FINANCING 101- In case you didn't know
If you are planning on purchasing a new car, read this,
This applies to "buy here, pay here" loans under 60 months. All major banks that car dealerships use are simple interest loans.
Are you sure about that? . I suggest you read the fine print on any loan contract you sign. Remember, the devil is in the details.
WWFORD - take a look at this, http://loanstreet.com.my/learning- centre/how-banks-fooled-you-with-the-rule-of-78
Buy here, pay here operations should be outlawed, they're oppressive and prey on the most marginalized segment of society. Also, watch for rebates, they're not helping you.
I'm positive. Contracts you sign at a dealership are generic, not sent from the bank. As far as rebates "not helping you" , I would love to hear the reasoning behind that statement.
Years ago I bought a cheap car when I was low on cash and read the contract-- I thought. I saw 4.5% but it was 45%! I took them to court, something I have only done 3 times in my life- sued somebody - but the judge fined the dealer for 'usury' and let me out of the contract. Violated the "Truth in lending" laws. I had to return the car but got all my money back. Now.. Rebates- Mark..I would also like to understand what you mean.
"Buy here Pay here" being outlawed is a bit extreme.. as I told above they do prey upon folks that have little to no down payment... regulated sure but not allowing a dealer to carry their own contracts at all is preventing these same folks from buying a car. I am not a "Big Government -we will look out for you because you can't do it yourself" opinion, and I will not get in to politics here either
WWFORD do you get a um, I hesitate to use the word- but for lack of a better word- kickback- but legal- from a bank when you refer a buyer to them?
Some unscrupulous dealers will bury the rebate into the sales price of the car and/or charge you a less than favorable auto loan in order to hand over a cash rebate to you. While you think you're getting the best deal, you're merely financing the amount of money they just handed you. The best deal is to get the lowest possible price on a straight transaction with no trade in, and then get the lowest possible APR, period. Credit unions are great for this and the dealer will then view the deal as a cash transaction, they will get the payoff from your financial institution and you can pay off the loan at your institution. Done. No games, no drama, no sleight of hand with a trade in. Sell your old car privately.
45 percent, really! ! See what I mean, dealerships that do this are probably 'used car dealers '. No new car dealership would ever think of doing business like this, they would ruin their reputation in the community. Be careful, used car dealers are not reliable for their finances, or the reliability of their cars. On the other hand, new car dealerships have a lot at stake, they want you to be happy and referrals are a big part of their business.
Banks have incentives for sending them more deals, yes. They will normally approve loans that they normally would not, maybe buy lunch for the dealership one time, lower their bank fees, but no $ "kickbacks".
As far as "hiding" rebates, you sign a disclosure form that CLEARLY states the rebates you are receiving. There is no hiding them. Every car company shows the active rebates they have going on listed on their websites. Take the MSRP, subtract what you are willing to pay, then subtract the rebates you are eligible for. It's really that simple. As far as the tactic of "throwing the trade in after" yes, you could possibly get a little more for it. But it can also screw up the deal you have. Banks/credit unions will not accept deals that have too much negative equity or are out of book value. So if you throw in a trade at the end that has $6,000 negative equity, they have have to redo all of the bank calls they have already received. Some which will be declined now.
Most people think that the dealerships and the banks are teaming up to get you. That couldn't be more wrong. Unless you have perfect credit, the dealership sometimes has to negotiate more with the bank for approvals and better rates than the customer does with the dealershipeople for a fair price. Kind of off subject, but I figured I would throw it out there.
WWFORD, I have excellent credit and my used car loan was 1.95 percent for 60 months. Dealership couldn't compete with this and was disappointed when they didn't have an opportunity to carry the note. Look, there's a lot of shenanigans out there and you just have to be extra careful in financial transactions and services. I realize everyone does not get a great deal, but, they should get a fair deal and that includes any trade in, if they decide to do that. A friend of mine trades all his cars. Why? He wants to dispose of the car easily, it is definitely easier, no question, and he doesn't have to worry about it passing emissions standards. The dealer takes on that responsibility when you trade, but, does give up some dollars. You pay for that service and ease of transaction. OK, you mentioned above "negative equity ".. I never have ""negative equity ", and here's why, I keep my cars for 150,000 to 200,000 miles and at least 10 to 12 years, sometimes much longer if they are are a good car. You see, the secret is the service you get from a car, not the trade in value. So, I kept my Honda Accord 19 years and sold it for $3,000 and got back a lot of my original investment. Sure, I had to pay along the way for all that service, but, compared to car payments, it's almost always cheaper to just fix the car. Once your car is paid for, it only takes about $1,500 in actual repairs to keep the car going. Notice I said repairs not maintenance, all cars require maintenance like oil changes, brakes and tires. There's no way you're going to spend $5,000 per year on car repairs like you would on monthly car payments. Cars are tools , not long term investments, but, I realize not all people share my view on this and drive cars mostly to reflect their egos.
There are 17 states that DON'T TAX REBATES. http://www.realcartips.com/newcars/428-states-that-dont-tax- incentives.shtml
If you're getting a rebate, and live in another state not on this list, be aware that you're going to liable for the sales tax according to your district. A lot of people overlook this.
You're going to be better off financing a vehicle you can AFFORD, as opposed to leasing a more expensive vehicle and having to purchase it at the end of the term. Many people are too focused on the monthly payment and don't see the forest through the trees. If your only goal is to impress people, go ahead and lease, but, you'll never have any equity in the vehicle you're paying for. I guess it all depends on whether you want to "look good " or "feel good ".
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