of 20
Dustink
Valued Contributor

Re: Help. Problems with Negative Equity in Mercedes LEASE


@lionsfan20 wrote:

which was my point to begin with , you have the same advice for literally every single poster . The average person making 40-50k a year who wants to buy a car isnt gonna put 1/5th of there income down for the entire year on a car. And last I checked , 99% of people you are trying to help are not giving income so there is no way whether to know if your advise is good or not. So that gets me back to my main point , give advise based on each situationm , literally going into every thread and saying save a huge downpayment is just wrong considering the average income in america and the effect a downpayment like that will have on their lives.

 

Also , I think alot of the people who post here actually take advice literally and if they see people telling that the best way to get a car is to get a huge downpayment , they might feel demoralized in that they cant get a car or they might overcompensate and financially risk their future , so it's immoral to do the thing that your doing.

 

Remember , its like 17 dollars for every 1000 you finance so at 10k down versus 0 down , thats an extra 170 a month. Divide 10k by 170 and thats 58 months of paying an extra 170 versus paying 10k straight out. You could lose your job tommorow and all you gotta do is come up with an extra 170 a month , but thats still 10k in your pocket that you can use.


I don't see a problem with telling people to save 20% down plus TT&L, that amount will vary depending on the vehicle. If people have credit problems, over 20% could be helpful in moving them to a higher credit tier. If they can't afford to put 20% down, maybe they should buy a cheaper car. It is not immoral to tell somebody to save and plan for a large purchase. It just means they might have to wait a little while to make that large purchase. If somebody wants to have a nice new car, they should have the finances to support the purchase. If you don't see the benefits to a down payment, then fine. I will keep on giving the advice I am giving, and repeat it as needed. If somebody is looking at getting promo 0% financing, I might offer different advice.  I will leave it at that.

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Message 19 of 20
Dustink
Valued Contributor

Re: Help. Problems with Negative Equity in Mercedes LEASE

I apologize to OP for having this conversation in your thread.

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Message 20 of 20
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