Any economists here?

judypilot said:
They did not push the financing at all and, in fact, I was talking about buying it outright until fairly far into the discussion, when I thought to ask about zero-interest loans. However, I convinced myself (sort of) that they're at least not losing too much money. If inflation continues as it is today (unlikely), the final total will be only $3000 less (in today's dollars) than if I had bought it outright. So I guess it's OK from their standpoint. However, it is, of course, advantageous for me. I can absorb the payments in my monthly income. I'd have had to sell some assets to buy it outright; now I can leave those alone to grow. So I still think it makes sense.

I do want to acknowledge an important point Jeff O. made, that if I total the car before the loan is paid off, I'm still on the hook for those payments. But the psychological pain of totaling a car is true no matter what. Imagine totaling the car right after buying it; so I'm not sure planning for a crash contingency is worth it (or even possible).
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You can always elect for gap coverage if you're that concerned about totaling it and not being able to cover the loan. It's usually like $2/mo on the loan payment. Or, you could just make sure your insurance coverage meets your needs if it were to be totalled.
 
SoonerAviator said:
You can always elect for gap coverage if you're that concerned about totaling it and not being able to cover the loan. It's usually like $2/mo on the loan payment. Or, you could just make sure your insurance coverage meets your needs if it were to be totalled.
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Last I checked, several years ago, gap insurance was a good bit more than that. Plus you have the headache of remembering to cancel the gap insurance in a year or two when the loan to value equalizes, which some companies make into a bit of a pain to do.
 
Jeff Oslick said:
Last I checked, several years ago, gap insurance was a good bit more than that. Plus you have the headache of remembering to cancel the gap insurance in a year or two when the loan to value equalizes, which some companies make into a bit of a pain to do.
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Just had it on a loan I go sign for today, $3/month. Obviously that amount will be variable depending on what you're buying and how much you're borrowing. For that low an amount, I won't worry about the $100 I might save by cancelling early. :)
 
I've only known one person that's happened to (totaling the vehicle while they owed more than it was worth). What was more annoying about it was that it was someone else's fault - someone who ran a red light and then T-boned them, totaling the vehicle and leaving them on the hook for something like $15k worth of difference.

Yes, it's a pain if that happens, but realistically the risk is pretty small. It's not something that would concern me in the slightest as I was thinking about financing and finance terms. I'd just take whatever would make the most sense.

What concerns me more is making sure that the household is set up to be able to survive fine on the current payment structure in the even of some general financial calamity (loss of job, stocks market crash, etc.), which is why, even with low interest rates, I intend to pay off the truck before or shortly after we start the finance period on our new car, and make sure the payment is roughly the same. Keeps us at a monthly cost that we're comfortable with should something bad happen.

Dave Ramsey would say I'm an idiot for having any debt, and some "financial advisors" would say I'm an idiot for paying off a loan that's around 3% when I could make so much more on that same money in the stock market. I take the "hedging my bets" approach and blend the philosophies of low to no debt and managing financial risks. Seems to have worked ok for me thus far.
 
Ted said:
I've only known one person that's happened to (totaling the vehicle while they owed more than it was worth). What was more annoying about it was that it was someone else's fault - someone who ran a red light and then T-boned them, totaling the vehicle and leaving them on the hook for something like $15k worth of difference.

Yes, it's a pain if that happens, but realistically the risk is pretty small. It's not something that would concern me in the slightest as I was thinking about financing and finance terms. I'd just take whatever would make the most sense.

What concerns me more is making sure that the household is set up to be able to survive fine on the current payment structure in the even of some general financial calamity (loss of job, stocks market crash, etc.), which is why, even with low interest rates, I intend to pay off the truck before or shortly after we start the finance period on our new car, and make sure the payment is roughly the same. Keeps us at a monthly cost that we're comfortable with should something bad happen.

Dave Ramsey would say I'm an idiot for having any debt, and some "financial advisors" would say I'm an idiot for paying off a loan that's around 3% when I could make so much more on that same money in the stock market. I take the "hedging my bets" approach and blend the philosophies of low to no debt and managing financial risks. Seems to have worked ok for me thus far.
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My loan is a hair under 2% interest from my local credit union. Absolutely silly not to take advantage of that and throw the cash in an index fund or similar and earn triple that as an investment. Of course I am also putting about 20% down in cash, so the gap coverage won't likely ever come into use to begin with.
 
SoonerAviator said:
My loan is a hair under 2% interest from my local credit union. Absolutely silly not to take advantage of that and throw the cash in an index fund or similar and earn triple that as an investment. Of course I am also putting about 20% down in cash, so the gap coverage won't likely ever come into use to begin with.
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Right, if there was a significant amount left on the truck, then it would be different and we wouldn't be buying a second new car. But we're about 75% through the loan period, not a ton left, so it's more about just managing risk when the interest rate is not 0% (and not even in the sub-2% range, in which case I would probably do like you and keep it).
 
So interestingly, I decided to go take a look at what Alfa's current incentives were just to see what they were offering things month on the car we ordered. Turns out, they are offering 0% on it for 48 months for "well qualified buyers". However, there's a catch with that - while it technically applies to the model we ordered, no dealers have them in stock, and it's "must take delivery by 1/31/22".

We'll see what there is next month.
 
Ted said:
Dave Ramsey would say I'm an idiot for having any debt, and some "financial advisors" would say I'm an idiot for paying off a loan that's around 3% when I could make so much more on that same money in the stock market. I take the "hedging my bets" approach and blend the philosophies of low to no debt and managing financial risks. Seems to have worked ok for me thus far.
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All of those talking heads have their upsides and downsides, and make their money from telling you what to do with yours. A lot of Dave's approach will leave a nice nest egg for your kids when you die. In the last 6 months I have two friends that died suddenly within weeks or months of that golden retirement date. You have to make smart moves and save for that day, but you can't wait to enjoy life either.
 
Everyone is entitled to their own opinions and there’s not really a “wrong” answer here - well, there are plenty of mistakes you can make in financing a car but as long as you’re aware of the risks then so be it.

BUT... if you think you got one over on the car companies because you’re not paying them one way or another for the privilege of using their money, you're the one getting fleeced!
 
I have no idea of how car loans may work, but I suspect there may be similarities with some cosmetic surgery loans that I have been more familiar with. In the case of those loans, the plastic surgeon was basically having the same role as the car dealer, offering patients loans that were financed by a different company. Those loans had a set interest rate, generally quite high, but the surgeon had the option to offer lower rates, or even zero interest. The surgeon would receive the full amount financed if the loan was sold at the 'official' interest rate, or that amount minus the waived interest in the case of lower rate finance. What was happening in practice was that surgeons were offering zero interest finance while factoring the waived interest directly into the price. It worked, except that with cosmetic surgery there is nothing to repossess in case of missed payments.... Most loans were not approved to begin with, or often never fully repaid. Cars are much easier to deal with than breast enlargements, when it comes to irrecoverable loans. And I know of more than one boyfriend that paid for the breast enlargement of his beloved girl, only to be dumped the day she got her last follow up appointment with the surgeon, so don't get me started with that particolar type of zero interest loan :)
 
Steve explains 0.0% financing.

 
Whenever I buy a car I let them hit me with the high interest financing so I can negotiate a lower price on the car and then payoff the loan the same day I get the finance paper work from who ever is carrying the paper.

Had this happen when I bought my wife's Camry years ago. I think we had the loan for 15 days. Got a call for the dealership finance and sales guy... boy were they upset with me. :D
 
Ventucky Red said:
Whenever I buy a car I let them hit me with the high interest financing so I can negotiate a lower price on the car and then payoff the loan the same day I get the finance paper work from who ever is carrying the paper.

Had this happen when I bought my wife's Camry years ago. I think we had the loan for 15 days. Got a call for the dealership finance and sales guy... boy were they upset with me. :D
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Now THAT is clever. Not sure it would work in today's market, but it's pretty brilliant.
 
Rushie said:
Steve explains 0.0% financing.

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Well, the problem with that video is he didn't make the case (or I sure didn't see it) that MSRP isn't jacked up to make up for the loss. He threw in the seemingly irrelevant point about the Plan As. Unless he was saying that, because the Plan As are fixed, so are the MSRPs. If that's what he was saying, I missed it. If that IS what he was saying, then yeah, the Australian was out to lunch.

But as I said, I'm pretty sure that wasn't happening, at least not at the dealership we went to. Don did quite a lot of looking before we went there. One of the dealers we looked at was asking a lot more, in fact, about what the difference "loss" from 0% financing would be. So either our dealer jacked up the price and the other dealer jacked up the price even more, or the "other" dealer was attempting that scam and ours wasn't.
 
judypilot said:
Well, the problem with that video is he didn't make the case (or I sure didn't see it) that MSRP isn't jacked up to make up for the loss. He threw in the seemingly irrelevant point about the Plan As. Unless he was saying that, because the Plan As are fixed, so are the MSRPs. If that's what he was saying, I missed it. If that IS what he was saying, then yeah, the Australian was out to lunch.

But as I said, I'm pretty sure that wasn't happening, at least not at the dealership we went to. Don did quite a lot of looking before we went there. One of the dealers we looked at was asking a lot more, in fact, about what the difference "loss" from 0% financing would be. So either our dealer jacked up the price and the other dealer jacked up the price even more, or the "other" dealer was attempting that scam and ours wasn't.
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You didn’t misunderstand. He was defending his particular situation where he got the A-plan which most people don’t. He wasn’t saying the MSRPs are fixed, he was saying they are jacked up for 0% loans to make up for the lost interest. But that doesn’t make them scams. Just moving the money around. His point is, for any given price, zero interest is less than any number greater than zero. If you looked around and your price was good compared to elsewhere, you got a good deal IMO.
 
It’s not really an interest free loan. The auto manufactures set a price on there vehicles. Then they offer incentives to buy the vehicles. The incentive can be an instant rebate, a advantageous interest rate, trade in allowance, ect. There are also additional incentives from manufacture affiliated credit card rewards and organization discounts such as Farm Bureau.

The cost of your interest was in the selling price.
 
Ted said:
I've only known one person that's happened to (totaling the vehicle while they owed more than it was worth). What was more annoying about it was that it was someone else's fault - someone who ran a red light and then T-boned them, totaling the vehicle and leaving them on the hook for something like $15k worth of difference.
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He had lost that $15,000 long before the accident. He just didn't know it until then.

I don't like debt. I'm 56 years old have have had debt twice; both mortgages, both paid off in seven years or less. I don't care if I could have taken advantage of some dealer's interest rate promotion.

The advice I've seen for paying cash is to not tell the dealer that you want to pay cash until you are in the finance office with their price and their finance offers. Tell them that you want to see what financing terms they can offer before you decide. Dealers make more money on financing then they do on selling the car, in many cases. They aren't going to give you their best price if they know you'll be paying cash.

Financing also presents many other ways to increase dealer profit without the customer noticing. They want you in the finance office talking to the guy who is their best salesman in the building. There's a guy on YouTube who trains car salesman in closing the deal and increasing dealer's profit. It's enlightening to see what the dealers and salesman are taught.
 
I could have had a zero-interest loan on my tractor, or a cheaper "cash" price. I took the zero, for a few grand more, and "luckily" I'm paying it back with worthless dollars.
 
Larry in TN said:
I don't like debt. I'm 56 years old have have had debt twice; both mortgages, both paid off in seven years or less. I don't care if I could have taken advantage of some dealer's interest rate promotion.

The advice I've seen for paying cash is to not tell the dealer that you want to pay cash until you are in the finance office with their price and their finance offers. Tell them that you want to see what financing terms they can offer before you decide. Dealers make more money on financing then they do on selling the car, in many cases. They aren't going to give you their best price if they know you'll be paying cash.
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I'm usually allergic to debt, too, but in this kind of case, don't mind. After seeing Ventucky Reid's ploy, I'd have to agree about what you're saying, but I still think I did OK. Again, I get use of the money all the time I'm paying it off, and I'm willing to risk the unlikely event of it being totaled before it's paid off.
 
Ted said:
So interestingly, I decided to go take a look at what Alfa's current incentives were just to see what they were offering things month on the car we ordered. Turns out, they are offering 0% on it for 48 months for "well qualified buyers". However, there's a catch with that - while it technically applies to the model we ordered, no dealers have them in stock, and it's "must take delivery by 1/31/22".

We'll see what there is next month.
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Which is another use of the 0% ads, it draws in people who wont qualify for that rate and they'll wind up with a loan at a higher rate and length. Stats on length of auto loans for new cars is astounding.

https://www.creditkarma.com/auto/i/car-loan-term
 
NHWannabe said:
Which is another use of the 0% ads, it draws in people who wont qualify for that rate and they'll wind up with a loan at a higher rate and length. Stats on length of auto loans for new cars is astounding.

https://www.creditkarma.com/auto/i/car-loan-term
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Using the 30% rule all of these people rolling around in 60k SUVs should be making $200k/yr but you know most aren’t. Long loans I’d hope they make it happen.
 
midwestpa24 said:
All of those talking heads have their upsides and downsides, and make their money from telling you what to do with yours. A lot of Dave's approach will leave a nice nest egg for your kids when you die. In the last 6 months I have two friends that died suddenly within weeks or months of that golden retirement date. You have to make smart moves and save for that day, but you can't wait to enjoy life either.
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No financial "guru" is going to get everything right and I disagree with Ramsey on a number of things but considering about 60% of the US population say that don't have $1K to cover an emergency his advice is good for the masses.
 
Nobody is taking a loss on the 0% financing. Certainly not the dealer.

0% financing is associated with getting a loan from a lender that is typically the OEM/in bed with the OEM (think Ford credit). The way they pay for it is by eliminating some/potentially all potential rebates. They literally charge you more for the truck if you go 0%.

When I bought my 17 F150 new, the 0% financing was for fools, the loss of factory rebates by far exceeded the cost of interest.

The dealers are typically getting some sort of kick-back for every loan they are able to get underwritten. It costs the dealer MORE money for you to buy a vehicle from them with cash then with their lending partners.
 
A good way to get a solid deal on a new car is through Costco's car buying program. The last three vehicles (2 GM, 1 Volvo) we purchased used that, and all special dealer financing programs are still valid when you use the Costco pricing. Sometimes there are manufacturer loyalty or similar rebates available on top of that as well. From past experience buying new, the Costco pricing gets you basically the same best deal you could realistically hope to negotiate yourself, but without the haggling. While you might be leaving a small amount on the table, I'm not a proponent of squeezing every last nickel possible out of a dealer who I'll likely be wanting to help me with service at some point down the road.
 
I realize this is a bit of a dated thread, but does Costco allow one to order a vehicle exactly how they want it?

Jeff Oslick said:
A good way to get a solid deal on a new car is through Costco's car buying program. The last three vehicles (2 GM, 1 Volvo) we purchased used that, and all special dealer financing programs are still valid when you use the Costco pricing. Sometimes there are manufacturer loyalty or similar rebates available on top of that as well. From past experience buying new, the Costco pricing gets you basically the same best deal you could realistically hope to negotiate yourself, but without the haggling. While you might be leaving a small amount on the table, I'm not a proponent of squeezing every last nickel possible out of a dealer who I'll likely be wanting to help me with service at some point down the road.
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tommy1727 said:
I realize this is a bit of a dated thread, but does Costco allow one to order a vehicle exactly how they want it?
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Last I heard, Costco negotiates a fleet deal with the dealer. You then work with the dealer to buy the car using the fleet pricing that Costco negotiated. You're not really dealing with Costco during the purchasing.
 
asicer said:
Last I heard, Costco negotiates a fleet deal with the dealer. You then work with the dealer to buy the car using the fleet pricing that Costco negotiated. You're not really dealing with Costco during the purchasing.
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I see, I may look into that before my next car purchase. Thanks.
 
I'm in one of those 0% loans now on a car I could have just paid for..... Hadn't really considered the fact that I'm paying it off now with "worthless dollars".
But what I have thought about is with the market down turn I have lost way more than what I owe....I wish I'd have taken the money from my investment accounts and paid it off before I lost those dollars.
 
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