Example of how not to borrow for a car

[Anonymous]

I leased a mid sized sedan, leather interior, moonroof, navigation system for 0 down and $200 a month for 42 months. annual cost of ownership is $2400, which is likely lower than depreciation on most cars.....

[Anonymous]

You do get that lots of people have to finance even $8k for a car, right? Not everyone has that in savings.

And finding a good car for $8k for a family? Ok.

[Anonymous]

Anonymous wrote:You do get that lots of people have to finance even $8k for a car, right? Not everyone has that in savings.

And finding a good car for $8k for a family? Ok.

Of course I realize that, and if you need a car and you can't pay for one with cash, then you finance one. But you finance an $8k one, not a $30k one.

Look, maybe you have to go as high as $12k to meet the standard of what a lot of people consider "reliable and safe for a family". But there are many good cars at $8k, and once you get to $12k you have definitely maxed out the safety and reliability factor (we are talking about 5-10 year old cars in all cases, private third party transactions, not dealers).

Anything over $12k and you are in the realm of "want" as opposed to "need". And there is nothing wrong with that if you have the money. Lots of lawyers and doctors drive Mercedes/BMW and that's their choice. But what saddens me is to see many Americans buying cars they cannot afford. This thread began with a $30k car and I don't know the situation of the family in that example, but for the vast majority of Americans (maybe not the same majority of DCUM readers), $30k is unaffordable - it's way, way too much to pay for a car.

[Anonymous]

Anonymous wrote:I leased a mid sized sedan, leather interior, moonroof, navigation system for 0 down and $200 a month for 42 months. annual cost of ownership is $2400, which is likely lower than depreciation on most cars.....

What did you get? That sounds great for the price!

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Um how is this stupid? I'm looking for a car and can get 0%, why wouldn't I put down as little as possible?

How are you able to get 0%?

np. I bought my toyota highlander last year at 0% interest rate. Toyota financing was running a special and I had good credit. I also put my down payment on my amex so I could get the membership reward points.

But don't you need gap insurance? And, your credit score takes a little hit because you are financing. Plus, the administrative hassle. At the endvof the day why not buy it outright and be done with it?

That's fine of course, as long as you have 12k or more to just be done with it.
Our credit score did not take a hit - in fact, revolving credit lines that are paid as agreed can improve your score.
We had the cash to buy a car, but it was more valuable to us to keep it liquid, and/or in brokerage, in case of the unexpected, since we do not have tons of money in savings. Especially with the 0.9% interest rate.
DH put the DP on our MC in order to get the low interest rate, we got tons of points and paid it off right away. Win-win.

So if he has to sell the car within the next couple of years, he will take the hit just like anyone else would. In the meantime, we have our cash if we need it.

[Anonymous]

Anonymous wrote:
Anything over $12k and you are in the realm of "want" as opposed to "need". And there is nothing wrong with that if you have the money. Lots of lawyers and doctors drive Mercedes/BMW and that's their choice. But what saddens me is to see many Americans buying cars they cannot afford. This thread began with a $30k car and I don't know the situation of the family in that example, but for the vast majority of Americans (maybe not the same majority of DCUM readers), $30k is unaffordable - it's way, way too much to pay for a car.

Exactly! Yes, people need cars to get around, and it's ok to borrow money to buy what you need. But no one NEEDS a $30K car. That's a want. And you should be able to pay for a want with cash, otherwise don't buy it.

[Anonymous]

In my experience, the dealers do charge you more for the car if they give you 0% financing. We found that our after we negotiated a price for a Honda Odyssey a few years ago (based on looking online to find the lowest price and asking to pay that price). We planned to use money from our HELOC. Then we noticed that they had a sign offering 0% financing. I asked if we could take advantage financing instead of paying in full from our HELOC. The dealer apologized and said that the low price we had negotiated was not available with 0% financing. So 0% financing may still be a good deal, but perhaps not quite as good as it seems.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I also put my down payment on my amex so I could get the membership reward points.

CC don't normally let you pay your debts without additional fees. Are you sure they are not charging you 2% extra to pay via CC?

They probably didn't but they probably violated the auto loan policy. Down payment on cc is like no down payment at all.

Here's an interesting fact - dealers aren't required by law to offer you the interest rate the bank will. They set their own.

If you really want to fuck a dealer over, have them charge you 6 or 7% in return for money off the car. Then go home and pay it off. The dealer will end up with a chargeback from the bank and you'll end up with an extra $500 in your pocket.

I think the manufacturer's financing arm usually takes a month or two to set up your account before you can make your payments. So, in this situation ($30K car, 0 down) you'd be carrying about $150 of interest for the month so you'd need to keep that in mind when negotiating price/financing.

[Anonymous]

Anonymous wrote:In my experience, the dealers do charge you more for the car if they give you 0% financing. We found that our after we negotiated a price for a Honda Odyssey a few years ago (based on looking online to find the lowest price and asking to pay that price). We planned to use money from our HELOC. Then we noticed that they had a sign offering 0% financing. I asked if we could take advantage financing instead of paying in full from our HELOC. The dealer apologized and said that the low price we had negotiated was not available with 0% financing. So 0% financing may still be a good deal, but perhaps not quite as good as it seems.

I negotiated the price of my 2015 car a few weeks ago and it was only then did we even broach the subject of financing. Then they presented me with 0% and 1.9% monthly payment options, which were both calculated based on the negotiated price. So not sure where you went, but that sucks.

[Anonymous]

Anonymous wrote:In my experience, the dealers do charge you more for the car if they give you 0% financing. We found that our after we negotiated a price for a Honda Odyssey a few years ago (based on looking online to find the lowest price and asking to pay that price). We planned to use money from our HELOC. Then we noticed that they had a sign offering 0% financing. I asked if we could take advantage financing instead of paying in full from our HELOC. The dealer apologized and said that the low price we had negotiated was not available with 0% financing. So 0% financing may still be a good deal, but perhaps not quite as good as it seems.

That's when you say thank you very much - I'll go talk to another dealer and turn around and leave.

[Anonymous]

Anonymous wrote:

Anonymous wrote:You do get that lots of people have to finance even $8k for a car, right? Not everyone has that in savings.

And finding a good car for $8k for a family? Ok.

But what saddens me is to see many Americans buying cars they cannot afford.

I used to live in a crappy area of PG county and over the course of 3-4 years went from making 60k to around 150k. I continued to drive a 7-8 year old used Toyota, and every time I went out to the grocery store, I'd see countless luxury cars driven by people you know don't have that kind of disposable income.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:You do get that lots of people have to finance even $8k for a car, right? Not everyone has that in savings.

And finding a good car for $8k for a family? Ok.

But what saddens me is to see many Americans buying cars they cannot afford.

I used to live in a crappy area of PG county and over the course of 3-4 years went from making 60k to around 150k. I continued to drive a 7-8 year old used Toyota, and every time I went out to the grocery store, I'd see countless luxury cars driven by people you know don't have that kind of disposable income.

And you know everyone's income how?

[Anonymous]

I would pay no more than 50% my annual gross income for a car.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I also put my down payment on my amex so I could get the membership reward points.

CC don't normally let you pay your debts without additional fees. Are you sure they are not charging you 2% extra to pay via CC?

They probably didn't but they probably violated the auto loan policy. Down payment on cc is like no down payment at all.

Here's an interesting fact - dealers aren't required by law to offer you the interest rate the bank will. They set their own.

If you really want to fuck a dealer over, have them charge you 6 or 7% in return for money off the car. Then go home and pay it off. The dealer will end up with a chargeback from the bank and you'll end up with an extra $500 in your pocket.

Dealers might give you a better price on the car if you finance.