Author Topic: Auto loan question  (Read 3687 times)

dandypandys

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Auto loan question
« on: November 25, 2017, 04:49:14 PM »
Hello Mustachians.
Hubs and I want to buy a wee used Miata, it is 13k, and we have only 9k in the bank right now and have just fallen in love with a wee green one that we want to buy right now- QUICK! :) :)
haha

So what is the best way to get a wee loan.. for 1-3 months, so we have enough cash to get the car from the dealer next Friday?

I have no idea about auto loans and how they work, I bought my last 2 cars used with cash. We have no debt at the mo.

Maybe I should put it on a new credit card?

Any advice? Thanks!!

Cranky

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Re: Auto loan question
« Reply #1 on: November 25, 2017, 05:05:24 PM »
I think dealers are fussy about taking credit cards, though I guess it doesn’t hurt to ask.

I’d arrange financing through my bank or credit union and make sure it’s possible to pay it all off shortly.

But I’d ask why I wanted to buy a car right this minute if I didn’t have the cash and didn’t want to finance...

dandypandys

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Re: Auto loan question
« Reply #2 on: November 25, 2017, 05:17:06 PM »
Because it is perfect, green miata and they are on the rare side.

Yeah I can ask my credit union, I just don't know how it works. I just wonder if there would be an easier way.. I could force a credit card on the dealer right at the last minute perhaps.
« Last Edit: November 25, 2017, 06:21:45 PM by dandypandys »

bugbaby

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Re: Auto loan question
« Reply #3 on: November 25, 2017, 08:27:24 PM »
Seriously, you may be better off financing via the dealership. It's really fast and easy... I got approved for 2.64% after already agreeing on the cash price (but then got taken on warranties, remote start and such - beware)

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RWD

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Re: Auto loan question
« Reply #4 on: November 25, 2017, 08:36:44 PM »
Get preapproved for the loan through your credit union or bank of choice. They will fill you in on the whole process. You'll almost certainly get a better rate than the dealer would offer you.

Some dealerships will take credit cards up to a certain amount. When we bought our last Subaru the dealer allowed us to charge up to $3k on a credit card for the down payment. You would need to ask. But either way I would recommend having financing lined up ahead of time.

CogentCap

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Re: Auto loan question
« Reply #5 on: November 25, 2017, 08:40:29 PM »
I don't know how long getting preapproved for a loan takes, but if you're going to pay it all off within 3 months or so it won't matter much how much better of a rate the bank gives you compared to the dealership. 

The dealerships usually have financing available right there--they want you to be able to walk out of there with the car, not have a bunch of hoops to jump through that would discourage the purchase.  Since you want to move fast on the car, and you'll have the money to pay it off asap (meaning not a lot of interest), I'd go through the dealership just for simplicity if it were me.

shawndoggy

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Re: Auto loan question
« Reply #6 on: November 25, 2017, 08:41:49 PM »
I've been allowed to use credit cards up to $5K a couple of times.

You may do better on the price if you just finance the whole thing through the dealer tho.  Let them sell you the loan, then pay off as you would your cc.  You may be more attractive as a financing borrower than a cash buyer.  As long as the loan doesn't have a prepayment penalty, it's an easy way to get some free time.

BRG miata FTW!  As long as it's a manual.  ;-)

Dicey

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Re: Auto loan question
« Reply #7 on: November 25, 2017, 10:20:09 PM »
My sister's husband needed a new (used) truck for his business the week before last. His old one died with 245k on the odometer. She didn't want to deplete all their ready cash right before Christmas, so naturally, she called her frugal sister for advice. I suggested she get a loan for at least part of the purchase amount. Based on what I'd read here, I recommended PenFed. She applied and was approved in the same phone call. They offered her 2.49%. The same day, a friend mentioned having seen a truck that fit their checklist at a dealer in town. The looked, liked, and negotiated a price they were comfortable with. They told the dealer the rate they had been quoted from PenFed, and the dealer matched PenFed's rate.

She plans on paying it off in a couple of months. Since it's a legitimate business expense, I'm trying to convince her to let it run at least a year and save/invest the difference, but I doubt she'll last that long. The great thing about car loans is that you can pay them off whenever you like.

dandypandys

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Re: Auto loan question
« Reply #8 on: November 26, 2017, 04:57:02 AM »
Thank you everyone, all very helpful.

dandypandys

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Re: Auto loan question
« Reply #9 on: November 26, 2017, 08:44:43 AM »
My credit union has on their website: Used Auto    84 Months    3.60%
Not as good as the penfed one. Do I have to be a member?
I am a member at Ally too, but it seems that they have dealers they work with. I don't know how that works

RWD

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Re: Auto loan question
« Reply #10 on: November 26, 2017, 09:22:26 AM »
My credit union has on their website: Used Auto    84 Months    3.60%
Not as good as the penfed one. Do I have to be a member?
I am a member at Ally too, but it seems that they have dealers they work with. I don't know how that works

I believe you have to be a member.
https://www.penfed.org/learn/ways-to-become-a-member

frugaliknowit

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Re: Auto loan question
« Reply #11 on: November 26, 2017, 10:15:01 AM »
I would seriously consider NOT doing this.  There's always other cars out there you can buy for $9k cash.

That said, check out Pen Fed credit union (you don't have to be military...just make a small donation...).

ketchup

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Re: Auto loan question
« Reply #12 on: November 26, 2017, 11:36:58 AM »
I would seriously consider NOT doing this.  There's always other cars out there you can buy for $9k cash.

That said, check out Pen Fed credit union (you don't have to be military...just make a small donation...).
This. I wouldn’t consider spending more than half my liquid cash on a car, never mind more than what I have liquid total. My maximum (not “budget”; I hate that term used in this way) would be $4500.

Dicey

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Re: Auto loan question
« Reply #13 on: November 26, 2017, 11:43:50 AM »
I don't believe they asked if they should buy the car. Honestly,  people have even bought new cars with multi-year loans and still managed to FIRE. Unless they are asking for help with their hair on fire debt, can we just answer the question? If everyone gets slammed for everything they do, what use will this place be?

dandypandys

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Re: Auto loan question
« Reply #14 on: November 26, 2017, 12:36:39 PM »
We don't have all the cash because we are putting 42% into our 401k/IRAs and we didn't realize we would find the perfect car right at the beginning of our search.
We have backup PMs but I don't feel like trading them in at a loss, unless an emergency.


frugaliknowit

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Re: Auto loan question
« Reply #15 on: November 26, 2017, 01:58:50 PM »
We don't have all the cash because we are putting 42% into our 401k/IRAs and we didn't realize we would find the perfect car right at the beginning of our search.
We have backup PMs but I don't feel like trading them in at a loss, unless an emergency.

Ok, then stop the 401K for a while, accumulate some cash, buy the car, resume the 42% (sounds like too much if you only have 9K in cash...).  There will always be another "perfect" car.  Now that I punched you in the face, I give you a hug:)

Proud Foot

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Re: Auto loan question
« Reply #16 on: November 27, 2017, 12:48:01 PM »

So what is the best way to get a wee loan.. for 1-3 months, so we have enough cash to get the car from the dealer next Friday?

If this is your dream car and want to move fast then either contact your bank to apply for a loan or go through financing with the dealer. If you are going to pay off the loan within the the next few months I would worry less about the rate and care more about the loan origination fees and making sure there is not a prepay penalty.

Dicey

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Re: Auto loan question
« Reply #17 on: November 27, 2017, 08:49:08 PM »
Car loans from reputable lenders have origination fees and prepayment penalties? Really?? Clueless, party of one here.

JLee

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Re: Auto loan question
« Reply #18 on: November 27, 2017, 09:13:30 PM »
Car loans from reputable lenders have origination fees and prepayment penalties? Really?? Clueless, party of one here.

I have yet to have an auto loan that has either of those.

Proud Foot

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Re: Auto loan question
« Reply #19 on: November 28, 2017, 06:14:24 AM »
Car loans from reputable lenders have origination fees and prepayment penalties? Really?? Clueless, party of one here.

I have yet to have an auto loan that has either of those.

I have not had prepayment penalties on any of my auto loans and don't recall any origination fees but would have to check the paperwork. I know nothing of the dealer selling the vehicle in the OP but mentioned those as things to look out for if they are wanting to pay it off quickly.

boarder42

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Re: Auto loan question
« Reply #20 on: November 28, 2017, 06:27:01 AM »
you should search and get the cheapest loan you can find and then take it to term.  that penfed loan is sub inflation and your CU is barely higher than inflation.  There is NOTHING wrong with financing a vehicle as long as you have weighed all of the options and plan to buy it anyways.  why tie up 13k in a depreciating asset when you can put that money to work for you.

ketchup

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Re: Auto loan question
« Reply #21 on: November 28, 2017, 10:24:23 AM »
you should search and get the cheapest loan you can find and then take it to term.  that penfed loan is sub inflation and your CU is barely higher than inflation.  There is NOTHING wrong with financing a vehicle as long as you have weighed all of the options and plan to buy it anyways.  why tie up 13k in a depreciating asset when you can put that money to work for you.
Any time I've run the numbers on this, the need for full coverage insurance in order to finance blows up the math.  Maybe I've just been getting shitty quotes?

Slee_stack

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Re: Auto loan question
« Reply #22 on: November 28, 2017, 10:47:42 AM »
you should search and get the cheapest loan you can find and then take it to term.  that penfed loan is sub inflation and your CU is barely higher than inflation.  There is NOTHING wrong with financing a vehicle as long as you have weighed all of the options and plan to buy it anyways.  why tie up 13k in a depreciating asset when you can put that money to work for you.
Any time I've run the numbers on this, the need for full coverage insurance in order to finance blows up the math.  Maybe I've just been getting shitty quotes?
Yep, you must have pretty bad quotes.

I financed a whopping $8k because...hello 2% rate.  Why would I want to pull money from mutual funds for that?

Collision/Comp can be expensive, but it doesn't have to be...particularly with a high deductible.  My line in the sand is $5k car value to have comp/coll.  If I was buying underneath that, I would indeed just pay the cash.

Besides, comp/coll coverage isn't nothing.  Even if there is a net cost, you have...insurance.  I have a clean record and have avoided accidents for some time...but I've still made claims.  The last one was a damaged radiator and crushed lower front end when my car clipped a ridiculous speed bump in a parking lot.  Before that it was a vandalism claim.  Before that, something stolen from the vehicle.  Coverage isn't worth $0.
« Last Edit: November 28, 2017, 10:55:10 AM by Slee_stack »

ketchup

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Re: Auto loan question
« Reply #23 on: November 28, 2017, 10:55:40 AM »
you should search and get the cheapest loan you can find and then take it to term.  that penfed loan is sub inflation and your CU is barely higher than inflation.  There is NOTHING wrong with financing a vehicle as long as you have weighed all of the options and plan to buy it anyways.  why tie up 13k in a depreciating asset when you can put that money to work for you.
Any time I've run the numbers on this, the need for full coverage insurance in order to finance blows up the math.  Maybe I've just been getting shitty quotes?
Yep, you must have pretty bad quotes.

I financed a whopping $8k because...hello 2% rate.  Why would I want to pull money from mutual funds for that?

Collision/Comp can be expensive, but it doesn't have to be...particularly with a high deductible.  My line in the sand is $5k car value to have comp/coll.  If I was buying underneath that, I would indeed just pay the cash.
I bought my present car for $1800 so it definitely doesn't apply to me right now either way, I'm mostly just talking from a math perspective.  Everything I was seeing (granted this was a while ago so I might be mis-remembering) was something like $50/mo for "normal" liability coverage on Car X, but $100/mo for full coverage on Car X.  $600/yr in extra insurance would mean the break-even point would be at least 12,000 financed at at least a 5% spread.

JLee

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Re: Auto loan question
« Reply #24 on: November 28, 2017, 04:42:01 PM »
you should search and get the cheapest loan you can find and then take it to term.  that penfed loan is sub inflation and your CU is barely higher than inflation.  There is NOTHING wrong with financing a vehicle as long as you have weighed all of the options and plan to buy it anyways.  why tie up 13k in a depreciating asset when you can put that money to work for you.
Any time I've run the numbers on this, the need for full coverage insurance in order to finance blows up the math.  Maybe I've just been getting shitty quotes?
Yep, you must have pretty bad quotes.

I financed a whopping $8k because...hello 2% rate.  Why would I want to pull money from mutual funds for that?

Collision/Comp can be expensive, but it doesn't have to be...particularly with a high deductible.  My line in the sand is $5k car value to have comp/coll.  If I was buying underneath that, I would indeed just pay the cash.
I bought my present car for $1800 so it definitely doesn't apply to me right now either way, I'm mostly just talking from a math perspective.  Everything I was seeing (granted this was a while ago so I might be mis-remembering) was something like $50/mo for "normal" liability coverage on Car X, but $100/mo for full coverage on Car X.  $600/yr in extra insurance would mean the break-even point would be at least 12,000 financed at at least a 5% spread.

I posted this recently in another thread:

I have an $8k loan for 3 years at 1.99%, with a total cost of financing of $247.81 (over the full term).  The S&P 500 has returned 20.91% since October 2016 (when I bought this vehicle), which is a gain of $1,672.80 on that $8k.  The markets could be completely flat for the next two years and I'd still be up over $1400 by the end.

Obviously this calculation can be changed by reducing insurance coverage when a vehicle is paid off, but even still eliminating comprehensive and collision entirely would only save me $332/year (not something I am willing to do even if the vehicle was paid off). I'm still up over $1k, and this is ignoring the next two years of gains while already factoring in the interest I will be paying during the same timeframe.

jax8

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Re: Auto loan question
« Reply #25 on: November 30, 2017, 11:49:39 AM »
I don't believe they asked if they should buy the car. Honestly,  people have even bought new cars with multi-year loans and still managed to FIRE. Unless they are asking for help with their hair on fire debt, can we just answer the question? If everyone gets slammed for everything they do, what use will this place be?

PREACH.

I just bought a 2015 Honda on Tuesday.  The dealer offered 0.9% financing, and my first payment isn't due until January 12th, 2018. 

OP--if you go with a dealer now, you'll probably get a great rate AND have a month to decide if you want to pay the whole thing off right away or let your $9K work for you at a better rate than 1-2%.  With interest rates that low, you can afford to borrow a bit of money (and time) through financing for your perfect time!

GO GET IT! :) 

dandypandys

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Re: Auto loan question
« Reply #26 on: December 04, 2017, 07:38:34 AM »
We did it! And we got the CAR wooohooooooo. Plus we got them down by 1k.. private seller.. great price. woohoooooooo
FUN
Thanks for the advice everyone.

RWD

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Re: Auto loan question
« Reply #27 on: December 04, 2017, 07:45:57 AM »
We did it! And we got the CAR wooohooooooo. Plus we got them down by 1k.. private seller.. great price. woohoooooooo
FUN
Thanks for the advice everyone.

Congrats!