"extraspecialbitter" (extraspecialbitter)
03/05/2016 at 11:33 • Filed to: AUTO LOANS
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"extraspecialbitter" (extraspecialbitter)
03/05/2016 at 11:33 • Filed to: AUTO LOANS | 0
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Calling all financing gurus! All of them. Or, you know, people who just know their way around...
Buddy asked about this and I wasn’t too sure because I don’t know enough about the nuances of auto loans.
I get that generally, if you do finance, they want you to finance at least $5,000 so they can make some money from interest. But isn’t that just for cars that cost around $5,000?
What happens if you want to buy a CPO $35,000 car, but can only put down $30,000 max? Should you finance the remaining $5,000? Or, should you only put down around $20,000 and finance the rest to potentially keep the lenders and your interest rates happy?
BMW Z4 GT3 time lapse build for your time.
dogisbadob
> extraspecialbitter
03/05/2016 at 11:41 |
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Every bank has their own rules.
Renescent
> extraspecialbitter
03/05/2016 at 11:45 |
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Depends on the interest rate you can pull... at a low enough interest rate, it’s better to finance a larger chunk and invest the cash (YMMV).
PowderHound
> extraspecialbitter
03/05/2016 at 11:46 |
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Put the money in an account solely to pay off a bigger loan. Do auto payments and forget about it.
gmporschenut also a fan of hondas
> extraspecialbitter
03/05/2016 at 11:52 |
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banks dont want to go below 5k (amount varies) because it reaches a point that it is not worth it to them. If they’re making $400 profit off the interest they may be spending $200 just doing the paperwork.
RazoE
> PowderHound
03/05/2016 at 11:59 |
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This. Your credit will go up quicker as well.
Gone
> extraspecialbitter
03/05/2016 at 12:19 |
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Pretty much what everyone said. Investing should theoretically get you 8%, so if the loan interest rate is under that, invest your money and do car payments for the entire cost.
If you wanted to do a big payment instead anyways, put down the minimum amount on the car, take the loan, then make your first payment the big payment and do payments on the rest. You have $30k, car is $35k -put down $3k, loan for $32k, make first payment of $27k, have $5k left on loan. This doesn’t work if there’s some weird early payment penalty, otherwise it’s fine.
Shour, Aloof and Obnoxious
> extraspecialbitter
03/05/2016 at 12:54 |
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There are a lot of mitigating factors at play:
-Age/milage/value of the vehicle you are financing
-Amount of money you are financing
-Borrower’s credit rating
My financial institution was currently doing used autos at 3.9%, and I certainly qualified for that rate (with a rating well over 700). However, when they saw that the car I was looking to finance was 16 years old and was only $4500, they weren’t willing to finance that as an auto loan. Instead, I was offered a signature loan for $5000 at 6.9% for 18 months. That’s a significant jump in interest, but that’s because the loan (on paper, anyhow) has no collateral backing it. If I had been buying a car that was less than 8 years old, they would have given me the other terms, easy. The flip side being, of course, that an 8 year old car would have cost more (and likely would have had a longer term) than a 16 year old car.
TL;DR - Settle on what you want to buy, and how much you’re willing to finance, THEN you can really see what options you have available for financing.
Captain of the Enterprise
> extraspecialbitter
03/05/2016 at 13:45 |
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You could probably get a personal loan that is that low but the interest rate will be higher
greenagain
> extraspecialbitter
03/05/2016 at 14:18 |
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The $ 5,000 minimum is an effort to at least make doing the paperwork worthwhile.
JCAlan
> extraspecialbitter
03/05/2016 at 15:11 |
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Your local credit union will probably do any amount. Most big lenders have 7500 minimum to finance. Capital one will do down to $3000, and there may be others. You shouldn’t have a problem getting it done. But seriously? Hang on to your money unless you have a rate that sucks.