What interest rate did you get on your car loan?

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sunnyday
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What interest rate did you get on your car loan?

Post by sunnyday » Sun Feb 02, 2014 8:40 am

I'm trying to decide if it's worth setting money aside for a new car or if I should plan to finance it and have the money pay off other debt. So i'm curious what rates people have been getting.

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Re: What interest rate did you get on your car loan?

Post by midareff » Sun Feb 02, 2014 8:45 am

1.49% for 5 years.

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cfs
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Re: What interest rate did you get on your car loan?

Post by cfs » Sun Feb 02, 2014 8:49 am

Leaders, good morning/afternoon/evening

Thanks for asking and keep those good questions coming. Zero interest, for the last couple of vehicles bought we wrote a check for the exact amount and moved on. As far as rates (for comparison purposes), my credit union (Navy Federal) is charging on new vehicle 1.49% for up to 36 months, and for used vehicle 2.59% for up to 36 months (rates as of 2/2/14).

Thanks for reading.
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Re: What interest rate did you get on your car loan?

Post by mevertsen » Sun Feb 02, 2014 9:20 am

We just bought a new Toyota in December. Interest rate is 0.9%. 5 year loan. Total interest for the life of the loan is about $615 if I remember correctly from the paperwork. They also had a 0% offer for 36 and 48 months, but I was not quite comfortable with the payment amount.

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zzcooper123
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Re: What interest rate did you get on your car loan?

Post by zzcooper123 » Sun Feb 02, 2014 9:35 am

0.9% for 3 years, new Honda Accord, same as last time.

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pennstater2005
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Re: What interest rate did you get on your car loan?

Post by pennstater2005 » Sun Feb 02, 2014 9:39 am

Used car loan through my credit union at 2.5%.
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Re: What interest rate did you get on your car loan?

Post by MooreBonds » Sun Feb 02, 2014 11:38 am

I bought a Kia Soul in 2009 when they had their 2010 model lineup (the 2010 model was the first year they were introduced), so they were offering 0.0% financing for 36 month loan.

I don't often get people offering me $17,000 for zero interest, so I found it hard to pass them up on it. That, and the car dealer didn't offer any price differential between paying cash vs taking the financing (it was my first new car purchase, and I found out later on during the closing why they were happy to go through the paperwork of the zero interest financing - they will hit you up with any and EVERY possible add-on, from the stupid spray on your windshield for water to roll off so you don't need to use your wipers, all the way up to extended warranties).

For the last year or so, PenFed has been offering their 'car buying service', as well as something like 0.49% APY on new car loans/1.49% on used car loans. Don't know what the current rates are, but they'll likely be a good deal (but I think you have to have them buy the car for you, and they handle all of the negotiations, etc.)

While you may have already looked into this, one variable which can be a significant factor in the total cost of owning a car is resale residual value and annual insurance costs - both of those can actually add up to hundreds of dollars per year when buying one car brand vs another. Don't forget to look beyond just the sticker price!
Last edited by MooreBonds on Sun Feb 02, 2014 12:11 pm, edited 1 time in total.

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Re: What interest rate did you get on your car loan?

Post by jmg229 » Sun Feb 02, 2014 11:46 am

Just acquired a 36 month at 1.00%. They were willing to extend the 1.00 for up to 48 months, but we opted for the shorter time frame, though I now wonder if that was the smartest idea given where CD rates are. As it is, we will nearly break even with safely investing the amount we had saved up and interest on this loan.

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Re: What interest rate did you get on your car loan?

Post by joelly » Sun Feb 02, 2014 12:40 pm

0% for 5 yrs on a new corolla.

Toyota still has that promotion now.

jda
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Re: What interest rate did you get on your car loan?

Post by jda » Sun Feb 02, 2014 6:59 pm

1.49% 5 years from PenFed a year ago.

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mike143
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Re: What interest rate did you get on your car loan?

Post by mike143 » Sun Feb 02, 2014 7:35 pm

jda wrote:1.49% 5 years from PenFed a year ago.
+1, about a year ago from Honda at 1.99% for 5 years to PenFed at 1.49% for 5 years.

Then last week 1.49% for 72 months plus $100 back: http://www.bogleheads.org/forum/viewtop ... 1&t=131530

On the 2013 Prius it was either $2k customer cash OR $1k customer cash including financing up to 72 months between 0%-2.9%. My local dealership was using the financing part of the equation to play games so I just provided my own financing and asked for OTD prices.
Last edited by mike143 on Sun Feb 02, 2014 10:08 pm, edited 1 time in total.
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Re: What interest rate did you get on your car loan?

Post by Bidwell » Sun Feb 02, 2014 8:11 pm

1.54% for 72 months for almost 17k. We intend to pay off the loan in 12 to 18 months, My better half wanted a new CTS as she entered the retirement zone. Her 2007 CTS was very reasonable when purchased new. A bit of shopping expelled her hopes for another CTS. So she looked at the 2014s and bought a new CR-V while trading the Caddy. She loves the room, visibility and MPG of the CR-V. For me the sun never sets on Honda Quality and their extreme Durability. NFCU was lender.

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Re: What interest rate did you get on your car loan?

Post by grabiner » Sun Feb 02, 2014 10:54 pm

2.99% in 2001 for the only car loan I have had. At that rate, it was a better deal to take out a loan for the car than to sell stock for a capital gain to pay cash for the car. (I had no carryover losses at the time, so a stock sale would have led to 20% federal and 8% Maryland taxes on the capital gain.) I put extra money towards the loan, and I had a lot of extra money because I harvested stock losses in 2002.

I paid cash for my current car, bought in 2006; I needed to sell some stock, but I sold stock for $5032 which I had purchased for $5000.
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GerryL
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Re: What interest rate did you get on your car loan?

Post by GerryL » Sun Feb 02, 2014 11:49 pm

I paid cash for my first car and then wrote myself a loan: 5 years at 5% interest. Never missed a payment. Kept the car for 10 years.

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BrandonBogle
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Re: What interest rate did you get on your car loan?

Post by BrandonBogle » Mon Feb 03, 2014 12:14 am

sunnyday wrote:I'm trying to decide if it's worth setting money aside for a new car or if I should plan to finance it and have the money pay off other debt. So i'm curious what rates people have been getting.
My rates were 0%, 0.99%, 1.49%, and 2.00%, depending on whose car I was rotating through at the time. But I think this is the wrong question Sunny. For each of these cars, I could have paid cash, but it more financial sense to take the loan. Sometimes it would have involved selling funds at a gain, sometimes it was a CD available at a higher rate, and sometimes it was better to take out the loan for other uses (my 0.99% loan is on a paid off car and that plus cash paid off my 6.8% student loans, and I still maxed out my 401k and IRA). You should always have the cash to buy a depreciating asset like a car -- then you decide if the cash or the loan makes more financial sense.

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grabiner
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Re: What interest rate did you get on your car loan?

Post by grabiner » Mon Feb 03, 2014 9:18 am

sunnyday wrote:I'm trying to decide if it's worth setting money aside for a new car or if I should plan to finance it and have the money pay off other debt. So i'm curious what rates people have been getting.
The question depends on the rate and terms of the debt. The rate issue is obvious; if you can take out a low-rate loan to pay off a high-rate loan, that is a good deal. The terms matter because long-term fixed-rate loans are better. If you can take a five-year car-loan at 2% and pay off a ten-year student loan at 2% fixed rate after tax, it's better to keep the student loan, because the student loan gives you the option to keep the money borrowed longer. Conversely, if the student loan is at a variable rate, it's better to convert the debt to a fixed rate by paying off the car loan.

This may be easier to understand if you view a loan as a negative bond. When you buy a bond, you lend money to a business or government; when you take out a loan, a business or government lends you money. You can earn higher rates on long-term bonds than on short-term bonds, because you take the risk as the lender that interest rates will rise and you will be stuck with a bond paying less than the market rate. Similarly, banks demand higher rates on long-term loans than on short-term loans; the same bank may offer a lower rate on a three-year car loan than on a five-year car loan. But an adjustable-rate loan is at short-term rates, and thus eliminates much of this risk; if your mortgage resets every year, then it is equivalent to a series of one-year bonds, not a 30-year bond, and that is why adjustable-rate mortgages have lower rates.
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Re: What interest rate did you get on your car loan?

Post by Professor Emeritus » Mon Feb 03, 2014 9:34 am

Consumer Economics 101 Do not mix buying and borrowing.
you will cut your own throat. Guaranteed

all dealers negotiate price one way or another. ALL Low interest rates are magic fairy dust they sprinkle in the air to keep the suckers mystified.

arrange your financing in advance, and be prepared to walk.

I have walked into dealerships with either with a bank guarantee letter or a certified check. I would only speak to a person with authority to sell the car. The manager can sign the contract in blank to confer the authority. Or I deal only with the manager Then we discuss the car and the price. I walk away with or without the car depending on the price
Last edited by Professor Emeritus on Mon Feb 03, 2014 9:38 am, edited 1 time in total.

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Re: What interest rate did you get on your car loan?

Post by Bacchus01 » Mon Feb 03, 2014 9:36 am

2% for 72 months in August.

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greg24
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Re: What interest rate did you get on your car loan?

Post by greg24 » Mon Feb 03, 2014 9:36 am

Professor Emeritus wrote:Consumer Economics 101 Do not mix buying and borrowing.
you will cut your own throat. Guaranteed

all dealers negotiate price one way or another. ALL Low interest rates are magic fairy dust they sprinkle in the air to keep the suckers mystified.

arrange your financing in advance, and be prepared to walk
If you negotiate your final price before even discussing financing, you avoid your little "guarantee".

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Re: What interest rate did you get on your car loan?

Post by sunnyday » Mon Feb 03, 2014 9:37 am

Thanks for the replies and explanations. Since the rates are quite low, I'm going to use my "new car fund" towards paying down my debt. I don't have an immediate need to for a new car, but when I do, I'll work on saving to pay cash for it or I may just finance it (I would shop around in advance) if the rates remain low and I want to tackle my other debt first.

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Re: What interest rate did you get on your car loan?

Post by White Coat Investor » Mon Feb 03, 2014 9:40 am

I don't buy cars I can't afford. If I don't have cash, I buy a cheaper car.

I understand the arbitrage theory, but prefer to keep my fixed expenses low.

I think most, but not all of the time, you're paying more for the car by financing it. It might be the interest, it might be the fees, or it might just be an inflated price. I find a stack of $100s really lowers the price for me, although some weird incentives given to used car salesmen can actually make them give the same or lower price for a financed transaction, even one with no fees and 0% interest.
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Re: What interest rate did you get on your car loan?

Post by takeshi » Mon Feb 03, 2014 10:23 am

sunnyday wrote:Since the rates are quite low
You might want to verify that your credit qualifies for such rates rather than just relying on polling others whose credit may differ. Two years ago I was able to get 4.75 on a used vehicle. Today I can get 2.25. Rate would be lower if the vehicle was new, term was shorter, if I used the car buying service, etc.

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Re: What interest rate did you get on your car loan?

Post by Professor Emeritus » Mon Feb 03, 2014 2:58 pm

greg24 wrote:
Professor Emeritus wrote:Consumer Economics 101 Do not mix buying and borrowing.
you will cut your own throat. Guaranteed

all dealers negotiate price one way or another. ALL Low interest rates are magic fairy dust they sprinkle in the air to keep the suckers mystified.

arrange your financing in advance, and be prepared to walk
If you negotiate your final price before even discussing financing, you avoid your little "guarantee".
Most people who think they are "negotiating a price" are not. They are dealing with a flunky who has no authority to sell the car or agree on a price. The guarantee gets you past that person

In my experience the "little guarantee" cuts out a lot of nonsense and lets you discuss price with a person with authority. There is nothing like a bank letter guaranteeing your check up to 50 K to get a car dealership to take you seriously.

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Re: What interest rate did you get on your car loan?

Post by MathWizard » Mon Feb 03, 2014 3:51 pm

Professor Emeritus wrote:
greg24 wrote:
Professor Emeritus wrote:Consumer Economics 101 Do not mix buying and borrowing.
you will cut your own throat. Guaranteed

all dealers negotiate price one way or another. ALL Low interest rates are magic fairy dust they sprinkle in the air to keep the suckers mystified.

arrange your financing in advance, and be prepared to walk
If you negotiate your final price before even discussing financing, you avoid your little "guarantee".
Most people who think they are "negotiating a price" are not. They are dealing with a flunky who has no authority to sell the car or agree on a price. The guarantee gets you past that person

In my experience the "little guarantee" cuts out a lot of nonsense and lets you discuss price with a person with authority. There is nothing like a bank letter guaranteeing your check up to 50 K to get a car dealership to take you seriously.

The letter with the $50K figure in it will get the dealership to have you look at $49K cars and up.
Not what I would want. I don't come in with a suit and tie, I wear jeans and tee shirt, and hope they don't
think I have very much money, and that they will make their money on financing. Then when we
agree on the price, I pull out the checkbook.

Yes, of course you will deal with a salesman first. You can look at cars and not tie up the boss' time.

If the price they are asking is not near what I value the car at, then I don't waste my time.
If the car is close, I just say, here is how much I'll pay and walk out if I don't get close to that price.
I'vr had them call back weeks later with "Are you still interested in that car at $XXX dollars?"
Then I'll go buy it.


I don't buy a car anywhere near what I could pay for, or even what I have in the bank.

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Re: What interest rate did you get on your car loan?

Post by Mingus » Mon Feb 03, 2014 5:29 pm

0.9% for 60 months on a 2013 Camry I bought last year.

Saleslady told me originally 0%, but turned out that only applied to 2012s they were trying to move during the big Toyotapalooza.

After the sales price was agreed upon, the dealership calculated the cost difference between 0% and 0.9% financing. And then subtracted that out of the final price. Came to around $400 in finance fees if I remember right.

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kenyan
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Re: What interest rate did you get on your car loan?

Post by kenyan » Tue Feb 04, 2014 9:55 am

0.9% (48 months) on a Subaru last November. Probably would've gone with PenFed if I had to pay more. Price was negotiated without respect to financing.
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Re: What interest rate did you get on your car loan?

Post by goblue100 » Tue Feb 04, 2014 10:22 am

Hmm, I guess I should share my rate, since it appears I did much worse than everyone else. I got a $500 rebate from Ford Motor Credit for financing through them. The caveat was I had to accept their "regular" rate. It turned out to be 4.9, which I thought was ridiculous. I have a good credit score, somewhere over 800. Since I don't intend to pay it out anyway, I didn't fight all that hard. I did consider leaving and finding my own financing but I felt like the $500 back was still the best deal for me. I will probably pay the loan off in 2 easy payments, lol.
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Re: What interest rate did you get on your car loan?

Post by wilpat » Tue Feb 04, 2014 10:46 am

0% --- 100% down and nothin' a month for the rest of my life!
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Re: What interest rate did you get on your car loan?

Post by Rattlesnake » Tue Feb 04, 2014 10:48 am

O% for 60 months.... Put about $2,500 down.... 2011 Chevy Equinox LT....
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Re: What interest rate did you get on your car loan?

Post by BorisTheSpider » Tue Feb 04, 2014 12:12 pm

Just helped my daughter buy a car on Saturday -- a 2012 Honda Civic with 16,000 miles. Interest rate was 1.79% through her credit union for 5 years.
~Boris~

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Re: What interest rate did you get on your car loan?

Post by Ron » Tue Feb 04, 2014 12:43 pm

What's a car loan :mrgreen: ?

If I can't buy it for cash, I don't buy it...

If you need to get a car loan, you're buying beyond your means, IMHO.

- Ron

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Re: What interest rate did you get on your car loan?

Post by sscritic » Tue Feb 04, 2014 12:52 pm

Ron wrote: If you need to get a car loan, you're buying beyond your means, IMHO.
Don't call it a car loan, call it leverage. Take the loan so you don't have to sell your stocks and pay a 15% tax on the capital gain. Say the car is $20k and your $20k of stock has a basis of $12k. Sell and take a gain of $8k and a tax hit of $1,200. With a 1% 20k loan, the interest is $200 the first year. With a declining balance, you can take a six year loan and still beat selling your stocks.

[see grabiner's post above where he took a loan to avoid the tax]

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Re: What interest rate did you get on your car loan?

Post by BrandonBogle » Tue Feb 04, 2014 12:53 pm

Ron wrote:What's a car loan :mrgreen: ?

If I can't buy it for cash, I don't buy it...

If you need to get a car loan, you're buying beyond your means, IMHO.

- Ron
I agree that if you can't buy it for cash, don't buy it. I agree that if you NEED to get a car loan, you're buying beyond your means. However, to me at least, that does NOT mean you don't get the loan. It all depends on what your cash can do vs. what the loan offers you.

In 2006, I could have bought my car cash, but I took the 0% loan and put my cash (minus enough to make the year's payments) in a 8.5% CD. In 2007, I rolled that over to a 7.6% CD. In 2008, I rolled that over to a 6.5% CD. In 2009, that rolled over to a 3.99% savings account. I made MUCH more taking the loan and putting the savings away safely than if I simply paid cash. Now, in today's market, the spread between the loan and a CD probably wouldn't be worth it to me. But the spread to other expenses was. I took out a 0.99% on that same 2006 car a little over a year ago. This car was completely paid off at the time. I used the funds to pay off the last of 6.8% student loans. I then funnelled all my extra cash at the 4.5% student loans. This was all while still maxing my deductible 401k and Roth IRA annually.

Morale of the story: It can sometimes make sense to take a loan vs. paying cash, but that decision should be SEPARATE from "how much car can/should I afford?"

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Re: What interest rate did you get on your car loan?

Post by mickeyd » Tue Feb 04, 2014 2:27 pm

0% 36 months. Only a few payments left.
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Re: What interest rate did you get on your car loan?

Post by jda » Tue Feb 04, 2014 2:48 pm

Ron wrote:What's a car loan :mrgreen: ?

If I can't buy it for cash, I don't buy it...

If you need to get a car loan, you're buying beyond your means, IMHO.

- Ron
5 year car loan @ 1.49%
5 year CD @ 3.04%

Both from Penfed.

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Re: What interest rate did you get on your car loan?

Post by 92irish » Tue Feb 04, 2014 3:21 pm

I last paid 4.99% to Bank of America a couple years ago (for one week - see story below). I bought a relatively expensive luxury car that was 2 years old from a dealer. We agreed on a price and was about to pay cash. The salesman said the dealership got a kick back from the bank if we financed the car and he'd lower the price by $500 if I financed through Bank of America. I checked the paperwork and there was no prepayment penalty. I took out the loan, saved $500 bucks, and paid off the loan less than a week later.

Stupid bank.

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Re: What interest rate did you get on your car loan?

Post by Professor Emeritus » Tue Feb 04, 2014 4:41 pm

MathWizard wrote: The letter with the $50K figure in it will get the dealership to have you look at $49K cars and up.
Not what I would want. .
.
Nonsense
I'm not there to Look at cars. i am there to buy a car. I know what I want and what I will pay.
but I don't deal with people who cant sell the car.

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Re: What interest rate did you get on your car loan?

Post by Professor Emeritus » Tue Feb 04, 2014 4:45 pm

sscritic wrote:
Ron wrote: If you need to get a car loan, you're buying beyond your means, IMHO.
Don't call it a car loan, call it leverage. Take the loan so you don't have to sell your stocks and pay a 15% tax on the capital gain. Say the car is $20k and your $20k of stock has a basis of $12k. Sell and take a gain of $8k and a tax hit of $1,200. With a 1% 20k loan, the interest is $200 the first year. With a declining balance, you can take a six year loan and still beat selling your stocks.

[see grabiner's post above where he took a loan to avoid the tax]
read the definition of a "sinking fund"
A sinking fund is a fund established by an economic entity by setting aside revenue over a period of time to fund a future capital expense, or repayment of a long-term debt.
http://en.wikipedia.org/wiki/Sinking_fund

anyone who owns a car should be putting the annual depreciation into a sinking fund
otherwise you are BSing yourself

Even a HELOC is better

the key is understanding your consumption pattern versus your investments. If you could lease a car at a fair price (you usually can't) you don't have the problem since you consumption is rated over time. Cars are depreciating capital goods. The depreciation is annual consumption

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Re: What interest rate did you get on your car loan?

Post by Mandrale » Tue Feb 04, 2014 5:16 pm

I don't necessarily agree with the rule of pay cash or don't get the car. Say a car is $25K and you have that amount saved up. You are offered a 0% 60 month loan. Why would you pay the face amount for the vehicle up front, rather than just making payments that will have the vehicle paid off in exactly 60 months? Or 59 months for that matter.

To me that seems like a waste of emergency funds.

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Re: What interest rate did you get on your car loan?

Post by Geist » Tue Feb 04, 2014 8:30 pm

When I returned from living overseas for a couple years, I took a 1.79% 3-year loan from USAA in July 2012. I was also buying a home 1-2 months later, so I decided that it was better to have a higher downpayment on my 2.75% mortgage than to pay cash outright for my car. Saved an effective .55% on the money (after taxes), and also prevented myself from paying PMI. win-win.

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Re: What interest rate did you get on your car loan?

Post by Professor Emeritus » Tue Feb 04, 2014 9:07 pm

Mandrale wrote:I don't necessarily agree with the rule of pay cash or don't get the car. Say a car is $25K and you have that amount saved up. You are offered a 0% 60 month loan. Why would you pay the face amount for the vehicle up front, rather than just making payments that will have the vehicle paid off in exactly 60 months? Or 59 months for that matter.

To me that seems like a waste of emergency funds.
1) car cost is not a fixed item. you routinely get suckered on the price if they can make it up on the loan
2) The moment you drive the car off the lot you are underwater on the debt anyway . so you are engaged in self delusion.
3) It's not an emergency fund if it's your car fund.
4) self delusion makes you buy more car than you can afford.
5) Borrowing the money is a way of lying to yourself that you still have an "emergency fund"

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Re: What interest rate did you get on your car loan?

Post by grabiner » Tue Feb 04, 2014 9:11 pm

Professor Emeritus wrote:
sscritic wrote:
Ron wrote: If you need to get a car loan, you're buying beyond your means, IMHO.
Don't call it a car loan, call it leverage. Take the loan so you don't have to sell your stocks and pay a 15% tax on the capital gain. Say the car is $20k and your $20k of stock has a basis of $12k. Sell and take a gain of $8k and a tax hit of $1,200. With a 1% 20k loan, the interest is $200 the first year. With a declining balance, you can take a six year loan and still beat selling your stocks.

[see grabiner's post above where he took a loan to avoid the tax]
read the definition of a "sinking fund"
A sinking fund is a fund established by an economic entity by setting aside revenue over a period of time to fund a future capital expense, or repayment of a long-term debt.
http://en.wikipedia.org/wiki/Sinking_fund

anyone who owns a car should be putting the annual depreciation into a sinking fund
otherwise you are BSing yourself
This was my first car, so the "sinking fund" concept didn't really make sense. I don't do this now with my car because the value of the car is a tiny portion of my net worth, but I do it with my home; I keep a bond allocation equal to my mortgage balance, and consider the sum of those two to be no net bond allocation. Thus I am not even taking out leverage.

But I owned the assets to pay for the car without the loan (and, twelve years later, to pay for my home without a loan). In both cases, taking out the loan made more financial sense because of the tax laws. If the IRS allowed me to use my stock to buy a car or home at no tax cost, I would have paid cash.
Wiki David Grabiner

sunnyday
Posts: 1679
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Re: What interest rate did you get on your car loan?

Post by sunnyday » Tue Feb 04, 2014 10:12 pm

Professor Emeritus wrote:
sscritic wrote:
Ron wrote: If you need to get a car loan, you're buying beyond your means, IMHO.
Don't call it a car loan, call it leverage. Take the loan so you don't have to sell your stocks and pay a 15% tax on the capital gain. Say the car is $20k and your $20k of stock has a basis of $12k. Sell and take a gain of $8k and a tax hit of $1,200. With a 1% 20k loan, the interest is $200 the first year. With a declining balance, you can take a six year loan and still beat selling your stocks.

[see grabiner's post above where he took a loan to avoid the tax]
read the definition of a "sinking fund"
A sinking fund is a fund established by an economic entity by setting aside revenue over a period of time to fund a future capital expense, or repayment of a long-term debt.
http://en.wikipedia.org/wiki/Sinking_fund

anyone who owns a car should be putting the annual depreciation into a sinking fund
otherwise you are BSing yourself

Even a HELOC is better

the key is understanding your consumption pattern versus your investments. If you could lease a car at a fair price (you usually can't) you don't have the problem since you consumption is rated over time. Cars are depreciating capital goods. The depreciation is annual consumption
Where would I invest the money in the sinking fund and what interest rate could I get for it? If I can't get > 3% guaranteed for it, then a sinking fund doesn't make sense for my situation.

I could set aside $25k for my sinking fund and make say 1% on it. In 5 years, that will grow to $26,275 (even less after taxes). Or I could use that $25k and pay down my mortgage at 3.5%. In 5 years the savings will be $29,692. If I financed a car, I would have the option to pay it off quickly if I chose to do so.

It's not BS, just math :)

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joe8d
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Re: What interest rate did you get on your car loan?

Post by joe8d » Tue Feb 04, 2014 10:55 pm

Always payed cash.
All the Best, | Joe

harikaried
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Re: What interest rate did you get on your car loan?

Post by harikaried » Wed Feb 05, 2014 12:17 am

If we bought the car last week, we would have gotten PenFed's 0% 36-month car loan through their car buying service. We ended up going with PenFed's 0.99% 48-month. That's extra ~$500 in interest for being a week too slow. Our previous car loan was 0.9% 36-month Subaru/Chase loan -- we didn't go with Subaru's financing this time because it would have been 1.9% 36-month for ~$1000 interest.

placeholder
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Re: What interest rate did you get on your car loan?

Post by placeholder » Wed Feb 05, 2014 1:18 am

Professor Emeritus wrote:1) car cost is not a fixed item. you routinely get suckered on the price if they can make it up on the loan
2) The moment you drive the car off the lot you are underwater on the debt anyway . so you are engaged in self delusion.
3) It's not an emergency fund if it's your car fund.
4) self delusion makes you buy more car than you can afford.
5) Borrowing the money is a way of lying to yourself that you still have an "emergency fund"
This is just like the "credit cards make you spend more" argument because while it is often true it doesn't need to be as one can get loans from third parties or negotiate the loan after and make all the buying decisions independently.

Lowriskok
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Re: What interest rate did you get on your car loan?

Post by Lowriskok » Wed Feb 05, 2014 2:28 am

joe8d wrote:Always payed cash.
It is never 0% percent ever. It is a marketing ploy to emotional motivate and create urgency for the buyer. Ally Finanical or GMAC is one of the largest car lender in the US. They get their funding from Mutual funds or EFTs between 0.1% to 7%, depending on the duration of the loan. Funds like FAGIX, JNK, and BND all own loan obligations from Ally Financial, as of Jan 2014. When the dealership uses Ally Financial to finance your purchase and Ally borrows at an average of 4% to cover the dealership, how would that be possible for you get 0%-2%?! Well, like any purchase of an investment or asset the immediate surrendering value after the purchase are the fees and commission. When you buy a new car and want to sell the car back to dealership immediately the discount is nearly 20% (which are the cost of selling car and buying the car back for you). The typical depreciation rate of a car after five years is 50% between private party sales. The typical price a dealership would buy back a car with less than 12K to 15K miles per year after five years is about 35% from new car price. The dealership than marks up the car between 80% to 100%.

This is the math, dealership game, and how to squeeze them:

Toyota Seinna LE new for 25K. After taxes, registration fee, and other BS fees you take the car home for $29K.

Five years later, they buy the car back for about 9K, under 80K miles.

Dealership process and re-certifies the car (they put some money to get it showroom ready, like $500-1K). Dealership's new cost is between 10K to 11K.

Car goes back on the lot between 17K to 18K.

Massive opportunity to bargain with them! Let them do the bad guy/good guy game. Use the power of walk away, smart phones searches, and clearly written contracts of what is delivered on payment day.

Make them give you two wireless keys. Every used car I tried to buy for some reason had only one key! They do not hesitate to remind me the parts department can make a new copy. Why waste your time on this tedious process and have them pass you the expenses of a second key and reprogramming?
Here is the chess move:
You are sitting down in the negotiation table.
You: Tell me about the car.
Dealership: This is a pre-owned certified car. It is an excellent car with all the reliability of new car without the price.
...
...
...
You: [inquire about how many wireless keys.]
Dealership: There is only one key.
You: I thought you said "It is like a new car."
Dealership: There is only one key.
You: Is there anything else I need to worry that is not like a new car when you said the car is a "certified car?" [pause, say nothing, look at them, and wait for their response. This is the moment you are leveraging power.]

Best day to buy a car, the first week of the month. This is because sales people want to bag a few cars quickly and reduce the stress of month so they can make their sales numbers by the end of the month.

Good luck. Now I need a drink.
:sharebeer

Lowriskok
Posts: 24
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Re: What interest rate did you get on your car loan?

Post by Lowriskok » Wed Feb 05, 2014 2:49 am

sunnyday wrote:
Professor Emeritus wrote:
sscritic wrote:
Ron wrote: If you need to get a car loan, you're buying beyond your means, IMHO.
Don't call it a car loan, call it leverage. Take the loan so you don't have to sell your stocks and pay a 15% tax on the capital gain. Say the car is $20k and your $20k of stock has a basis of $12k. Sell and take a gain of $8k and a tax hit of $1,200. With a 1% 20k loan, the interest is $200 the first year. With a declining balance, you can take a six year loan and still beat selling your stocks.

[see grabiner's post above where he took a loan to avoid the tax]
read the definition of a "sinking fund"
A sinking fund is a fund established by an economic entity by setting aside revenue over a period of time to fund a future capital expense, or repayment of a long-term debt.
http://en.wikipedia.org/wiki/Sinking_fund

anyone who owns a car should be putting the annual depreciation into a sinking fund
otherwise you are BSing yourself

Even a HELOC is better

the key is understanding your consumption pattern versus your investments. If you could lease a car at a fair price (you usually can't) you don't have the problem since you consumption is rated over time. Cars are depreciating capital goods. The depreciation is annual consumption
Where would I invest the money in the sinking fund and what interest rate could I get for it? If I can't get > 3% guaranteed for it, then a sinking fund doesn't make sense for my situation.

I could set aside $25k for my sinking fund and make say 1% on it. In 5 years, that will grow to $26,275 (even less after taxes). Or I could use that $25k and pay down my mortgage at 3.5%. In 5 years the savings will be $29,692. If I financed a car, I would have the option to pay it off quickly if I chose to do so.

It's not BS, just math :)
Cash is always king. Having cash is a form of insurance. You paid to lose to have cash but it gives you security. You never know when you car will be fail, be condemned, in an accident, or destroyed by natural disaster. The wonderful insurance people will only pay the market value of your vehicle despite the fact you can not purchase the car at the price. Insurance may only pay 80% after your deductibles. You are still out 20%.

You need a reliable car to get to work. The way people lose their home is not because they have a mortgage rather only when they are not able to make those payments. Your math of saving interest as you are paying off your home mortgage as quickly as possible is a very admirable objective.

I need a drink,
:sharebeer

winglessangel31
Posts: 211
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Re: What interest rate did you get on your car loan?

Post by winglessangel31 » Wed Feb 05, 2014 5:05 am

sunnyday wrote: Where would I invest the money in the sinking fund and what interest rate could I get for it? If I can't get > 3% guaranteed for it, then a sinking fund doesn't make sense for my situation.

I could set aside $25k for my sinking fund and make say 1% on it. In 5 years, that will grow to $26,275 (even less after taxes). Or I could use that $25k and pay down my mortgage at 3.5%. In 5 years the savings will be $29,692. If I financed a car, I would have the option to pay it off quickly if I chose to do so.

It's not BS, just math :)
jda wrote: 5 year car loan @ 1.49%
5 year CD @ 3.04%

Both from Penfed.
:sharebeer

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Go Blue 99
Posts: 830
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Re: What interest rate did you get on your car loan?

Post by Go Blue 99 » Wed Feb 05, 2014 9:38 am

5-year at 1.94%. I was going to use PenFed at 1.99% but the dealer had a better rate through PNC Bank.

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