Help - I've never had a car loan - a little guidance?

[Anonymous]

Hi. In my 50s and I'm going to buy a car for the first time with a loan. I've always paid cash for older used cars. I really do t know how this works. Do I get it financed through the dealer? Through a bank? Also, I want to pay it off as quickly as possible so if I pay extra each month is that permissible (like paying extra principal on a mortgage)? Any advice? Good website for me to read up on? Thanks.

[Anonymous]

OP here. And I have an excellent credit score and no debt beyond my mortgage.

[Anonymous]

Get one from a credit union. Tell the dealer you are paying cash. When you get to end see if dealer will match financing.

Shorter the term the better (and usually the better rates, too).

It doesn’t always make sense to pay off early if it’s a low rate (I.e under 2%).

[Anonymous]

Also do not fall into the trap of discussing a monthly payment. That’s how they get you to take 5-,6-, 7- year loans, which are terrible. Another reason to get a credit union loan.

Typically expect to pay about $160/month for each $10k you borrow, assuming 4-year amortization and lowish interest rate.

[Anonymous]

Anonymous wrote:Get one from a credit union. Tell the dealer you are paying cash. When you get to end see if dealer will match financing.

Shorter the term the better (and usually the better rates, too).

It doesn’t always make sense to pay off early if it’s a low rate (I.e under 2%).

Agree. It's a few calls/steps. The reason you want to wait until the end is you don't want them to fiddle with the price of the car to match what you say is your tolerable monthly payment or something like that. I would also say, this is a place where if you are doing this for the first time and someone is willing to go with you have them go with you. It's not that you can't do it alone, it's a strategy to make it not the whole dealership "against" you. Don't chitchat about how this is the first time you have bought a car with the guy who is selling it to you.

Consider one of the places where the price is the price for late model used car (CarMax, CarVana) and then do financing through a credit union.

[Anonymous]

Thank you PP. So tell the dealer that I'm paying cash even if I'm getting a loan from elsewhere (credit union)? Because the dealer will ultimately get cash even though I'll have a loan?

What about shopping at dealers vs. CarMax, Carvana, etc? I'm getting a newer car (and might get new) but don't feel like I must get new.

[Anonymous]

OP again. And let's say I get a 3 year loan but at the end of year one I get a nice bonus at work and want to throw $5000 toward the car, do auto loan typically allow that without penalty and helping save interest?

[Anonymous]

Anonymous wrote:OP again. And let's say I get a 3 year loan but at the end of year one I get a nice bonus at work and want to throw $5000 toward the car, do auto loan typically allow that without penalty and helping save interest?

yes. As a PP upthread noted, you want to weigh the pros and cons based on the interest rate, but you can do this usuallyl

[Anonymous]

Anonymous wrote:Thank you PP. So tell the dealer that I'm paying cash even if I'm getting a loan from elsewhere (credit union)? Because the dealer will ultimately get cash even though I'll have a loan?

What about shopping at dealers vs. CarMax, Carvana, etc? I'm getting a newer car (and might get new) but don't feel like I must get new.

Yes.

Look, dealers sell several things: cars, loans and things like extended warranties -
and undercoating (don’t buy it). The more you can do to negotiate the price of the car only, the better.

From a dealer’s perspective, you are paying cash if you come in with financing arranged elsewhere.

You get to the end and tell them the CU will issue the check, they may try to compete with the financing offer.

This advice is less relevant if you buy from Carmax or Carvana, which will rip you off with fixed prices that are not negotiable.

[Anonymous]

Anonymous wrote:Thank you PP. So tell the dealer that I'm paying cash even if I'm getting a loan from elsewhere (credit union)? Because the dealer will ultimately get cash even though I'll have a loan?

What about shopping at dealers vs. CarMax, Carvana, etc? I'm getting a newer car (and might get new) but don't feel like I must get new.

Use car as, etc only for comparison purposes. They will save you the hassle of negotiating but are a little more expensive. If you have a price from there, it can be your fallback if you try to negotiate a better deal elsewhere.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Thank you PP. So tell the dealer that I'm paying cash even if I'm getting a loan from elsewhere (credit union)? Because the dealer will ultimately get cash even though I'll have a loan?

What about shopping at dealers vs. CarMax, Carvana, etc? I'm getting a newer car (and might get new) but don't feel like I must get new.

Use car as, etc only for comparison purposes. They will save you the hassle of negotiating but are a little more expensive. If you have a price from there, it can be your fallback if you try to negotiate a better deal elsewhere.

Meant to say use *car max* etc….

[Anonymous]

Thanks very much PPs. I'm feeling less unknowledgeable already. Any insight about all the fees and extras I can expect to be presented with after agreeing on a price for the car? So agreed car price is $25,000. Then they tell me $??? for various fees? Does the dealer handle getting the car registered and tagged? I'm sure I sound incredibly unknowledgeable. Sorry

[Anonymous]

Anonymous wrote:OP again. And let's say I get a 3 year loan but at the end of year one I get a nice bonus at work and want to throw $5000 toward the car, do auto loan typically allow that without penalty and helping save interest?

You’ll need to read the contract section about prepayment penalty.

[Anonymous]

Anonymous wrote:Thanks very much PPs. I'm feeling less unknowledgeable already. Any insight about all the fees and extras I can expect to be presented with after agreeing on a price for the car? So agreed car price is $25,000. Then they tell me $??? for various fees? Does the dealer handle getting the car registered and tagged? I'm sure I sound incredibly unknowledgeable. Sorry

When you negotiate the price ask for the “out the door” price. This will include tax, titling, Doc prep fees (which tend to be ridiculous but usually transparent). If you buy a new car you will pay the freight charge.

All of these fees will add around $2,000 to the price of a used car and $3,000 to the price of a new one.

[Anonymous]

When negotiating, you want the “out the door price”. That will include taxes and fees which are thousands.