Author Topic: Saw this while sitting in used car dealer's finance office  (Read 10548 times)

PhreakyMike

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Saw this while sitting in used car dealer's finance office
« on: November 07, 2013, 09:15:13 AM »
I bought a used car with a certified bank draft yesterday. Earlier last week, when I was in the Finance Manager's office, the first question he asked me was: "I hear you are paying cash, are you paying with 'fake cash' from a line of credit, or 'real cash' from your own account...we need to know where this money comes from for security purposes".

 I was perplex with his question.... with a confused look on my face, I said "uh...real cash?...my own savings". Seems like this is the classic preamble for offering their own financing.

So we carried on with the financial paperwork. Shortly after, I noticed a sign next to me and asked my wife to take a picture of each side.


http://imgur.com/RmWs3Jb

http://imgur.com/7JSJxoP

First post! :)
« Last Edit: November 07, 2013, 09:46:49 AM by PhreakyMike »

GuitarStv

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Re: Saw this while sitting in used car dealer's finance office
« Reply #1 on: November 07, 2013, 09:23:55 AM »
Woah.
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Mississippi Mudstache

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Re: Saw this while sitting in used car dealer's finance office
« Reply #2 on: November 07, 2013, 09:32:36 AM »
They're all pathetic, but this one: "Lost opportunity for inexpensive life and disability loan insurance"...WTH?
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AlmostIndependent

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Re: Saw this while sitting in used car dealer's finance office
« Reply #3 on: November 07, 2013, 10:20:45 AM »
The ease and speed with which I can dispel each of those points as complete bullshit makes it really hard for me to believe that anyone actually falls for that shit. But alas I am a perpetual optimist and put way too much faith in society in general.

Funny, but sad. Thanks for sharing.
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Jamesqf

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Re: Saw this while sitting in used car dealer's finance office
« Reply #4 on: November 07, 2013, 10:53:10 AM »
Yet another reason not to buy from dealers :-)

Forcus

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Re: Saw this while sitting in used car dealer's finance office
« Reply #5 on: November 07, 2013, 11:21:29 AM »
I love that that sign is right next to the undercoating / scotchgard / paint protection package sign :)
Note, these opinions are from someone who is half-mustachian at best. Please consider my comments in that light.

footenote

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Re: Saw this while sitting in used car dealer's finance office
« Reply #6 on: November 07, 2013, 11:27:17 AM »
1) Car dealers make a shit-ton from financing. So of course they are going to try to persuade you to finance through them. (Not through your own stinkin' line of credit!) While I find this unattractive and obviously unMustachian, it is a free market reality.

2) Having said that, there are Patriot Act anti-money laundering hoops to jump through for businesses dealing with large transactions. So the finance manager probably did actually need to understand where the money was "coming from."
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NumberCruncher

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Re: Saw this while sitting in used car dealer's finance office
« Reply #7 on: November 07, 2013, 12:34:22 PM »
Haha! Thanks for sharing. My favorite excuse for buying a new car instead of an old car was that the financing rates were lower...

Today I learned what disability insurance for a car loan is!

http://money.stackexchange.com/questions/4041/should-i-get-credit-life-or-credit-disability-insurance-with-my-auto-loan

"If you die before payments have been completed, full ownership of the car would be transferred to a beneficiary that you name, and they would not have to make any of the remaining payments. If you become sick/disabled and unable to work, the insurance would cover car payments until you are able to resume working and paying. The idea appears to be to protect your investment already put into the vehicle instead of losing ownership in the event illness or death (transfer of ownership)."

Yet another reason why buying an expensive car on credit is a bad idea.

Phoebe

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Re: Saw this while sitting in used car dealer's finance office
« Reply #8 on: November 07, 2013, 01:01:21 PM »
Holy cow!  Haha, those are hilarious, thanks for posting!

zinnie

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Re: Saw this while sitting in used car dealer's finance office
« Reply #9 on: November 07, 2013, 01:06:08 PM »
Wow. Thanks for sharing!

mlipps

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Re: Saw this while sitting in used car dealer's finance office
« Reply #10 on: November 07, 2013, 01:17:00 PM »
1) Car dealers make a shit-ton from financing. So of course they are going to try to persuade you to finance through them. (Not through your own stinkin' line of credit!) While I find this unattractive and obviously unMustachian, it is a free market reality.

2) Having said that, there are Patriot Act anti-money laundering hoops to jump through for businesses dealing with large transactions. So the finance manager probably did actually need to understand where the money was "coming from."

Except that OP is Canadian. And I think those only apply with cash, not a bank draft/cashiers check type transaction.

Numbers Man

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Re: Saw this while sitting in used car dealer's finance office
« Reply #11 on: November 07, 2013, 01:44:44 PM »
That is some creative shit, ROFL!

skyrefuge

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Re: Saw this while sitting in used car dealer's finance office
« Reply #12 on: November 07, 2013, 02:00:58 PM »
I can dispel each of those points as complete bullshit

Even the first two on the "Cash" side? They actually seem like legitimate arguments to me, the kind that are actually discussed frequently on these boards ("should I invest, or pay down my mortgage?")

If the loan from the dealer doesn't cause you to spend any more money for the car than you would have spent in cash, AND if the interest rate on the dealer's loan is lower than your expected return from investments (or your mortgage rate), then it IS mathematically optimal to take the loan.

Now, it's probably unlikely that the dealer will offer you money that cheaply, but who knows?

huadpe

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Re: Saw this while sitting in used car dealer's finance office
« Reply #13 on: November 07, 2013, 02:09:11 PM »
I can dispel each of those points as complete bullshit

Even the first two on the "Cash" side? They actually seem like legitimate arguments to me, the kind that are actually discussed frequently on these boards ("should I invest, or pay down my mortgage?")

If the loan from the dealer doesn't cause you to spend any more money for the car than you would have spent in cash, AND if the interest rate on the dealer's loan is lower than your expected return from investments (or your mortgage rate), then it IS mathematically optimal to take the loan.

Now, it's probably unlikely that the dealer will offer you money that cheaply, but who knows?

If you believe in the efficient markets hypothesis, you cannot get a risk-adjusted return above what someone is willing to lend you money at.  The current expected and risk adjusted return will always be no higher (and usually lower) than the rate of interest you are being offered.

If you are being offered a rate below market interest rates, it is uniformly to get you to purchase more of a high-margin good than you otherwise would, or to pay a higher price for a given good than the difference between market rate and the offered rate.  Sometimes, if you're very careful, they will have a poorly drafted contract which lets you get a below market rate without paying more for the good.  But this is extremely uncommon, and unless you have read the whole contract, and understand EVERY clause fully, you should assume it screws you...because it probably does.

footenote

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Re: Saw this while sitting in used car dealer's finance office
« Reply #14 on: November 07, 2013, 02:25:40 PM »
1) Car dealers make a shit-ton from financing. So of course they are going to try to persuade you to finance through them. (Not through your own stinkin' line of credit!) While I find this unattractive and obviously unMustachian, it is a free market reality.

2) Having said that, there are Patriot Act anti-money laundering hoops to jump through for businesses dealing with large transactions. So the finance manager probably did actually need to understand where the money was "coming from."

Except that OP is Canadian. And I think those only apply with cash, not a bank draft/cashiers check type transaction.
I did not notice the Canadian, apologies.
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willn

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Re: Saw this while sitting in used car dealer's finance office
« Reply #15 on: November 07, 2013, 02:44:21 PM »
I can dispel each of those points as complete bullshit

Even the first two on the "Cash" side? They actually seem like legitimate arguments to me, the kind that are actually discussed frequently on these boards ("should I invest, or pay down my mortgage?")

If the loan from the dealer doesn't cause you to spend any more money for the car than you would have spent in cash, AND if the interest rate on the dealer's loan is lower than your expected return from investments (or your mortgage rate), then it IS mathematically optimal to take the loan.

Now, it's probably unlikely that the dealer will offer you money that cheaply, but who knows?

If you believe in the efficient markets hypothesis, you cannot get a risk-adjusted return above what someone is willing to lend you money at.  The current expected and risk adjusted return will always be no higher (and usually lower) than the rate of interest you are being offered.

If you are being offered a rate below market interest rates, it is uniformly to get you to purchase more of a high-margin good than you otherwise would, or to pay a higher price for a given good than the difference between market rate and the offered rate.  Sometimes, if you're very careful, they will have a poorly drafted contract which lets you get a below market rate without paying more for the good.  But this is extremely uncommon, and unless you have read the whole contract, and understand EVERY clause fully, you should assume it screws you...because it probably does.

I guess the value of the car at the end of the financed term figures into this too, although it doesn't change whether you buy with cash or with credit, so I guess that isn't variable across the comparison?  But, it does seem wrong to finance a rapidly depreciating asset.  A 30K car turns into a 15K car pretty damn quick, which could increase risk if you owe more than its worth.

AlmostIndependent

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Re: Saw this while sitting in used car dealer's finance office
« Reply #16 on: November 07, 2013, 03:57:30 PM »
I can dispel each of those points as complete bullshit

Even the first two on the "Cash" side? They actually seem like legitimate arguments to me, the kind that are actually discussed frequently on these boards ("should I invest, or pay down my mortgage?")

If the loan from the dealer doesn't cause you to spend any more money for the car than you would have spent in cash, AND if the interest rate on the dealer's loan is lower than your expected return from investments (or your mortgage rate), then it IS mathematically optimal to take the loan.

Now, it's probably unlikely that the dealer will offer you money that cheaply, but who knows?

If you believe in the efficient markets hypothesis, you cannot get a risk-adjusted return above what someone is willing to lend you money at.  The current expected and risk adjusted return will always be no higher (and usually lower) than the rate of interest you are being offered.

If you are being offered a rate below market interest rates, it is uniformly to get you to purchase more of a high-margin good than you otherwise would, or to pay a higher price for a given good than the difference between market rate and the offered rate.  Sometimes, if you're very careful, they will have a poorly drafted contract which lets you get a below market rate without paying more for the good.  But this is extremely uncommon, and unless you have read the whole contract, and understand EVERY clause fully, you should assume it screws you...because it probably does.

I guess the value of the car at the end of the financed term figures into this too, although it doesn't change whether you buy with cash or with credit, so I guess that isn't variable across the comparison?  But, it does seem wrong to finance a rapidly depreciating asset.  A 30K car turns into a 15K car pretty damn quick, which could increase risk if you owe more than its worth.

I will concede that there are some scenarios where it would make more sense to finance but in reality the points they are making are nothing more than total bullshit designed to siphon dollars out of your wallet.
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MrsPete

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Re: Saw this while sitting in used car dealer's finance office
« Reply #17 on: November 07, 2013, 05:20:54 PM »
I agree it sounds like an attempt to steer the conversation towards financing.  I have "real money", and -- as long as my check is good -- it's none of their business where I got it.  If the police or the IRS have any reason to think I'm involved in something bad, it's their job to ferret out the truth, but the car dealer should mind his own business. 

yahui168

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Re: Saw this while sitting in used car dealer's finance office
« Reply #18 on: November 07, 2013, 06:27:45 PM »
I didn't have any problems paying cash for a car at the dealer, but oddly enough they wouldn't accept it for the extended warranty. I had to pay that by credit card.

Abe

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Re: Saw this while sitting in used car dealer's finance office
« Reply #19 on: November 07, 2013, 07:04:02 PM »
I received a 2% loan for my car, and checked the math to be sure. It was through the dealership.  From that money, I've already gained in the stock market significantly more than the total interest over the course of the loan. I think it that scenario it made sense to take the loan. There wasn't anything suspicious in the contract.

huadpe

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Re: Saw this while sitting in used car dealer's finance office
« Reply #20 on: November 07, 2013, 08:52:59 PM »
I can dispel each of those points as complete bullshit

Even the first two on the "Cash" side? They actually seem like legitimate arguments to me, the kind that are actually discussed frequently on these boards ("should I invest, or pay down my mortgage?")

If the loan from the dealer doesn't cause you to spend any more money for the car than you would have spent in cash, AND if the interest rate on the dealer's loan is lower than your expected return from investments (or your mortgage rate), then it IS mathematically optimal to take the loan.

Now, it's probably unlikely that the dealer will offer you money that cheaply, but who knows?

If you believe in the efficient markets hypothesis, you cannot get a risk-adjusted return above what someone is willing to lend you money at.  The current expected and risk adjusted return will always be no higher (and usually lower) than the rate of interest you are being offered.

If you are being offered a rate below market interest rates, it is uniformly to get you to purchase more of a high-margin good than you otherwise would, or to pay a higher price for a given good than the difference between market rate and the offered rate.  Sometimes, if you're very careful, they will have a poorly drafted contract which lets you get a below market rate without paying more for the good.  But this is extremely uncommon, and unless you have read the whole contract, and understand EVERY clause fully, you should assume it screws you...because it probably does.

I guess the value of the car at the end of the financed term figures into this too, although it doesn't change whether you buy with cash or with credit, so I guess that isn't variable across the comparison?  But, it does seem wrong to finance a rapidly depreciating asset.  A 30K car turns into a 15K car pretty damn quick, which could increase risk if you owe more than its worth.

Yes, you have to risk adjust both the returns you expect to see, and the risk involved in the loan.  When you do both of those things, the EMH says that the loan rate you're being offered will match the market return from investing the money.

Think of it this way: when you get a loan, a bank somewhere is deciding that the highest return they can get on that money is the interest on your loan.  If they thought the return was higher somewhere else, they'd invest in that somewhere else instead, or jack up the interest rate til the loan to you was again a better deal. 

bacchi

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Re: Saw this while sitting in used car dealer's finance office
« Reply #21 on: November 10, 2013, 02:31:35 PM »
Think of it this way: when you get a loan, a bank somewhere is deciding that the highest return they can get on that money is the interest on your loan.  If they thought the return was higher somewhere else, they'd invest in that somewhere else instead, or jack up the interest rate til the loan to you was again a better deal.

For dealers, the bank is owned by the car manufacturer. The bank may have an incentive to push a model or their entire line to make their numbers for the quarter/year look good or to raise cash.

Whatever the reason for the dealer/manufacturer, stoozing this way was simple in a better interest rate environment. There were 0.9% car loans from the dealers in 2003 but ING was paying 2.9% or more. The math just worked. This isn't as true today, what with interest rates sub-1, but it can be done with an 0.0% rate.

aglassman

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Re: Saw this while sitting in used car dealer's finance office
« Reply #22 on: November 14, 2013, 01:07:50 PM »
That is where dealerships make all their money.  That's why the sales person is so nice!  They have the easy job.  The hard job is the financier who does all the hard selling.  They make boat loads of money off extended warranties, tire warranties, gap insurance, scotch guard, ect.  It's easy to add on some of these packages because, hey, it only adds 10-30 bucks a month onto my monthly payment!  People don't realize how much these packages actually cost, since they only see the monthly payment increase. 

When I bought  my first used car, i was duped into buying a warranty.  I was hard sold on it, and decided to go over the paperwork when I got home.  I then realized how stupid I was for financing this.  After I read what the warranty would actually cover, it pretty much boils down to NOTHING.  Only things that are covered are parts that break due to manufacturer defect.  Wear and tear is NOT covered!  I called the dealership back up, yelled at them for selling me this shit, and they refunded me all the money, which i promptly used to pay back that part of the principal. 

When we bought my wife's car, the a hole financier tried selling us Gap Insurance.  She tried hard selling us with scare tatics.  I did the math and pointed out to her that this only makes sense if you owe more than the car is worth, which we did NOT, and it would not cover an amount rolled over from a previous loan.  She insisted it would, but I called her bluff, and showed her the fine print on the spot.  She was not happy.

Bottom line, never trust dealership financiers, go to your credit union, or pay cash! 

mm1970

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Re: Saw this while sitting in used car dealer's finance office
« Reply #23 on: November 15, 2013, 08:48:14 PM »
Yeah, when we bought our first new car (for cash), I learned to first negotiate the price of the car.  They will try and get you to a "payment", but stand firm.  So, I just said "I don't care what the payment is, I have never spent this much for a car in my life, and I think it's too high.  See ya later."

And they came down to our price.

Then, you negotiate the trade in, if there is one (ours was a lemon, I was happy they took it off my hands, really, would have felt bad selling it to a private individual).

Then, you negotiate the financing, which is our case, wasn't financed.

AJDZee

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Re: Saw this while sitting in used car dealer's finance office
« Reply #24 on: November 24, 2013, 09:41:14 PM »
I can dispel each of those points as complete bullshit

I will concede that there are some scenarios where it would make more sense to finance but in reality the points they are making are nothing more than total bullshit designed to siphon dollars out of your wallet.

Very true!
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sunshine

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Re: Saw this while sitting in used car dealer's finance office
« Reply #25 on: November 25, 2013, 01:19:16 PM »
They are sure preying on the uniformed financially. Sad really. We last bought a year ago. Same dealer we always use. They know better to push the financing and took our personal check for a bit under $25k. We had the argument about the stupid add on  extended warranty insurance once our sales guy left us with the lady that does the paperwork. She kept stressing we could have a $3K repair right off the bat and this $1500 policy would cover it and on and on.  I got mad and told her if the truck was that shitty she had to keep pushing it we were leaving and she could explain to our regular sales guy why he lost the sale. She got pretty crabby but quit.

daverobev

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Re: Saw this while sitting in used car dealer's finance office
« Reply #26 on: December 06, 2013, 03:22:39 PM »
Heard on the radio yesterday:

"Tired of looking at your 3, 4, or 5 year old vehicle? Trade it in for a brand new model and keep the same car payment, today!"

I was driving my 10 year old car at the time... heh.

It just makes me wonder. How many people fall for this shit? My MIL said something like "oh, I only buy new cars, so I don't have to worry about things like burning oil" (after friends had been checking out certain things on a used car).

Just... throwing money away. "Convenience" I hate that word.
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