How best to finance a vehicle

[duccarlos]

I know that quite a few people here work for car dealers. A friend that used to be a sales guy basically told me that with the internet, he doesn't have much room to negotiate, but where the dealer makes up for that is when the buyer sits with the finance manager. That's where the fees are added to the total price, not to mention the extended warranties and any additional item they can add up to it. Of course I want to avoid this painful process by simply declining everything and paying on my own terms. I've been wondering if the best way to accomplish this is to go through a credit union. With check in hand, I can simply state "I have this much money right now and I'm not paying $0.01 more". The trick is to have the balls to walk out. Is financing outside of the dealer a better option?

[derby]

Is financing outside of the dealer a better option?

it depends...

who has the lower rate?

if the dealer is making points on the financing, they may be "more negotiable" on the sales price.

avoiding the after-the-fact fees is really as simple as saying "no".

fwiw, i pretty much know what my sales price is going to be when i walk in the door. i research the "invoice price" and current incentives so i have a good idea what i should pay.

[duccarlos]

I know I have good credit, so I would need to check first with the dealer to see if they offer a better rate. Like anything in life it depends. The older way of thinking about it, it was better to show up cash in hand.

[Grappa]

I don't know if they like cash anymore.  I think that a lot of dealerships seem to just be banks with lots of cars on the lot.   I am looking for a car too, and have visited several dealerships recently and one of the first questions they ask you is what you want your monthly payment to be.  It seems like nobody ever pays for a car in full anymore.  

[Monster Dave]

I know I have good credit, so I would need to check first with the dealer to see if they offer a better rate. Like anything in life it depends. The older way of thinking about it, it was better to show up cash in hand.

+1

The best way to finance is not to finance!!!

Unfortunately that's easier said than done.  

I read recently (thanks in no small part to Cash For Clunkers) that during a comparison of prices for new cars and used cars, that they discovered that the prices for used cars actually increased to the point where it's smarter in most cases to just buy a new one.


...so if you're set on financing, at least finance a new car to get the most for your money.

[Veloce-Fino]

I know I have good credit, so I would need to check first with the dealer to see if they offer a better rate. Like anything in life it depends. The older way of thinking about it, it was better to show up cash in hand.

Go through a credit union. I got 3.75% 5yr for my 696 through Merck Federal Credit Union. FCU's are much more pleasant to deal with and will be able to offer a better deal. If you are a member of a private credit union there is no way dealer financing will offer better rates.

[duccarlos]

That's good to hear. Not only is it the better rate, but also having a check when you walk in makes it easier to be able to deal with the finance guy.

[ducpainter]

Lot's of times the factory will offer x% or xxx cash back.

It's usually a better deal to take the cash incentives than the lowball rate. If you use a cu you can get a good rate and the cash incentives.

[Speedbag]

Lot's of times the factory will offer x% or xxx cash back.

Or sometimes both.

When I bought the new VW this past weekend, I got rebates and 1.9% on the balance owed.

[Buckethead]

Go through a credit union. I got 3.75% 5yr for my 696 through Merck Federal Credit Union. FCU's are much more pleasant to deal with and will be able to offer a better deal. If you are a member of a private credit union there is no way dealer financing will offer better rates.

Again, it depends on who has the best rate.

Credit unions will typically have lower interest rates than banks. There's less profit margin built into your loan through a FCU versus through a bank. Also, as mentioned, having a pre-authorized finance check in hand is a good thing.

HOWEVER...

If your credit is good enough to get you a lower interest rate through the dealer's finance company (and you should be able to tell based on the fine print on their fliers) then that can possibly be the better option. If you go this route, you'll need to watch carefully that they don't try to slide in one of those after-purchase extras that are almost all profit for the dealer.

When negotiating price, you want final purchase price in writing before you sign anything. ANYTHING. Don't start talking about financing until you know HOW MUCH you're financing. If you've got a bank check, once you've settled on a final purchase price for the vehicle, get the details on what it's going to take to get it out the door/on the road. Taxes, tags, etc, etc. Get the list, and the price for each, and a final itemized figure with a bottom line. Have them explain any line item you have questions about/want an answer for. If they try to use smoke and mirrors, feel free to walk away. Go back the next day. Start again. Go to another dealer. Get price quotes on similar cars. Get them to compete.

If you get to a sticking point on something (dealer fee, price, etc.) walk away. Seeing you start to walk away will usually unstick things. If it doesn't, you can always come back tomorrow and try again. You'd be surprised how much the price drops when the sales guy gets tired of seeing you coming because he knows you're going to fight with him for an hour.

Once you have a final, on the road, keys in your hand bottom line (IN WRITING) that you're happy with, feel free to whip out the bank check and write it for the full amount. OR, at that point, you can begin negotiations with the finance department.

[Latinbalar]

Just like you priced out the car/truck you price out the credit union/bank and the dealer. And trust me ask your wife for your balls back to walk away from the deal. And the only power you have over the dealer is to get up and walk away.  When my friend bought his truck his mom paid for it with her credit card (yes she had the limit and had already bought and paid off 3 cars with it).  They said they couldn't but when we got back to the car and started to sit down they ran back and told us yes we could pay with the card.

[Howie]

There is no set rule.  Sometimes they offer low interest or a cash incentive.  Sometimes only low or even 0% interest but no cash incentive.  If you own a home a home equity loan or line of credit may be the way to go since the interest is tax deductible.  You also want to know if there is an acquisition fee, early buy out penalty or required gap insurance.  You should call your insurance company and determine what deductible on comprehensive and collision will be required if you finance.  You also need to know what it will cost you to insure the vehicle. 

Most dealers have software that will compare the true cost of financing, leasing and paying cash.  Paying cash does have a cost since you loosing interest unless you normally save your money under the mattress.  In 2004 we bought two cars.  We could have paid cash.  0% financing was available.  There was no cash incentive.  Guess what we did.

[duccarlos]

If 0% is available, chances are we will go that route. I just dislike the whole dealing with the finance guy thing. I'll do my homework and I won't go in there like an asshole, but I will stick to my out the door price. From what I understand the sales guys no longer have to haggle prices, that's what they pay the finance guy for. I will try to find a place with no commissions so that I don't feel bad if I have to walk out.

[superjohn]

That's good to hear. Not only is it the better rate, but also having a check when you walk in makes it easier to be able to deal with the finance guy.

It does make certain negotiations a lot easier. I did this last year when the dealers were desperate for sales and the process went so much easier.

[mitt]

I am not a credit union member, and have found typically that dealers bank of choice (Harris in Chicago for some reason) always have a 1% lower rate than my bank so I use them.  If you are going to use the dealer, ask how many banks they check with (can ding your credit score if they check your rate with several banks due to the credit check).


mitt