We’re using our HELOC for a big chunk of our down payment on our new house. When we turn around and sell our current house we’ll pay off the HELOC - it’s ideal for a short term bridge loan.
How much are they offering you as a trade-in on your old car?
Thanks to all of you for the great advice. Looks like I have several good options.
Bump, I haven’t talked money with the dealer, yet. I doubt they’ll offer enough, but I’ll ask. I’m comfortable selling the car (a 2017 VW Golf R) on my own. Kelly Blue Book estimates it’s value at $27k. I checked similar cars on Craigslist, and I think I can get a little more than that. It’s crazy right now. I bought the car 3 years ago for $31.5k. It probably depreciated to $15-20k, but this year I can almost get my money back, after driving it 40,000 miles!
Yeah, used car prices are absolutely nuts now for any remotely modern car that doesn’t have any problems. The chip shortage is causing the demand for brand-new cars to not go fulfilled, meaning people are driving their not-so-new cars just a bit longer than they used to, tying up inventory that normally would go on the used car market.
I would be leery of getting financing through the dealership. They have no incentive to give you a low interest rate, and in fact if they can stick you with a higher rate, they pocket the difference. You’d also need to be VERY careful about any prepayment penalties etc.
If you do let them arrange financing, make sure you have checked around with local banks / credit unions. One place, the car we bought in the mid 1990s,they insisted I HAD to speak with their finance person, despite having been preapproved for a loan from our CU. That meeting took about 2 minutes - the guy flat out said he couldn’t beat that rate. With the most recent one, we had also gotten preapproved, and they said they couldn’t beat that rate. Then spent an hour trying to upsell us with various extended warranties etc.
Interesting. I recall, from a long time ago, that dealers often offered very good rates if you were a good enough negotiator. The theory was that borrowers rarely default on car loans as they would rather lose their house than see their car towed.
Yeah they did that to me too. Their guy actually found me a slightly better deal than my CU gave me, but I was going to repay the loan in entirety the next week anyways so I stuck with what I already had.
Vinny in action:
There are numerous loan services you can find online. While they may list a term of 24 months there is no penalty for paying off early.
Of course, they basically nail you with the fees upfront so there may well be less expensive options but these loans are usually really easy and fast to get.
You’d have to do some math to see if it is worth it.
That’s the point: you have to be a good negotiator and know what the going rate is when you go in.
Some articles on the dealership markup:
For what the OP is doing, this wouldn’t make a lot of difference as he’s expecting to pay it off in full within a few weeks. Still, it’s good to go in armed with alternate rates if possible. And read any paperwork carefully before signing - IIRC, GM’s in-house financing was notorious for having prepayment penalties.
I only once had a dealer arrange financing - for my first “real” car (a Dodge Omni, in 1982). The rate was something like 15% - which sounds high, but was actually not that outrageous for back then. I’m sure there was some markup involved. We paid it off somewhat early as I recall. I think we did bank financing through our own bank for our next car in 1985, and every car since then was financed through the credit union.
With our most recent purchase, they might have been able to come somewhat close to the CU rate, but not quite, and we’d been preapproved for that one. We did have to provide proof of having the large down payment, to avoid another hard credit pull; fortunately, my pulling up our CU’s app on my phone and showing them the balance solved that quickly.
I think I’ve read that car dealers get “kickbacks” for arranging financing, so if you finance the car through them, you might pay slightly less. So it might be worth financing through the dealer, as long as there’s no prepayment penalty, and then just refinance elsewhere or pay it off the next week.