Buying a Car for the first time from a dealership

[KSpan]

Lastly free credit reports are not always accurate. You can get the real report from any dealer(required to show you score by law after pulling your credit). 

if this truely is your first time buying anything over 10k then you will not get prime rates in spite of how good your score is. 

Good luck 

 

 

 

Lots of misinformation here. Credit reports obtained through annualcreditreport.com are absolutely accurate to the extent that the bureaus themselves have it correct, as they are obtained straight from the bureaus. If you're referring to credit scores, there are numerous models out there that can result in varying numbers but the reports themselves will be accurate.  It's also been mentioned that places are not obligated to give you the "best rates" even if you have the "best score", so you need to know where you stand before talking to anyone.

Also, as much as I detest the credit scoring industry there is no reason that someone wouldn't get a 'prime rate' with a strong score. The models take types of debt into account when issuing a number and they don't care what kind of car you're buying  or have bought in the past as long as your debt/income ratio is acceptable.

OP: You're better off paying cash for something and staying out of debt, but if you insist on getting a loan then pull a report and score or two from annualcreditreport.com and figure out where you stand. That will give you the best insight into what types of loans you might qualify for and let you make the most accurate cost projections.

[Doc Holiday]

Been in the car biz for 10 years. If you're waiting till January then wasting your time looking for a used vehicle that will no longer be for sale by then. May be similar ones but every used car is different and has its own unique history.

For new use truecar.com as this will get you the lowest price without having to haggle.

For used shop on car gurus for best deal on type of vehicle you want. The days of negotiating for thousands of advertised price on used is long gone. Everyone has to be competitive online so most offer closer to their lowest price up front. 

As far as your current car goes it's probably not worth much from your description so don't get hung up on trade value. Can get free quote from Carmax first and if dealer offers less Carmax gives you a week to take them up on your offer.

Lastly free credit reports are not always accurate. You can get the real report from any dealer(required to show you score by law after pulling your credit). 

if this truely is your first time buying anything over 10k then you will not get prime rates in spite of how good your score is. 

Good luck 

 

 

 

Thanks for some great advice, my car is a absolute beater, literally am 100% sure that I could get a better offer fairly quickly by selling it myself. If they offered me $2k for trade-in value i'd take it in a heartbeat.  

last time I checked was years ago before I got a better job, and it was good then, and I assume it's better now, but I have no idea for sure.

And I've kinda wondered about the how much not making a prior big purchase would hurt me, I've always been a very financially responsible person, always pay my bills on time, dont let myself get in credit card trouble by pretending I'm Bill Gates on random weekends. ect.  but I have no idea what I should expect or accept as a interest rate, what would be an acceptable offer?? Part of the reason I'm looking to buy a car now too, is I'm getting to the point where I know I'm settling into a career path, and would like to eventually buy a house, sooner than later. Figured this would be a good first step towards that goal by establishing my good credit history a bit more than just credit cards and random small things.

 

[pantherclaw]

The net has made it harder and harder for them to get one over on you, everyone....well most folks are just too educated.

I would spend a little time on finding out the best financing for your situation, and what you should get toward a trade in if you are going that route.

Personally, I don't let 1000 stand in my way if I want a specific car.  If I found exactly what I want, I buy it, now I'm not saying spend an extra 2000 or more, I'm just not one that feels like I need to get one over on the sales guy to be happy.  Some people are, and they miss out on things all the time.

if the buyer wants it to be a painless, shorter experiencr, that is how you should purchase. After all, a buyer wouldn't be there to buy a car that he doesn't see value in. 

 

[panther4life]

Lots of misinformation here. Credit reports obtained through annualcreditreport.com are absolutely accurate to the extent that the bureaus themselves have it correct, as they are obtained straight from the bureaus. If you're referring to credit scores, there are numerous models out there that can result in varying numbers but the reports themselves will be accurate.  It's also been mentioned that places are not obligated to give you the "best rates" even if you have the "best score", so you need to know where you stand before talking to anyone.

Also, as much as I detest the credit scoring industry there is no reason that someone wouldn't get a 'prime rate' with a strong score. The models take types of debt into account when issuing a number and they don't care what kind of car you're buying  or have bought in the past as long as your debt/income ratio is acceptable.

OP: You're better off paying cash for something and staying out of debt, but if you insist on getting a loan then pull a report and score or two from annualcreditreport.com and figure out where you stand. That will give you the best insight into what types of loans you might qualify for and let you make the most accurate cost projections.

I was referring to the score itself not the other jazz.

You can have a 750+ score and a high credit of  4K from a credit card and this will absolutely not guarantee you a prime  rate, simply because you have no history of paying back a large loan which puts you at a higher risk. They may not care about the type of car your buying but they do care about the amount financed in relationship to nada value or kbb if on the west coast. 

Lenders allow up to 2 points to be added from the "buy"'rate pending the whole picture. I'm sorry bro but there is 0 chance you know more about this subject than I do.

[panther4life]

Thanks for some great advice, my car is a absolute beater, literally am 100% sure that I could get a better offer fairly quickly by selling it myself. If they offered me $2k for trade-in value i'd take it in a heartbeat.  

last time I checked was years ago before I got a better job, and it was good then, and I assume it's better now, but I have no idea for sure.

And I've kinda wondered about the how much not making a prior big purchase would hurt me, I've always been a very financially responsible person, always pay my bills on time, dont let myself get in credit card trouble by pretending I'm Bill Gates on random weekends. ect.  but I have no idea what I should expect or accept as a interest rate, what would be an acceptable offer?? Part of the reason I'm looking to buy a car now too, is I'm getting to the point where I know I'm settling into a career path, and would like to eventually buy a house, sooner than later. Figured this would be a good first step towards that goal by establishing my good credit history a bit more than just credit cards and random small things.

 

sounds like you will be considered a "first time buyer" so you will be subject to paying a higher rate than someone with the same score but more history and prior purchase of a house/car or even a large personal loan. Odds are you will get a better rate on a new vehicle as many mfrs. offer more incentived rates and programs through their own financing vs going through any other lender. Equity always helps you obtain a lower rate on new or used. Banks are essentially a co-signer with you and the lower the risk for them the more apt they are to give you a good rate. the more equity you have (financing a smaller portion of nada retail value on used or invoice on new) will better your odds of obtaining the lowest rate possible. You get equity by one paying the right number for a car and 2 by having cash down or a paid for trade with some value. Again to get a good feel for the market and best prices you could expect to pay for any vehicle is true car for new and car gurus for used. Figure up a budget for yourself and check insurance rates so you know the total picture before you get too involved in the process. Once you know this then you will have a better idea if new or used is better for you. I typically lean toward used for financing a pre-owned vehicle or if you go new a lot of times leasing is better pending what terms are being offered at the time you chose to move forward. Safe rule of thumb for someone like you would be to plan on $20 per 1k financed at 60 months or 17 per thousand at 72 months. Almost any dealership will have a doc fee between $500-$700 and has to charge you  state tax and title/registration fees. 

If you decide to get pre-approved through your personal bank of credit union then you will have an exact rate to get you started. Take that rate and play around with different amount financed amounts and length of financing on an auto loan payment calculator( just google it).  This way you can be very informed on what you can and can't afford. 

Lastly a dealer may be able to secure you a better rate and can almost always at least match the rate you get pre-approved for. 

If you have more specific questions let me know 

Edit: forgot to mention you can get a decent idea of trade value to expect by looking at the "fair value" on kbb.com when looking at trade values. You can also try Carmax before hand just so you have a floor for the dealer to match or beat.

 

 

[KSpan]

I was referring to the score itself not the other jazz.

You can have a 750+ score and a high credit of  4K from a credit card and this will absolutely not guarantee you a prime  rate, simply because you have no history of paying back a large loan which puts you at a higher risk. They may not care about the type of car your buying but they do care about the amount financed in relationship to nada value or kbb if on the west coast. 

Lenders allow up to 2 points to be added from the "buy"'rate pending the whole picture. I'm sorry bro but there is 0 chance you know more about this subject than I do.

That's absurd, because what you imply is that no first-time home-buyer would EVER qualify for 'prime rates' because they've 'never purchased something this expensive before', and pointing to the fact that a car is different than a house only goes to show the silliness of financing a vehicle, a constantly-depreciating asset, in the first place.  And you did not specify loan amount vs. black book value/NANDA/etc., you said he simply wouldn't get the rate because of a lack of history. Of course someone putting a significant amount down will be viewed as a better risk. You're talking about two different scenarios, and that scenario applies to anyone getting any kind of vehicle or home loan.

Also, financing through a local lender removes a layer of risk and, in certain situations, gives someone a better chance of getting a 'prime rate' than going through a dealer because the bank/credit union themselves are making the decision (as you mentioned in your post). Dealers have to sell the loans to a bank and therefore have to add a certain amount of risk mitigation to their loan percentages to ensure a sale.

You likely know more about the industry itself, but your advice on financing and credit is partial at best and incorrect at worst.

Thanks for some great advice, my car is a absolute beater, literally am 100% sure that I could get a better offer fairly quickly by selling it myself. If they offered me $2k for trade-in value i'd take it in a heartbeat.  

last time I checked was years ago before I got a better job, and it was good then, and I assume it's better now, but I have no idea for sure.

And I've kinda wondered about the how much not making a prior big purchase would hurt me, I've always been a very financially responsible person, always pay my bills on time, dont let myself get in credit card trouble by pretending I'm Bill Gates on random weekends. ect.  but I have no idea what I should expect or accept as a interest rate, what would be an acceptable offer?? Part of the reason I'm looking to buy a car now too, is I'm getting to the point where I know I'm settling into a career path, and would like to eventually buy a house, sooner than later. Figured this would be a good first step towards that goal by establishing my good credit history a bit more than just credit cards and random small things.

 

See my post above. Don't get caught in the credit trap, as debt sucks. The credit score game is also a joke - I'm 32 and my wife and I have been debt-free since 2008 (only had one credit card with a $1500 limit prior). Since then we've financed two mortgages at the best rates with zero issue, opened utilities with no deposit required, and don't pay a penny more for things like insurance than people who regularly use credit. The best financial decision, and arguably the best non-family related decision, we ever made was to pay off our debt and stay out of the land of payments.

Whether you're looking for a loan or not, you should also be checking your credit reports annually for errors or for fraud via annualcreditreport.com, which is the government-endorsed/approved single source for the free reports that bureaus are obligated by law to provide you at your request. You can get a credit score if you want but a score and the report itself are two separate things, with the score being derived from the contents of the report based on any number of formulas that may be in use.

If you're going to finance, however, you can go on bank and credit union websites and see exactly what they themselves are offering on loans. Dealers have situations where they can offer their buyers lower rates due to volume, but you don't sound like the type of buyer that would fall into that category at a dealer. Also, getting a loan at a local bank/credit union can be very convenient if/when questions arise and, in my opinion, could be worth a minor interest rate difference if one would happen to exist.

A couple of quick reads on the subject:

http://www.autotrader.com/car-tips/who-has-the-best-interest-rates-the-dealer-or-the-bank-215278

http://blog.truecar.com/2009/09/08/should-you-finance-through-a-dealer-or-a-bank/

https://www.communityfirstfl.org/about-us/blog/should-i-finance-my-car-loan-with-a-dealership-or-my-bank/

http://www.cars.com/go/advice/Story.jsp?section=fin&subject=car-loan-tips&story=best-interest-rates

And from a non-industry source:

http://www.consumer.ftc.gov/articles/0056-understanding-vehicle-financing

[ladypanther]

Start shipping online. Know what going rates are before you walk in the door. My wife and I test drove several different cars without even considering buying that day. You cant impulse buy if you have already decided that you will be test driving only.Also look for financing outside the dealer, you can get better rates. A lot of upgrades can be gotten aftermarket much cheaper. If you go in armed with the information about the car you want, you wont pay full price and you will feel better when it's over. 

Dealerships can often get better financing rated than an individual because of the volume of business they send to the banks. Best bet is to do some research about credit unions you could join.  I work at a dealership...most of the time we can beat any financing rate through the banks we use.  The only exception has been a couple of credit unions.  Tell the dealership you can get x% on your loan from another bank/credit union (that you have been approved for) after they tell you what they can get.

Know what you are wanting to pay for the vehicle. Offer the dealership 2-3k under that at first, and be willing to walk away if they don't flex. They are in the business of selling cars. If you don't buy from them, they know you will buy from someone else. YOU have the upper hand.

What you want to pay for a car is not the approach.  Do your research and have evidence of what the car should cost.  Dealerships will compete with facts, not wishes.

 

Listen to Panther4life...he knows what he is talking about. I am also in the car business...feel free to use me as a resource as well.

[panther4life]

Kspan you post is too long too quote and arguing is too much of a waste of both our times. I know the car biz and know how the financing works, do it every day!You probably know a lot of things I don't. We're both panther fans. We just can't agree on this. Hope you have a great day

[Doc Holiday]

Well, I did my first bit of shopping around, and pressure tactics are for reals.

Good news, is I have perfect credit 750+ but very little history $5k, so as someone mentioned earlier I'm not getting a prime rate even though I have great credit, I think I'm going to hit up a few manufacturer Dealerships, and see if I can get a better deal on something new.  

[KSpan]

Well, I did my first bit of shopping around, and pressure tactics are for reals.

Good news, is I have perfect credit 750+ but very little history $5k, so as someone mentioned earlier I'm not getting a prime rate even though I have great credit, I think I'm going to hit up a few manufacturer Dealerships, and see if I can get a better deal on something new.  

What do you mean 'very little history $5K'?  Like your available credit is only $5K? 

[Doc Holiday]

What do you mean 'very little history $5K'?  Like your available credit is only $5K? 

yep, I've only ever had credit cards, and not really used them a lot.   Funny how being a financially responsible person bites you in the ass at times.

[KSpan]

yep, I've only ever had credit cards, and not really used them a lot.   Funny how being a financially responsible person bites you in the ass at times.

That has little to do with it, as your credit utilization and debt/income ratios cover this aspect. The biggest reason that you aren't getting 'prime rates' is the amount of your potential loan vs. the actual value of the car according to the black book or whatever source the dealer/bank is using. If you were buying a $20K car and rolled in with a $4-6K down payment (different than a trade-in value) and had a comfortable debt/income ratio, your score of 750 would get you the best possible rates regardless of your currently-available credit.

The issue for you, and any other buyer who isn't putting anything down, is the risk that the financial institution who owned your loan would take a loss if you defaulted and they couldn't sell the car for what you borrowed. This applies to buying houses as well, where 20% down is the gold standard for getting optimal loan rates. I would again suggest that you look to completely avoid car debt and find something that you can pay for straight up, but if that isn't an option then you will get the best interest rates by having a strong down payment. 

Again though, as someone who has been debt-free for almost a decade now (except our mortgage... that's in our crosshairs) I cannot stress enough how great it is to be debt free. If you can start paying yourself a car payment every month and viewing your beater for what it is - cheap transportation with low insurance, tags, and taxes - then you'll quickly save up some cash and be able to step up in car without debt.

[Doc Holiday]

That has little to do with it, as your credit utilization and debt/income ratios cover this aspect. The biggest reason that you aren't getting 'prime rates' is the amount of your potential loan vs. the actual value of the car according to the black book or whatever source the dealer/bank is using. If you were buying a $20K car and rolled in with a $4-6K down payment (different than a trade-in value) and had a comfortable debt/income ratio, your score of 750 would get you the best possible rates regardless of your currently-available credit.

The issue for you, and any other buyer who isn't putting anything down, is the risk that the financial institution who owned your loan would take a loss if you defaulted and they couldn't sell the car for what you borrowed. This applies to buying houses as well, where 20% down is the gold standard for getting optimal loan rates. I would again suggest that you look to completely avoid car debt and find something that you can pay for straight up, but if that isn't an option then you will get the best interest rates by having a strong down payment. 

Again though, as someone who has been debt-free for almost a decade now (except our mortgage... that's in our crosshairs) I cannot stress enough how great it is to be debt free. If you can start paying yourself a car payment every month and viewing your beater for what it is - cheap transportation with low insurance, tags, and taxes - then you'll quickly save up some cash and be able to step up in car without debt.

 well I kinda need a reliable car at some point in my life and i don't have $20k just sitting around staring at me either.

[KSpan]

 well I kinda need a reliable car at some point in my life and i don't have $20k just sitting around staring at me either.

The notion that only 'new' cars are reliable is nonsense, and I didn't say that you had to save up $20K, though you will eventually have that much by staying out of debt. Reliable cars can be had for way, WAY less than $20K; we just bought my wife a 2005 single-owner van with every option out there and it does everything a new van does except siphon our money every month.

I don't know what you're currently driving, but putting the same effort into researching older cars, saving your money and paying cash can net you a vehicle that costs the same or less to drive per year than a new car once you factor in interest, depreciation, and the increased tags/taxes/insurance.  

It sounds like you're pretty fixated on getting into a big loan, and there is plenty of advice in this thread on how to do that (which was the objective) - I'm just presenting an alternative perspective that younger me would have appreciated.