Financing a car? New vs Used

What is the best way to finance a car? Should I go through a dealer or should I try to get a loan from the bank? What are your experiences? I don’t think I will have enough cash to buy a car outright. I’d like to get a new car (mostly because I like the idea of peace of mind for three years) My two choices right now are a Honda Fit and a Toyota Matrix.

The average rate for car loans right now is about 6.8%. Call your bank and ask what kind of rate they will give you.
When you go to buy the car tell them that you have secured financing through your own bank so you will only be negotiating the price of the car. If not they will use this to their advantage to play with the numbers (i.e. What’s the max you can afford a month? How about an extra $10 a month? Let’s stretch it over 6 years. etc.) Don’t play that game.
Once you have the price of the car settled upon and in writing tell them you’d like to talk to their financing department to see if they can offer you a better rate than your bank is giving you. 9 times out of 10 they will be able to beat it. Then just finance it through the dealer.

I just bought a Honda CRV last week. My wife and I have very good credit scores, so we were able to get the Honda “special” rates. Right now it is 1.9% for 36 months, 2.9% for 48 months, and 3.9% for 60 months.

I would suggest working with the internet/fleet team. Most of them didn’t play games with me. When I went around doing test drives, almost every floor salesman tried to screw around with me. Also, get quotes from multiple dealerships.

While new car dealers are hurting big time these days and may grovel to help you, if the warrantee alone is pushing you toward a new car, check CarMax cars and their MaxCare warrantee. Their warantee costs more, but a potentially lower vehicle cost could still make that a better overall deal. Still go in with financing already approved. If nothing else you will have peace of mind you made the best choice for you.

Nitpick: warranty, not warrantee.

A warrantee is the holder of a warranty or guarantee.

rainwalker’s suggestion is wise - the fleet sales department doesn’t have time to muck about with you and try upselling, so they’re no good if you don’t know what you want, but perfect if you do.

Not directly related to financing, but if you are interested in a Toyota Matrix, you might want to take a look at Pontiac Vibes - the two cars are nearly identical, and are built in the same factory. The Vibe might end up slightly cheaper, or with better financing.

When I bought my current Expedition used (at the height of $4.35/gallon gasoline), I went in with financing at a rate that I liked, got the price that I liked (again, $4.35 gasoline; it was easy), and told them I’d be back in two days with the certified check, but I’d give them the chance to finance me on the spot given the same terms. They couldn’t do it on the spot, but about an hour later I got the call, and I went in a few hours later, signed the documents, and drove home with my truck.

If you have access to a credit union, go thru them. Worth joining for a auto loan.

Fun fact: Mrs. Ftg’s won’t finance Carmax cars since they are waaay overpriced.

Having just gone through the process, my advice is to know as much info as possible going in.

Determine the price you think you can get for each of your target cars (including tax, title, license) and even try and nail down that number with a dealer over email. When I negotiated with our dealer over email, I told him I wanted to know both the offered price and what that would be “out the door including tax, title, license.” That way, I didn’t have to try and estimate that stuff myself and I could check his calculations. Then, subtract your down payment and that will give you a rough idea of the amount you’ll have to finance.

Your bank will probably have their auto loan rate right on their website. Our credit union offered a better rate (5.9%) than our bank and we were able to apply online and get pre-approved. After I was pre-approved, I talked to the CU guy and I asked if he thought we’d qualify for a special rate offered by the dealer. It’s not like he can say for sure, but it was nice to know his opinion (e.g. “you have great credit” vs. “you bearly made the cut with us”) before we went to the dealer.

Check out the Toyota and Honda websites. They should have pages for their current incentives, which include financing deals, cash back offers, ect.

Start playing with some financing calculators online. Take the amount you’re willing to pay for the car, minus the down payment, and plug it into the calculator with the rate your bank is offering. Then do it for what the car dealer is offering (if you think you’ll get it) and compare the monthly payments and amount of interest you’ll pay over the course of the loan. Adjust the loan length and see how it changes your payment and what you’ll pay in interest.

Keep in mind that financing through the dealer at an incentive rate will often cancel out their rebate offer. In my case, they were offering $750 back or 3.9%. By using a calculator, I could see that their interest rate would save me more than $750 over the long run. Each time I computed a different scenario with the online calculator, I printed the page so I could quickly reference it at the dealer.

You mentioned new vs. used cars. Our CU offered the same financing rate on I think any car, used or new, that was 2006 and newer (or maybe 2007). Then they had different rates for older used cars. They offered a .25% lower rate if you go with online payment, and another .25% off if you got a hybrid, so those are other things you can ask about. Also keep in mind that a lightly used car that’s only a year or two old may still have some of the warranty left on it, and if it’s a Certified Used Car, it may have an extended warranty.

Auto Dealer Finance Manager checking in.

Your finance rate will depend on your credit history, the amount you need to finance vs. the value of the car you are financing, the length of the contract, and new vs. used.

Used car rates are in most cases higher than new car rates. Credit Unions can be an exception as many have the same rate no matter what you are financing, as long as you qualify for their program.

Credit Unions don’t always have the best rates or terms. It is wise for you to secure financing before you walk in the dealership in order to give you some negotiating leverage. Always let the dealership try to get you a better deal. Most of the time I can. Sometimes I can’t, but you don’t want to pay more if you don’t have to.

I had a customer the other day that got a 4.79% for 72 month loan on a used vehicle. He had a stellar credit history.

In the last two weeks though that rate has been more typical of new cars. I’m seeing 5.79-6.79 on used for people with really good credit.

The manufacturer may offer 0%, or 1.9% or the like. If they do, and you qualify, you will probably save more money in the long run by taking the rate rather than cash back if you have to choose between the two options. Usually we have some type of program such as 0% for 48 OR $2000 rebate. If you are financing a larger sum, the rate is better. You have to figure out what the break even point is. The Finance Manager should give you those options if they are worth their salt.

Good luck!

I shopped financing with my credit union, a regular bank, and - shockingly - Capitol One Auto finance. (Because gawd-amighty I hate Capitol One!) Capitol One Auto Finance was the best until I got to the dealer, who gave me 2.9%. This was all on a new car. I also had 20% to put down. My understanding is that that can also make a difference in your rate.

I always get my own financing before going to the dealership. Then, as another poster said, only negotiate on the full price of the car, not a monthly payment.

Then, at the end, I tell them that I have my financing in place, but I will be glad to go with them if they can do better than my financing. Usually those 1.9% or 0.9% deals have a cash back option as well.

Bring a calculator and figure out if you would be better financing the higher amount at the lower rate, or the lower amount at the regular rate.

And in the past 10 years, all my negotiations were done online. I just pick out the car I want, and email all the local dealers, telling them what I want and ask their bottom line full price.

If you’ve got a trade-in, you almost have to negotiate in person, but recently, I don’t trade in. I sell my old car on Ebay Motors and buy the new one outright.

My last 3 cars were 1.9% and 0% and 0%.

I always negotiate to the lowest interest rate and then re-negotiate the price of the car. And feeling good about all that will attempt to get free stuff, oil changes, mats, whatever. The best deals finacially are always on new cars, not used. But the best price will be on used cars. A good used car you do not credit for can be a better deal.

Yep, negotiate online and use the quotes you get against their competitors. Ask them directly how much better than xxxx they can do. I didn’t see one sales person until the day I went to pick up my car. I negotiated everything including financing via email. I was in an out of the dealership when I got my car.

Interestingly enough, for the aforementioned SUV, CapitalOne is bank that the dealer used to fund my loan near instantly. But that’s not the interesting thing. The interesting thing is that I’d already been approved by them, but subsequently rejected them when they came back with an unacceptable rate. Yes, the dealer actually got the rate down below the directly-available rate, and of course with dealer discount, the net earnings on my loan will be less than if they’d given my preferred rate in the first place.

Really? They got kinda screwed? Yay!!! Thank you for doing your part to dick Capitol One, oh Mighty Balthisar.

Well the reason that I went to them first was because I’d had a previous loan originated with PeopleFirst, who were totally and completely excellent in every way. Then, CapitalOne bought PeopleFirst, and only had to collect my payment for a year or two, so I didn’t have any bad experience to keep me away (I’ve never had a CapitalOne card, but I always hear that their service is bad).

Capital One has many branches. There’s a branch for credit cards, a branch for Capital One Blank Check (their online auto loan), and a Capital One Auto Finance that the dealers use (and I’m sure there are other branches too). None of the branches are connected except at the very base of the tree. My CapOne buyer loves to beat the Blank Check rate. The Blank Check branch takes business away from the dealer branch so they love to screw them back.

I didn’t realize that the “blank check” people were different than the dealer financing people, but the dealer financing people certainly trounced the blank check people in my case. Now I’m wondering if I couldn’t have done better, since I was content that they “merely” matched a signature loan rate (which, in any case, was the absolute best I was able to acquire online, oddly enough).