Author Topic: More than 100% Financing  (Read 3429 times)

poetdereves

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More than 100% Financing
« on: September 27, 2018, 02:47:06 PM »
I just received an email from my credit union that says that they are now offering financing cars for more than 100% of the value so that you have the chance to buy upgrades. They are also offering the ability to get cash out for the extra value. You can pretty much get a car loan and personal loan all in one. Has anyone else ever heard of this?! I cannot imagine the people that sign up for that. You end up being upside down on your loan from day one!

Just Joe

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Re: More than 100% Financing
« Reply #1 on: September 27, 2018, 02:55:05 PM »
Well if a person is shopping for payments rather than total purchase cost then they won't care. I've heard of these loans. Pay off other debt with the extra money or go straight to buying custom wheels and stereo. ;)

I figure the next recession is getting closer every time I hear about more ways to wildly spend money.

dandarc

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Re: More than 100% Financing
« Reply #2 on: September 27, 2018, 02:55:41 PM »
Out of curiosity, what is the interest rate?

poetdereves

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Re: More than 100% Financing
« Reply #3 on: September 28, 2018, 08:05:35 AM »
It says rates as low as .9%, so I can see someone taking advantage if that in some type of leveraging situation. I just don't think that's what the normal patron is thinking.

ysette9

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Re: More than 100% Financing
« Reply #4 on: September 28, 2018, 09:37:54 AM »
In my young and foolish days I did exactly this. The 100% financing doesn’t cover things like warranty, protective finish, or any of those other things they try to up-sell you. I definitely had the lunch at the time that maybe this was a bad idea, but had my parents with my encouraging me on. I paid off the car early, no problem, I kept it for ten years, but it was a dumb move in retrospect.

Indexer

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Re: More than 100% Financing
« Reply #5 on: September 28, 2018, 10:21:47 AM »
You hear about people who get a new car when they are still underwater on the last car and they finance the difference. That requires more than 100% financing so this happens pretty often.

Slee_stack

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Re: More than 100% Financing
« Reply #6 on: September 28, 2018, 11:30:16 AM »
It says rates as low as .9%, so I can see someone taking advantage if that in some type of leveraging situation. I just don't think that's what the normal patron is thinking.
Oh heck, I wonder if they do refi's.

I chose a 1.9% on my used vehicle and financed as much as I could for as long a term as I could get.  I'd love to up the loan and get a lower rate and/or longer term!  I'd definitely dump whatever 'cash out' I could get into an investment.  Even a piddly 2.5% CD would be a sweet easy and guaranteed bonus.

Obviously the majority of the car buying population would use the 100%+ to just spend even more money they don't have.
« Last Edit: September 28, 2018, 11:34:51 AM by Slee_stack »

faithless

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Re: More than 100% Financing
« Reply #7 on: September 29, 2018, 05:50:43 AM »
I'm a bit confused as to how they can offer .9% on what is a leaning towards being an unsecured loan?
I figured mortgages and car loans were cheaper cause they're secured, but that doesn't hold so much truth when you're offering over 100%. Once you drive it off the lot it's worth substantially less than 100% of what you paid, never mind what it's worth compared to more than 100%!

TheGrimSqueaker

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Re: More than 100% Financing
« Reply #8 on: September 29, 2018, 12:22:10 PM »
How in the world do they find insurance?  Do they buy a regular policy plus a gigantic "gap" insurance for the rest of the by-definition-underwater loan?

They aren't just underwater on that loan. They're knees-deep in the Mariana Trench.

secondcor521

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Re: More than 100% Financing
« Reply #9 on: September 29, 2018, 07:02:17 PM »
I'm a bit confused as to how they can offer .9% on what is a leaning towards being an unsecured loan?
I figured mortgages and car loans were cheaper cause they're secured, but that doesn't hold so much truth when you're offering over 100%. Once you drive it off the lot it's worth substantially less than 100% of what you paid, never mind what it's worth compared to more than 100%!

My guess is that they offer 0.9% as a teaser rate and only on loans with terms of 24 months or shorter.  Most everyone interested in this type of loan is also interested in a 72 or 84 month term, so the 0.9% is just the headline rate to get them in the door.

The other game they could play is offering 0.9% as the rate but then selling the car for $5K over its real value.

faithless

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Re: More than 100% Financing
« Reply #10 on: September 30, 2018, 04:04:14 AM »

The other game they could play is offering 0.9% as the rate but then selling the car for $5K over its real value.

If the loan were from the dealer, I'd assume they were marking it up, but it's from a credit union, that's what got me!
I agree that's likely just a teaser rate though.

talltexan

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Re: More than 100% Financing
« Reply #11 on: October 02, 2018, 09:31:46 AM »
I'm pretty open-minded to smart debt, but for some reason, whenever anyone talks about "refinancing" a car, the Dixie Chicks song "There's your trouble" plays in my head.

CoffeeAndDonuts

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Re: More than 100% Financing
« Reply #12 on: October 06, 2018, 06:16:38 AM »

The other game they could play is offering 0.9% as the rate but then selling the car for $5K over its real value.

If the loan were from the dealer, I'd assume they were marking it up, but it's from a credit union, that's what got me!
I agree that's likely just a teaser rate though.

I just went through this. We finally threw up our hands after weeks of looking for just the right ev for us and bought a 2018 leaf.

So, we decided to see what kind of deal we could get and I inventoried every leaf available within 250 miles of us. I discovered WI had better prices for some reason. Two WI dealers were competing on price.

I also called all our local dealers withh a suitable vehicle in stock asking them to meet the WI price. Each told me to go pound sand... Until the last one who said "I like you directness. I'll take I."

Off I go with to buy it that am with a 2.59% pre approval from boa intending to borrow instead of selling equities.

Dealer offers to me to raise price by $2400 and I get 0% for 6 years.

I worked the math and said yes. The spread in rates made it worth it to me, reducing cost by another $1000 or so.

Before saying yes, I chatted w my wife to make sure we really, really we're keeping this car for 6+ years. Sure are. Last cars are 9 and 18 years old right now so not unusual.

Anyway, it felt so weird and wrong to turn down the cash today for a slightly lower loan. But the math works.

Weirder yet is that we financed every cent, not accounting for the fact that we receive the full $7500 credit.

That credit creates a massive depreciation for lightly used ev's so I'm massively overborrowed on this thing.

Explaining to people what I paid is a very confusing conversation to all involved.

It was the most math I've ever done for a car purchase. I kept doubting myself as it became more complicated.

Super happy with the car and 99% confident in our deal.

Slow2FIRE

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Re: More than 100% Financing
« Reply #13 on: October 07, 2018, 10:33:51 PM »
I'm a bit confused as to how they can offer .9% on what is a leaning towards being an unsecured loan?
I figured mortgages and car loans were cheaper cause they're secured, but that doesn't hold so much truth when you're offering over 100%. Once you drive it off the lot it's worth substantially less than 100% of what you paid, never mind what it's worth compared to more than 100%!

One of the "lessons" that the financial institutions "learned" from the Great Recession is that while people may stop paying their mortgage, even though they thought that would never happen, they did find that many people did all they could to continue making the car payments even when they couldn't make their mortgage payments.

FamilyGuy

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Re: More than 100% Financing
« Reply #14 on: October 08, 2018, 08:52:58 AM »
Hmmm. Interesting !!

talltexan

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Re: More than 100% Financing
« Reply #15 on: October 08, 2018, 08:53:15 AM »
Cars are easier to re-possess. Much, much easier. Just need one guy and a truck in the middle of the night.

chouchouu

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Re: More than 100% Financing
« Reply #16 on: October 10, 2018, 03:42:34 AM »
I just received an email from my credit union that says that they are now offering financing cars for more than 100% of the value so that you have the chance to buy upgrades. They are also offering the ability to get cash out for the extra value. You can pretty much get a car loan and personal loan all in one. Has anyone else ever heard of this?! I cannot imagine the people that sign up for that. You end up being upside down on your loan from day one!
Well, stupid shit happens when the reserve bank essentially pays people to spend. Lowering the cash rate below inflation has never happened before the global financial crisis and we're going to see what a decade of free money does in the not too distant future. It has been an interesting experiment, I think in Australia they expected people to pay off their homes sooner and get out of debt, instead they over leveraged and bought bigger houses and created a housing bubble too big to pop. Judging by the crazy loan market in the US  things might go a bit banana Republic by the looks of it.

sapphail

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Re: More than 100% Financing
« Reply #17 on: October 10, 2018, 04:31:34 AM »
I think in Australia they expected people to pay off their homes sooner and get out of debt, instead they over leveraged and bought bigger houses and created a housing bubble too big to pop. Judging by the crazy loan market in the US  things might go a bit banana Republic by the looks of it.

They might have possibly believed that right at the beginning, but the bubble has been debt-fueled by easy credit. Banks were lending to anyone with three payslips and a pulse, and at one point 60% of buyers were investors, not first home buyers. The government is complicit too, they should have given the regulators some teeth to prevent all the irresponsible lending (not excusing the irresponsible borrowers here, of course). APRA stepped in earlier this year, and there's been the Royal Commission as well, but it's all too little much too late. A lot of over-leveraged 'investors' are going to be in some serious poop in about twelve months' time.

talltexan

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Re: More than 100% Financing
« Reply #18 on: October 10, 2018, 07:55:08 AM »
I, too, have been trying to pay down debt over the past year, not because the amount I have was necessarily problematic, but rather because it gives me more options to be debt free if there is some kind of bubble-burst.

craiglepaige

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Re: More than 100% Financing
« Reply #19 on: October 10, 2018, 09:20:16 AM »
I, too, have been trying to pay down debt over the past year, not because the amount I have was necessarily problematic, but rather because it gives me more options to be debt free if there is some kind of bubble-burst.

A mustachian does not fear the bubble, it relishes within its chaos.

chouchouu

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Re: More than 100% Financing
« Reply #20 on: October 14, 2018, 01:20:40 AM »
I think in Australia they expected people to pay off their homes sooner and get out of debt, instead they over leveraged and bought bigger houses and created a housing bubble too big to pop. Judging by the crazy loan market in the US  things might go a bit banana Republic by the looks of it.

They might have possibly believed that right at the beginning, but the bubble has been debt-fueled by easy credit. Banks were lending to anyone with three payslips and a pulse, and at one point 60% of buyers were investors, not first home buyers. The government is complicit too, they should have given the regulators some teeth to prevent all the irresponsible lending (not excusing the irresponsible borrowers here, of course). APRA stepped in earlier this year, and there's been the Royal Commission as well, but it's all too little much too late. A lot of over-leveraged 'investors' are going to be in some serious poop in about twelve months' time.

I think the government knew exactly what was happening and didn't care, it's pure self interest. They're all baby boomers and have benefited very nicely from the increase in real estate prices plus most of their voter support comes from the same demographic.  So they protect housing prices at all costs, I'm sure there will be plenty of protections when it starts crashing, all to help investors from their own foolishness but to the cost of everyone else.

Sugaree

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Re: More than 100% Financing
« Reply #21 on: October 14, 2018, 10:39:44 AM »
I'm pretty open-minded to smart debt, but for some reason, whenever anyone talks about "refinancing" a car, the Dixie Chicks song "There's your trouble" plays in my head.

I refi'd a car once.  Lowered the interest rate by 5% but kept throwing the same amount into paying it off.

talltexan

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Re: More than 100% Financing
« Reply #22 on: October 16, 2018, 11:27:51 AM »
Thank you...how onerous was the refinance? Was it filling out an application at a credit union and paying like a $35 origination fee?

Sugaree

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Re: More than 100% Financing
« Reply #23 on: October 16, 2018, 12:21:12 PM »
It wasn't bad.  Did it over a lunch hour at my credit union.  It was pretty much just filling out the application and paying their fee.  The hardest part was getting my car insurance paperwork transferred over and that just took a few phone calls.

ixtap

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Re: More than 100% Financing
« Reply #24 on: October 16, 2018, 02:07:32 PM »
Well if a person is shopping for payments rather than total purchase cost then they won't care. I've heard of these loans. Pay off other debt with the extra money or go straight to buying custom wheels and stereo. ;)

I figure the next recession is getting closer every time I hear about more ways to wildly spend money.

Are 0% down, interest only mortgages back yet?

talltexan

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Re: More than 100% Financing
« Reply #25 on: October 17, 2018, 11:35:38 AM »
*raises hand, pick me, pick me!!!

Chris22

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Re: More than 100% Financing
« Reply #26 on: October 19, 2018, 10:00:51 AM »
I financed over 100% the value of a car once, because I rolled the sales tax into the loan and put $0 down.  I was all ready to make a sizable down payment, but the loan rate was 0.9%, really no point to putting anything down.  Yeah, I was upside down, but since I had money in the bank I didn't really care (upside down only matters if you want to/have to sell).  I paid that loan off (let it go full term, 48 months) and drove the car several more years.  The worst case scenario would have been I had to sell the car and then I would've had to just pay the money I was going to put down anyways.  No fucks given.

Granted, that's very different than rolling a ton of negative equity into a purchase, but it's an example of why someone might finance ~108% (in my case) of the purchase. 

swampwiz

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Re: More than 100% Financing
« Reply #27 on: October 19, 2018, 10:26:33 PM »
I'm pretty open-minded to smart debt, but for some reason, whenever anyone talks about "refinancing" a car, the Dixie Chicks song "There's your trouble" plays in my head.

I refi'd a car once.  Lowered the interest rate by 5% but kept throwing the same amount into paying it off.

I had a recently-new car that was purchased in cash, and when the stock market downturn of the early 00's happened, I hocked the car and bought a leveraged Nasdaq fund that doubled in value in 1 year and a half.