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New Cars and Financing
Dalboz
Resident Puppy EaterRight behind you...Registered User regular
Resident Puppy EaterRight behind you...Registered User regular
This is slightly embarrassing to admit that I don't this at 30 years old, but I'm not sure what all is involved with purchasing a new car. Long story short, I was rear ended a few days ago and my car was totaled. Aside from some slight back-tweaking and a stiff shoulder, I'm okay. The other driver was insured, so my car is being covered by their insurance. My car was 15-years old, so I won't get much for it.
However, now I need to get a new ride. I don't know how to deal with the down payment, financing, etc., or the process. I'm in California, which I know has some unique registration laws. I purchased my old car for straight cash from my parents, so I didn't have deal with it before.
I think my credit should be okay. I'm carrying a fair credit card balance due to a slight financial issue earlier combined with some bad financial decisions on my part, but I've also never missed a payment on those or any of my other bills or rent. However, I am only working part time right now as I've been going back to school for my Master's degree. As a part timer, I still make about $40K per year. I don't know what else will make a difference (no, you can't have my SS number to check for me). I don't know if these will be significant strikes against me, but will these be potential credit issues and cause a problem with financing, or just require a larger down payment or higher interest rate?
However, now I need to get a new ride. I don't know how to deal with the down payment, financing, etc., or the process. I'm in California, which I know has some unique registration laws. I purchased my old car for straight cash from my parents, so I didn't have deal with it before.
I think my credit should be okay. I'm carrying a fair credit card balance due to a slight financial issue earlier combined with some bad financial decisions on my part, but I've also never missed a payment on those or any of my other bills or rent. However, I am only working part time right now as I've been going back to school for my Master's degree. As a part timer, I still make about $40K per year. I don't know what else will make a difference (no, you can't have my SS number to check for me). I don't know if these will be significant strikes against me, but will these be potential credit issues and cause a problem with financing, or just require a larger down payment or higher interest rate?
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I'll specify that I'm in the Los Angeles area where public transportation is not a viable option.
On topic, if you're a member of a credit union, talk to them about a car loan. See how much you can get and decide how much you can afford to pay per month. Do this before you ever set foot on a car lot.
You may want to talk to your bank about a car loan if you don't belong to a credit union. Even if you do, ask anyway. The bank may offer a better interest rate. In general, expect to pay 17 dollars a month for every 1000 you finance (rough estimate).
Once you know how much you can afford and get a pre-approval on your loan, go looking. Like many others, I'd advise looking at used cars from a reputable dealer. New cars depreciate in value way too fast.
Down payments, I'm not sure exactly how much you'll be required to pay upfront. However, the more you pay up front, the less you pay later and the less interest you have to pay out.
Cool 8-)
Just a couple of general car-buying tips here:
-Finance at the BANK, not the dealership. It's easier, you get better rates, and have to spend less time at the dealership.
-Do lots of research on what kind of car you want and what kind of prices to expect.
-Don't get screwed over.
I know this isn't really exactly the info you're looking for, but it can't help to throw it out there.
*EDIT* It seems see317 beat me to it. And yes, buying a new car usually ISN'T a great idea unless you get an unbelievable deal or are rich.
Um.. there are unique registration laws in CA? The dealership did all of that stuff for me (for free), and as far as I know there wasn't anything horrendous (if you buy a used car you might need to do the smog testing, but for new cars it's waived for 2 years)
As for credit report - you can check yours yourself if you want, you get one viewing free from each of the three companies per year (though you might have to pay ~$10 to view the actual score)... obviously, the lower your score is the higher the interest rate will be, and it will decrease correspondingly with the more money you pay there, but the specifics will depend on how your credit actually is (and how good a deal the dealership is trying to make for you)
So does carrying a balance on the credit card affect the score much, or is it more based on the credit history? Like I said, while I have a fair balance, I've never missed a payment, so there should be no late payments on my history.
Does the credit score affect how much I can actually get for the loan, or will it only affect the interest rate?
Also, will having a cosigner with impeccable credit help, and to what extent?
Not a clue with the co-signer information though. Can't see how it would hurt though.
I would recomend going to the bank first to get pre-approval shop around for a car and see what the dealers offer also, many will be shit but you may find a decent deal.
Also try and pay it off quickly, I just got pre-approval and paying the minimum amount and taking 7 years would mean I would pay 14 grand interest, by paying it off in two and a half I'd only pay 4k.
Satans..... hints.....
There is no translating. I have seen people specifically say that cars and gas are a waste of money. Which is true in plenty of cases, but not for people who live in areas where public transportation isn't a viable option. That's all.
Remember, public transportation is always viable, just not always in the most legal sense....
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That said, I bought a new car in November. I have (apparently) good credit, and ended up with a 4.9% interest rate for 60 months, which is better than any bank could've given me, going through Volkswagen Credit. It's an incredibly simple process. If a down payment is needed, you pay it. If not, you sign and are usually given the option of paying the tax on the car, which is advisable. Most dealerships will either do the plate transfer (if you want to keep your plate) for you, some even have permanent plates and perform the registration right then if you're not keeping your old plate. Otherwise, you'll get a temporary tag, and receive a notice in the mail within the first month as to where to go and when to get your permanent tag. Other than that, there's not much to it.
If you're buying new, it pays go to go different dealerships that sell the car you want, presuming your city has more than one VW, Chevy etc. dealership in it. Play the salesmen off each other, i.e. "Well salesman X at X dealer said he'd give it to me for $xxx", and see how the one your talking to responds. Remember, lying doesn't work, as they do call each other to check. If you're buying used, know your Blue Book values, since you can't really go from dealer to dealer. The average dealer markup for a used car is 20% over Blue Book value.
Also, the whole "OMG YOUR CAR DEPRECIATES AS SOON AS YOU DRIVE IT OFF THE LOT" school of thought for new cars doesn't always apply. Yes, your car depreciates. Does that matter? Only if you're planning on selling the car as soon as you drive it off the lot. Buy a year old car, you're down a year on the warranty. Buy a 3 year old car, no warranty. Also, when you're buying a used car from a dealer, you're paying more than the car is actually worth, as the dealer is making money off you. Talking down the price on a new car is easy. Talking it down on a used car, not so much.
Who says that? Certainly not the majority of people on this board! Go look at (and actually READ) the last thread of this nature. I don't know where you got the idea from that we were promoting mass transit over cars.
The last car forum we had, there were a lot of people saying you should get a USED car... but you are grossly misrepresenting the opinion of the people on this board. I don't think there was even a single person who suggested mass transportation the last post. And if there was, they were drowned out in the massive amount of voices supporting used cars.
That being said, allow me to support used cars once more! A used car is financially a much more rational option. I made the mistake of buying a new car more than a year ago... now the car is as old as what I could've gotten used anyways, and I'm still paying (and will be for many years) a premium on the cars' price. It's just not worth it to buy a new car.
If your heart is set on it, don't let us stop you. But know that there are solutions that are much more financially viable. Much more.
If you do want a new car (or even if you decide to go used), make sure to try and get the money for your car loan in advance. Don't deal with the dealership on a car loan, because they'll clean you out. Also, don't let them trick you into thinking that they have to charge you more than the MSRP (Manufacturer's Suggested Retail Price) of the car for ANY reason. A dealership telling you that they "Have to" charge you more is lying to you, plain and simple. A dealership that tells you that they're "going to" whether they have to or not also doesn't deserve your business.
Find a dealership that's honest enough to at least give you the MSRP for the car. You'll be glad you did. You *can* theoretically get better than that price-wise, but that involves extreme haggling skills that not many people (myself included) posess.
Also, don't buy their "factory installed extras". They're always much more expensive than getting them installed seperately. Why pay 250 bucks for floor mats when you can buy much better ones for 50 bucks? Don't let them pull the wool over your eyes on extras.
Damn, that's impressive. Was it a limited time deal on the interest (like a special sale?)
It matters because you can save a significant amount if you buy the prior years' model (or earlier). You are, in effect, paying a substantial premium just to have the car a year newer than you would have otherwise.
If you get it from a factory authorized reseller, you will often get a very similar warranty plan to what you would've with a new car.
You are paying more than the car is actually worth, but you're doing that regardless of if you're buying a new or used car. Even the MSRP is a substantial price more than what the dealership had to pay for it. The dealer is going to make money off of you whether he's selling you a new car or a used car. If you know the blue book value of the car you're going to purchase, however, you'll be able to find someone who'll give you as close to the actual value as possible. But no one should pretend that they're going to get ANY car (used or new) at dealer cost.
My particular taste is in your average 4-door sedan. I'm not looking for anything fancy, and I know what I'm looking for in the car. I'm looking at new 2007 model year cars since I know that dealerships still have them and at this point they're getting pretty desperate to get rid of them, so I may be able to get good price on it.
I'm mostly concerned with the financing right now, especially since I doubt that I'll get the insurance payment soon.
The thing is though, the intial depreciation is huge compared to the standard year by year depreciation.
It may be substantially different in America but I know from personal experience that dealers buy the cars for well under the market value (people sell to dealers just due to the convience of selling them, it's very hassle free) and have the sell price a bit over the market there is still a bit of wiggle room to work your way down. Then there is the option of pricate sales but those have their own hassles.
Satans..... hints.....
Aye, I think you're on the right track with that. Last years' models should garner you a significant savings. Definitely shop around online. I found this somewhat useful in the past:
About Car Financing
It gives some great intro information, as well as things to be careful of.
One thing in particular you'll want to look out for: don't let them con you into insurance packages (like GAP insurance). GAP insurance basically pays the difference between what's left of your loan and what your insurance company gives you if you get in an accident that totals your car. The odds of you needing GAP before you pay down enough of your car that GAP won't pay anything anymore is relatively low, which means that you'll just be giving them a free check.
Now granted, if you find yourself getting in frequent accidents for some reason, it might not be terrible to consider... but hopefully, getting in accidents that total your car is an exception to the rule for you rather than a common occurence. Drive carefully and defensively, and unless someone's being a total maniac you won't need gap.
In addition, check out bankrate.com, eloans.com, capital one auto finance and others to get some online rates for auto loans. Once you know the interest rate they'll give you, you can barter with the dealership. Feel free to let them know what you found: if they can't (or won't) give you better, use the best offer you find.
I hear that some brick and mortar banks have decent rates too, though I did my looking online. In particular, a friend of mine said he got a good rate at a Golden One credit union in his area... I don't know the details though. But look around for a good loan rate before you go to buy, otherwise the dealership will have the upper hand on you.
Remember, major brand financing companies have a larger incentive to loan you money than banks do. The bank is just in it for the interest payments, but the manufacturer-owned financing company may be able to offer a sweeter deal than the banks because it helps further the car company's core business, which is selling cars. I imagine you have to catch them at the right time in order to find such a sweet deal, but it pays to check. In my case, it was a promotion that they were offering at the end of '02 in order to help make room for next year's models.
No late payments is a good thing, but you also want to reduce the ratio of credit balance to credit available. Get it under 50%, if it's already under 50% get it under 30%; if it's under that, pay off the balance. Don't take out any new credit cards. Keep up to date on your other obligations (utilities, phone bill, cable, school loans, etc.).
You should be able to get the rate that your co-signer would. The co-signer is there as someone to be responsible for your payments should you stop making them. So if you can only get 12% and your friend can get 4%, then if your friend co-signs the note you should be able to negotuiate for 4%.
When I bought a new car in '03, that's exactly what I did. I picked up a new Kia Rio for < $13,000. The 5 year 60,000 mile bumper to bumper warranty just expired, and the 10 year 100,000 mile powertrain still has 5 years left. Now, you can't get a used car warranty that good.
I checked and they're still offering the 5/10 warranty. And, the Rio starts at $12,000. It's a fine car. I had a few more problems than I would expect from a brand new car, but the warranty means I don't really care. If you were looking to spend in that area, I would think about a Kia. Of course, if you're looking to go cheaper than that, there's not much you can do but go used.
As far as the financing goes, what people have said above is all good advise. Although, if you go with a no down payment plan, you may want to look into the GAP insurance (especially if you go with a new car), but only after you run the numbers.
now is the time of year to buy. the dealers need to get the 07s off the lot, and not alot of people are wandering their lots in the snow looking at cars.
more and more dealers don't make any money on the cars. they make money on the back end, in the service department. they will sell you cars at invoice, or below, or give you interest rates that are practically free(ish), just to get that car on the road needing service ever 3k miles. so bank or credit union if you are buying used, dealership for new.
Satans..... hints.....
Every time I was able to get a better interest rate from the dealership than from a bank or credit union. In two cases, the difference was only one point. In one case (a 2001 VW Bug purchased in 2005), I was able to get a 1.9% APR promotional interest rate for the life of the loan.
Get the rate quotes from banks and credit unions (protip: credit unions will usually give you better rates) but also talk to the dealership about what they can do.
Also, keep in mind that if you plan on negotiating the interest rate, you should go during bank hours. This means between 9am-2pm PST (or 12pm-5pm EST). The bank that the dealership uses for financing may be in a different state, and typically they only have loan officers available to talk rates during business hours. If you go after hours, you're often stuck with whatever interest rate the computer spits out for your credit score.
the "no true scotch man" fallacy.
Aye, if you can get an interest rate that low, that's MONEY. I'm pretty sure that I dream about loans like that, and wake up crying when I realize that my loans don't approach such grace.
Still make sure to get it at MSRP... but if you can get a loan that low (even 0%), you'd be rollin'.