Auto loans for new car

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magoouniv
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Joined: Sun Jun 26, 2022 11:42 pm

Auto loans for new car

Post by magoouniv »

Does anyone have any recommendations for best practices on auto loans for a new car?

I am planning on getting a new car for ~30k and could theoretically pay cash, but thinking of just taking out a ~2% loan and investing the rest into my portfolio. Was thinking of doing 20% down over 2 or 3 years.

Would love any perspective from the group on the approach broadly and how others decided to purchase their vehicles. Thanks!
Admiral
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Joined: Mon Oct 27, 2014 12:35 pm

Re: Auto loans for new car

Post by Admiral »

Welcome to the forum.

I can't comment on whether a 2% car loan is even still available...it's possible, though that would be a good rate in the current market.

Keep in mind that a loan from a car manufacturer's financing arm may appear low, but is likely to be adjusted based on the price you pay at the dealer, which might ultimately make the car more expensive even with this "low APR! 0% financing" gimmick. They still make money even with "0%" financing.

When I bought a new car in late 2020 I put down $10k and financed $20k thru PenFed for 2.1% for 36mo, because I didn't want to sell $20k in stock and pay cap gains. Total interest was around $600 over three years which seemed (and still seems) like a great deal. If you can find fixed income rates higher than your car loan rate, then it's a no brainer to me. Naturally the shorter the term, the better. 36mo was the sweet spot for me in terms of having a new car paid off while it's still "new" and killing the car payment pretty rapidly.

First, agree on an out-the-door price, then go get your financing. You can also tell them you're paying cash, then "change your mind." It's possible that the dealer might agree to a price and then make you a financing offer, but in my experience this is not the norm, and not the way they make the most money.

Others will have varying mileage!
Jack FFR1846
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Re: Auto loans for new car

Post by Jack FFR1846 »

I've watched YAA on youtube and learned from them that taking a loan from the dealer is your best move to get a price reduction on the car. Up front, tell them that you want to finance. Sure, you can push them for a lower interest rate and you may beat your best outside rate. I did once, buying a Subaru where the credit union office was literally 100 yards away. They beat the credit union rate and I took the loan.

Now, I get that you may want to pay cash. Make the first 3 payments, then pay off the loan. There's a good chance that your price on the car will be $1000 higher if you don't take the dealer's loan. The dealer gets a kick back that can be over $1000 for writing the loan, so it makes sense that they are willing to drop the price if....and only if you take the loan through them.

If after paying those 3 payments, you want to get a lower rate, DCU pretty much specializes in re-financing car loans and their rate for new cars, used cars and re-financing is exactly the same.

If you are set that you will pay cash, dig into that wallet a bit more because it's going to likely cost you an extra grand to do so.
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MorgansRun
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Joined: Tue Jun 08, 2021 8:07 am

Re: Auto loans for new car

Post by MorgansRun »

I just got a '22 Mazda CX-5 last month and i did my loan research ahead of time. I told the dealer i was pre-approved for 3.49% from my credit union, but they did their magic and got me 3.19% for the same term (this was before the most recent rate hike, so I can only imagine rates are going up). My credit score is above 800 to give you a reference point.
KyleAAA
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Re: Auto loans for new car

Post by KyleAAA »

Conventional wisdom is the dealer will typically be able to beat your pre-arranged financing and, since they get a kickback on it, will usually be willing to give you a bit of that as a discount if you finance through them. You should at least give them the chance to try if you want the lowest price. Paying cash will typically get you the worst price.
delamer
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Re: Auto loans for new car

Post by delamer »

Just an FYI, my credit union is offerng 2.24% for 36 months and 2.44% for 48 months (I assume with excellent credit).

I’d probabky take that rate rather than pay income taxes on a sale of securities, or a withdrawal from tax-deferred.

I was surprised the rates were that low, given what’s happened with mortgage rates lately.
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livesoft
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Re: Auto loans for new car

Post by livesoft »

Four years ago loan rates were 0%. Are they still not available?
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dknightd
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Re: Auto loans for new car

Post by dknightd »

I recency bought a new car, I decided anything less than 2% would be OK.
Retired 2019. So far, so good. I want to wake up every morning. But I want to die in my sleep. Just another conundrum. I think the solution might be afternoon naps ;)
dknightd
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Re: Auto loans for new car

Post by dknightd »

livesoft wrote: Mon Jun 27, 2022 9:46 am Four years ago loan rates were 0%. Are they still not available?
Go buy a new car, and find out for yourself
Retired 2019. So far, so good. I want to wake up every morning. But I want to die in my sleep. Just another conundrum. I think the solution might be afternoon naps ;)
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