Advice for buying new car, Truecar, etc.

[jimotis4heisman]

uh, it depends. though generally speaking rates are good right now. so its hard to say with such a generic lead in...

 

[Thump]

Question for anyone that would know...

Which option is preferable to the dealer - a buyer paying cash for a car, or financing through the manufacturer? I could see how cash is nice and easy, no need to worry about the buyer's credit, etc. But I could also see the dealer getting some type of incentive for financing because the manufacturer would make money back on the interest over the life of the loan.

Cash is king.

The money you would save in interest payments would not be offset by any incentives or investing of the money in the markets.

There's a reason wealthy people pay in cash, it saves them money in the long run.

 

[CleveBucks]

Cash is king.

The money you would save in interest payments would not be offset by any incentives or investing of the money in the markets.

There's a reason wealthy people pay in cash, it saves them money in the long run.

I'm talking about from the dealer's perspective. Do they make money when you finance through them, or do they prefer cash buyers? I've had people tell me both ways.

 

[jimotis4heisman]

must good businessmen make money, if you dont you either end up out of business or with your mitts out looking to the feds...

 

[Thump]

I'm talking about from the dealer's perspective. Do they make money when you finance through them, or do they prefer cash buyers? I've had people tell me both ways.

Think about it, why would they offer financing if they did not make money on the deal?

 

[sharkonwheels]

Dealers make "points," or a percentage, of your financing. If it's not an easy credit sell, the bank will give them less.
Basically, after submitting your credit request to lenders, the bank will return a number, and whatever they add to it, they get.
For example, the bank may tell the dealer4.17%, but the dealer tells you 4.67%.
that .5% the dealer makes.

Points to remember:
1) NEVER discuss lease or purchase beforehand
2) NEVER discuss cash or financing beforehand
3) ALWAYS negotiate a price on the car BEFORE incentives and rebates. INSIST on a pre-incentive price, or walk out
4) ALWAYS work on a particular unit, ie, choose a car, and work that particular car
5) If you bring YOUR own financing, again never mention up-front, you will USUALLY get a better deal

This is all moot with highline/luxury/limited prodcution vehicles, because they don't need to bargain, ie, BMW/MB/Lexus. Not always true, though, depending on market.

Other suggestions, is look for vehicles that have been on the lot for a while - dealers pay financing on vehicles over 30/60/90 days, depending on who finances them for
inventory. They'll be more willing to deal on a car that has been on the lot 30+ days, than one that arrived 14 days earlier.

 

[Deety]

Think about it, why would they offer financing if they did not make money on the deal?

They do make money in most cases. But the other reasons would be to seal a deal before a customer can go elsewhere, to get a relationship with the lenders so they can get some borderline people approved, and to try to ensure people stay connected to the dealership for future buys and service.

They make very little off the sort of buyers who can get financing everywhere; they're in it more so they can sell to less qualified buyers. My dealership even had some sort of program where people who were rejected by multiple places could get a car by agreeing to pay weekly, in person - a special arrangement with the finance company, guaranteed by the dealership. Probably not a good idea for the people who did it, though I know of at least one who was happy about her credit score going up after completing the loan.

 

[Jaxbuck]

Cash is king.

The money you would save in interest payments would not be offset by any incentives or investing of the money in the markets.

There's a reason wealthy people pay in cash, it saves them money in the long run.

Avoiding compounding interest on a consumer loan is always a good thing but there is some over simplification in this statement.

First off a car is a depreciating asset so there is no real good way to "win" and the return you make investing the difference, so to speak, is a very individual thing. If you have a fantastic investment opportunity then you'd be crazy to tie your cash up in a car.

Rich people (you should say anyone smart with their money) don't always pay cash, they understand the cost of capital and the time value of money. If I can borrow at 2% and get a return > 2% I am going to borrow as much as I can get my hands on. Money is a resource, the most beneficial use of it is not static, it varies from instance to instance.

If you don't invest at all and by that I mean no plans to start your own business, go to school or anything that requires cash now for higher cash flows later then your advice is pretty close to correct. Pay the least amount of interest possible. The 500 dollar rebate or what have you doesn't offset the 0% APR.

If however you want to look at it from a strictly financial perspective why would you want to own a depreciating asset when you can rent one? If you are like 75% of Americans you swap cars every 2-3 years and if that's the case and you can stay in the zip code of 12-15K miles a year you should at least consider leasing it. Like I said, because its a big ticket item that depreciates like mad there is no good way to get a new car. Paying cash has drawbacks, financing has drawbacks, leasing has drawbacks, buying a 2 year old car has drawbacks. The tallest midget is, despite the horrible reputation, leasing (if you can stay close to the miles-it doesn't have to be exact). Next tallest is buying a 2-3 old used car.

The advice I'd give to the car buyer is to not forget that cars are a very emotional investment for people no matter if they will admit that or not. Obviously you need to have a budget in mind and have done all the homework necessary to get a good deal but after that its a very personal thing. Yes a lease might be the better use of your money but if it bothers you too much, don't do it. If an older car on the lot is $15 a month cheaper but has something in/on it you just don't like then get what you like. You will forget about the payment once you get used to it, that thing you settled for will drive you nuts every time you get in your car.

If its the car you like and the price/payment is what you can afford (based on good homework) then do it and don't beat yourself up over the "deal' you got. You are going to spend a lot of money, make sure you don't forget to feel good about what it is you are getting.

 

[Mac]

Was in an accident tonight. My '94 grand prix is probably totaled. It was not my fault. My parents are probably going to help with the purchase of a new vehicle. As much as I want my jeep that I was going to get, I can't afford it right this second. I just bought a ring for the g/f, so I can't take on anything too huge right now. What are your suggestions??

 

[Gatorubet]

Was in an accident tonight. My '94 grand prix is probably totaled. It was not my fault. My parents are probably going to help with the purchase of a new vehicle. As much as I want my jeep that I was going to get, I can't afford it right this second. I just bought a ring for the g/f, so I can't take on anything too huge right now. What are your suggestions??

Sell the ring. Buy the jeep. Bring the cannoli.

 

[MightbeaBuck]

I just bought a ring for the g/f, so I can't take on anything too huge right now. What are your suggestions??

It depends, just how huge is the g/f?

 

[Jake]

ALWAYS be willing to walk out. I had a friend a few years back who so obviously wanted the car that the salesperson actually managed to convince him he would have to pay a premium above sticker to get it, so I offered to take over the negotiation. Saved him thousands, and on the final visit I overheard the salesperson say, "Damn it, he brought her again."

I used to audit car dealerships in the early 90s so I knew what the real price of the car was versus the "sticker" price. During that time, my mom was negotiating for a new Buick and she thought the guy wasn't taking her seriously. She was right.

I met her at the dealership after work one night, walked in wearing my blue suit and carrying my briefcase. The guy jokingly says "who is this, your lawyer?", to which mom replied "No, my son the CPA." He didn't seem too excited about that information.

After an hour or so of jerking around the price of the car had magically been reduced a couple thousand bucks. I was positive the chump would come down even more but mom was tired and the price was lower than she had hoped so we made the deal. I think I enjoyed that even more than she did driving away in the car she really wanted. She drove it the rest of her life. :)

 

[buckeyebri]

I hate the process of dealing on a car. I am currently trying to negotiate a deal on a 2010 Ford Explorer that has 25000 miles on it. They were asking 22900 for it.

I offered 18000 and my car, which they appraised at $2400 (which is fair) out the door. So, with tax, title, etc. we are about 2600 apart. So, I said no and they came down $100. I was like are you fucking kidding me. The most I can get them to come down is another $500. I even came up a little bit.

This is so ridiculous isn't even funny.....Needless to say, I told them to have a nice day today.....really, it is the end of the month and year.....

 

[CleveBucks]

If all goes well, I should have a new car this week. Negotiating through email beats the in-person routine for sure. Is the "dealer's cost" on Truecar accurate?

 

[Taosman]

I have bought 2 the day after Christmas and saved $$$$ Highly recommended.