Car loan questions

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I think you scare them when you say you are paying cash. They figure that you know how to watch out for your money if you have that much disposable cash and most salesman sell the monthly payment not the car. It was like pulling teeth trying to get them to give me a bottom line number.
 
Originally Posted by daves87rs
Originally Posted by Aredeeem
Just read an interesting Wall St. Journal article. Seems there's an uptick in what's called "Kicking the Trade." Dealers encourage potential buyers who have existing car loans to simply stop paying them and have their cars repossessed. They make more money arranging new financing then they make on the new car sale itself or the trade in. The lender of the first loan is left holding the bag.
That is scary....you would figure the person would be upset about their credit getting screwed up after that......

Many, well some, "buyers" don't care. They're only looking at that new-to-them car that they will soon be taking home. Guarantee you that the salesperson and the finance person will downplay any credit impacts too.

Going back to this practice, presuming it's even true, they obviously have to do this after signing the new loan. In that case, why doesn't the lender look at the borrower having (2) car payments ? Well, no doubt they do and in turn, could justify a bit higher interest rate. On the dealer side, this is genius. Without a trade-in, they finance a higher amount ! Pretty genius on their part !!
 
Originally Posted by pbm
…. I ask because I see a good deal on a 2018 (at a dealer)..but the APR is over 6% for 72 months.
Yeaahhhh, compared to PenFed seems just a little steep. The used car loans start 2.99% with a high of 4.49% for 72 months. So, with a respectable credit rating you can do much better.

https://www.penfed.org/auto/used-auto-loans

As noted if you go that route, just make sure it's a simple interest loan with no early payoff penalty. Though I've never used PenFed for an auto loan, I have a CC with them and expect that's what their auto loans are.
 
Originally Posted by pbm
I ask because I see a good deal on a 2018 (at a dealer)..but the APR is over 6% for 72 months.

Did you see the "*" after those finance terms ? That's just an example interest rate. I presume it has a down-payment (or no down-payment) and the monthly payments listed too ? You think someone with a 400 credit score will get that 6% rate ? Nope, not going to happen ! Or someone with 800+ credit will wisely run away from that interest rate and either get their own financing or qualify for lower.
 
Originally Posted by JustN89
Yes, you can get a better deal by financing at a large dealership. This isn't just due to interest, though that's certainly a driving factor if you finance through the brand's financial institution. Always read the fine print, but in the time I spent selling cars, I've never seen any instance where there was blow back from someone paying off their note early.


When we did mortgages, there was a seasoning provision in the loan which applied to the loan officer. If it was paid off within 3-6 months, the loan officer didn't get paid. While those no prepayment penalty loans can be paid off anytime, the car dealer/saleman might not get their cut if it's paid off too early. I suppose people could ask the car dealer how long it had to be on the books for them to make their cut. Then you can work the numbers to both sides advantage. I did buy an extended warranty once on a piece of merchandise and it had a full refund within 6 months of purchase and I asked the salesman how long it had to be on the books for them to get paid on the sale and they said it was 2 months. I just waited past the two months before canceling it. Lenders just run the stats and they figure if you keep it for a few months, you'll probably keep it much longer so they pay out the commission on the loan at that point.
 
How does it typically work on car loans (I guess for any loans) where the dealer pads the interest rate ? As I mentioned above, a lender offers 5% interest and the dealer tells the prospective buyer "we can get you financed at only 7.5%, sign here", when does the dealer get that 2.5% "extra", month by month (I doubt) or in a lump sum ?
 
Crazy stuff. Each lender in the cycle plays "kick the can". As long as they feel they won't be the ones without a chair when "musical chairs" stops they couldn't less.
 
Originally Posted by Aredeeem
Just read an interesting Wall St. Journal article. Seems there's an uptick in what's called "Kicking the Trade." Dealers encourage potential buyers who have existing car loans to simply stop paying them and have their cars repossessed. They make more money arranging new financing then they make on the new car sale itself or the trade in. The lender of the first loan is left holding the bag.


Saw it too. Mentioned the borrower can still legally be liable for any amount that the lender can't recover by reselling the car. Also, the IRS can go after you for tax on a forgiven debt.

What I didn't understand is how the new lender would approve the new loan given the debt to income ratio.
 
Originally Posted by WagonWheel
Mentioned the borrower can still legally be liable for any amount that the lender can't recover by reselling the car.

Something is missing there. How do you sell a car that you don't hold the title (free and clear) to ? I mean, you can take the person's money and you can 'give' them the car but they won't own it if you still owe money on the loan for it.
 
Dealers make money on financing, sometimes as much or more than the vehicle. That is why you sometimes see higher interest rates vs a credit union. Promotional financing from the manufacturer is usually the best deal ; just make sure to take the longest term available at the lowest interest rate they offer if it is well below market. That is usually 36 mo or so.
 
Originally Posted by hallstevenson
Originally Posted by WagonWheel
Mentioned the borrower can still legally be liable for any amount that the lender can't recover by reselling the car.

Something is missing there. How do you sell a car that you don't hold the title (free and clear) to ? I mean, you can take the person's money and you can 'give' them the car but they won't own it if you still owe money on the loan for it.


I'm not sure I understand your question. The lender holds the title (lien) until the debt is paid off, but takes ownership once the borrower defaults. In most states the lender must pay the borrower if they resell the car for more than owed - minus fees. But if there is a balance, the borrower is still liable.
 
Originally Posted by hallstevenson
How does it typically work on car loans (I guess for any loans) where the dealer pads the interest rate ? As I mentioned above, a lender offers 5% interest and the dealer tells the prospective buyer "we can get you financed at only 7.5%, sign here", when does the dealer get that 2.5% "extra", month by month (I doubt) or in a lump sum ?


In mortgages, if you could get the borrower to agree to a higher rate, you got paid a higher rate for the loan. You'd sometimes use that money to pay off their closing costs so on mortgages, people sometimes focus on just the interest rate when it's the fees and interest rate that really matter. You can have a higher interest rate and low fees/no fees or a lower interest rate and more fees. You got paid points on the loan depending on what the interest rate was. Say you normally make 2 points on the loan, if the interest rate is higher, you could get 3 points or 2.5 points or whatever. They would just have clawback provisions where you didn't get the money if it was paid off within a couple months. But if you told the borrowers that and they liked you, they wouldn't refi it or pay it off til after your clawback period had expired.

Originally Posted by hallstevenson
Originally Posted by WagonWheel
Mentioned the borrower can still legally be liable for any amount that the lender can't recover by reselling the car.

Something is missing there. How do you sell a car that you don't hold the title (free and clear) to ? I mean, you can take the person's money and you can 'give' them the car but they won't own it if you still owe money on the loan for it.


Your question doesn't really make sense in the sense in the flow of the thread. The dealer just tells the buyer not to make a payment on his old car so it gets repossessed. Dealer doesn't take it in trade and the borrower doesn't sell the car, the bank takes it back. No selling takes place by either dealer or borrower, the bank takes it back. It's a bad way to go because the back typically tacks on repossession charges, late fees, etc so that the borrower is worse off than if they just tried to sell it on their own even if it was upside down. It's never a good idea to just let the bank take it unless you're going to declare bankruptcy anyway.
 
Originally Posted by WagonWheel
The lender holds the title (lien) until the debt is paid off, but takes ownership once the borrower defaults. In most states the lender must pay the borrower if they resell the car for more than owed - minus fees. But if there is a balance, the borrower is still liable.

If I have a loan on a car and "sell" it to someone, what title can I give them ? In Ohio, you get a copy of the title, on white paper, and it's only used for registering the vehicle (to get plates). I can sell the car, hand them a copy of that title, but they'll never get it transferred to them without the real title. One could sell the car, send the payoff amount to the lender, and wait for them to process it to get the real title sent. Then the buyer could transfer the title into their name. In a private sale, that's just not gonna happen unless the buyer and seller know each other and accept this arrangement.

Now, if I am buying a car through a dealer and owe money, they're generally okay with this as long as the new lender will roll the payoff cost into the new loan. In fact, that's advantageous to the dealer as they finance even more and get more kickback money from the new lender. They have to sit on that trade-in until the original lender gets their money and sends them the title too but to a dealer, that's probably routine.
 
Originally Posted by Kira
72 months is way too long.
Finance people cite car loan lives of 5, 6 and 7 years (60, 72 and 84 months) as a bad indicator one's economic health.
And, more and more, people are opting for these terms.
Not good.


You are OK with 72 months on a new car-that's well within 100,000 miles at the average miles per year. Used is another story.
 
Originally Posted by Wolf359
Your question doesn't really make sense in the sense in the flow of the thread.

I misunderstood part of it. I didn't realize they meant the lender selling the car after they had repossessed it, as in there was $5000 outstanding on the loan and they sold it for $4000, they still want the "missing" $1000. Titles, new buyers, etc aren't a factor in that case.
 
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