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Old 07-28-2020, 11:07 AM   #43
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Avoid dealer loans. They do things like not let you pay off the principal faster you have to mail in hand written checks to pay off the principal. There is things like this with dealer loans they work to their advantage. Why go through a third party middle man for what you can do on your own?

Go to credit union get the best rate you can and if you want to see if your dealer can beat it then go ahead. In my experience it's always always better to avoid the dealer.
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Old 07-28-2020, 11:12 AM   #44
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Originally Posted by Coded4SS View Post
Avoid dealer loans. They do things like not let you pay off the principal faster you have to mail in hand written checks to pay off the principal. There is things like this with dealer loans they work to their advantage. Why go through a third party middle man for what you can do on your own?

Go to credit union get the best rate you can and if you want to see if your dealer can beat it then go ahead. In my experience it's always always better to avoid the dealer.
Initially, I wanted to cry for the first part of this post. Then I realized something...

There's a HUGE difference between "buy here, pay here" financing (what is truly a "dealer loan") and loans secured through a legitimate lender that are "brokered' by the dealer (you fill out a general loan app at the dealership and they shop your loan to various banks). The former should be avoided at all costs. They are huge rip-off's financially. The latter seldom will have penalties for early repayment.

Credit Unions are 100% -NOT- the panacea that so many people claim them to be. As mentioned before, I have only gotten a better rate from a credit union ONCE than I did from any other lender when buying a car. And, honestly, I was quite surprised that I got the rate that I did as the manufacturer was already offering reasonable rates for their CPO cars.

If you are shopping for a loan based on the rate, Credit Unions seldom have better interest rates than banks if you have a high credit score (over 700-725). Sometimes they have better rates if you have a significant amount of money on deposit with them.
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Old 07-28-2020, 09:43 PM   #45
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Credit Union’s are great if you are building your credit but you will consistently beat their rates if you have established credit.

Beginning of 2016 when I purchased my 2016 Mustang GT, Capital One gave me a 6 Year @ 1.95% with $2,000 down. Had just under a 700 credit with each major credit agencies back then. Summer 2020, around 750 now, yet they only offered a 6 Year @ 3.98% with $2,000 down. If GM Financial offers another 0% type promo when my 2021 Camaro is delivered in October, I would more than likely go with them this time around versus my bank Capital One. In other words, it varies who has the best rates.
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Old 07-28-2020, 10:34 PM   #46
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Originally Posted by ember1205 View Post
Initially, I wanted to cry for the first part of this post. Then I realized something...

There's a HUGE difference between "buy here, pay here" financing (what is truly a "dealer loan") and loans secured through a legitimate lender that are "brokered' by the dealer (you fill out a general loan app at the dealership and they shop your loan to various banks). The former should be avoided at all costs. They are huge rip-off's financially. The latter seldom will have penalties for early repayment.

Credit Unions are 100% -NOT- the panacea that so many people claim them to be. As mentioned before, I have only gotten a better rate from a credit union ONCE than I did from any other lender when buying a car. And, honestly, I was quite surprised that I got the rate that I did as the manufacturer was already offering reasonable rates for their CPO cars.

If you are shopping for a loan based on the rate, Credit Unions seldom have better interest rates than banks if you have a high credit score (over 700-725). Sometimes they have better rates if you have a significant amount of money on deposit with them.
I too was thinking WTF at that post until I realized what he was talking about.

Financing through a dealer, especially if you have Tier 1 credit can be beneficial to you. First, the dealerships have contracts with several lenders. Whereas, if we, the customer, go to our own bank, we are going to get a rate that is profitable to the bank. The only thing a bank does is sell money. However, a dealership has more bargaining power with lenders because dealers generate more business for them.

There is truth that a dealership can bump the rate up to 2 points. However, how that really happens is not that raise your rate, they negotiate with the bank to lower the buy rate for the dealer. This is why many people show up with pre-approval from their bank at 3or 4% and the dealer gets them out of finance at 2.5 or 2.9%, from the same bank. The dealer negotiates the buy rate down. Sure, dealers are out to make money, they are not 501c operations, and neither are the banks.
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Old 07-29-2020, 07:49 AM   #47
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Originally Posted by seethruya View Post
Credit Union’s are great if you are building your credit but you will consistently beat their rates if you have established credit.

Beginning of 2016 when I purchased my 2016 Mustang GT, Capital One gave me a 6 Year @ 1.95% with $2,000 down. Had just under a 700 credit with each major credit agencies back then. Summer 2020, around 750 now, yet they only offered a 6 Year @ 3.98% with $2,000 down. If GM Financial offers another 0% type promo when my 2021 Camaro is delivered in October, I would more than likely go with them this time around versus my bank Capital One. In other words, it varies who has the best rates.
I'm curious why you would limit yourself to what GM Financial is offering or Capital One only? I financed through the dealership and landed with Citizens One (whom I hate after they screwed up upon my paying off a loan and promptly losing my title) for about the best rate anywhere at the time (two months ago). GM's rates were significantly higher and Capital One didn't even show up on the radar in terms of who was offering competitive rates at the time. My score is definitely on the high side with one of the financial institutions documentation of having pulled my credit showing my score at well over 850, but none of the lenders would budge on their rates (I asked to have one drop their rate to at least match Citizens and they wouldn't do it).

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Originally Posted by MrChrisLS3 View Post
I too was thinking WTF at that post until I realized what he was talking about.

Financing through a dealer, especially if you have Tier 1 credit can be beneficial to you. First, the dealerships have contracts with several lenders. Whereas, if we, the customer, go to our own bank, we are going to get a rate that is profitable to the bank. The only thing a bank does is sell money. However, a dealership has more bargaining power with lenders because dealers generate more business for them.

There is truth that a dealership can bump the rate up to 2 points. However, how that really happens is not that raise your rate, they negotiate with the bank to lower the buy rate for the dealer. This is why many people show up with pre-approval from their bank at 3or 4% and the dealer gets them out of finance at 2.5 or 2.9%, from the same bank. The dealer negotiates the buy rate down. Sure, dealers are out to make money, they are not 501c operations, and neither are the banks.
This is a really good point... Yes, the dealers have profit baked into the loan you just got but it's because they are buying money from the banks in volume. And the banks don't have to do a bunch of the legwork, so they don't need all of the profit directly and will "share" it with the dealership. I suspect that this is largely why the dealerships will tell you that you have to maintain your loan for a minimum number of months (I know they told my parents that they had to hold the loan on their new car for four months in order to properly qualify for some rebate they had gotten as paying off earlier would have required them to forfeit that or something).
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Old 07-29-2020, 08:41 AM   #48
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Originally Posted by Coded4SS View Post
Avoid dealer loans. They do things like not let you pay off the principal faster you have to mail in hand written checks to pay off the principal. There is things like this with dealer loans they work to their advantage. Why go through a third party middle man for what you can do on your own?

Go to credit union get the best rate you can and if you want to see if your dealer can beat it then go ahead. In my experience it's always always better to avoid the dealer.
To address this directly, unless this is a buy here pay here lot, which is a completely different animal, once the loan is funded, you're relationship is now strictly between you and the lender, the dealership is no longer involved.

On that loan, you have a contracted monthly payment. Anything you pay over and above that amount on any given payment goes directly towards principal.
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Old 07-29-2020, 09:27 AM   #49
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To address this directly, unless this is a buy here pay here lot, which is a completely different animal, once the loan is funded, you're relationship is now strictly between you and the lender, the dealership is no longer involved.

On that loan, you have a contracted monthly payment. Anything you pay over and above that amount on any given payment goes directly towards principal.
Yes, this is extremely common. I always look at the general terms and conditions on the Installment Loan Contract to look for things like Prepayment Penalty and won't sign unless it says "no" or "none."
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Old 07-29-2020, 10:05 AM   #50
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Quote:
Originally Posted by MrChrisLS3 View Post
To address this directly, unless this is a buy here pay here lot, which is a completely different animal, once the loan is funded, you're relationship is now strictly between you and the lender, the dealership is no longer involved.

On that loan, you have a contracted monthly payment. Anything you pay over and above that amount on any given payment goes directly towards principal.
The last couple of cars I've bought I have gotten my loans through reputable dealers, and this is exactly how it works. Currently my loan is through Wells Fargo, and I go on their website to make payments. I personally pay weekly and round it up to the nearest multiple of 10. I did the math one time, and just paying weekly I would pay off the loan 6 months sooner over the course of a 6 year loan, and pay a few hundred less in interest. Obviously your mileage will vary based on the details of your loan. Paying extra only improves that.
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Old 07-29-2020, 10:16 AM   #51
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The last couple of cars I've bought I have gotten my loans through reputable dealers, and this is exactly how it works. Currently my loan is through Wells Fargo, and I go on their website to make payments. I personally pay weekly and round it up to the nearest multiple of 10. I did the math one time, and just paying weekly I would pay off the loan 6 months sooner over the course of a 6 year loan, and pay a few hundred less in interest. Obviously your mileage will vary based on the details of your loan. Paying extra only improves that.
I've always followed the following premise when it comes to over-paying and/or paying early...

If I am able to pay more than the scheduled amount, or can pay ahead of time, I don't. Instead, I put that money into a savings account with a higher yield and let it work for me. As long as the interest rate that I am earning is either better than, or only slightly less than, the interest rate of the loan, putting that money away helps me to build a financial cushion should I need it during the course of the loan.

Once I have enough money saved up from doing the above to where I can pay the loan off in full, I do so.

And remember: If you ever have to choose between making a car payment or paying rent, make the car payment. You can live in your car but you can't drive your house. lol
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Old 07-29-2020, 10:18 AM   #52
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Originally Posted by ember1205 View Post
Yes, this is extremely common. I always look at the general terms and conditions on the Installment Loan Contract to look for things like Prepayment Penalty and won't sign unless it says "no" or "none."
Called GM Financial 2 weeks ago, paying $110 over min to have neutral/positive equity faster to refinance with someone else, asked if my account could be set up so that any payments over the min goes towards the principal and they told me "nope, every time you pay over the min, you have to contact us to inform us of this so we can make sure it goes towards to principal"
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Old 07-29-2020, 10:22 AM   #53
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Called GM Financial 2 weeks ago, paying $110 over min to have neutral/positive equity faster to refinance with someone else, asked if my account could be set up so that any payments over the min goes towards the principal and they told me "nope, every time you pay over the min, you have to contact us to inform us of this so we can make sure it goes towards to principal"
I've seen this with many lenders. On the one hand, it's completely stupid. On the other, pre-payments are merely setting you up for a smaller future payment or even being able to "miss" a payment. What I have never tried to find out, though, is whether having that money in-hand early does anything to reduce the accruing interest. If not, then it's not a good way to deal with them and the money should just be deposited into your own savings account until you want to make a "bulk" principle payment.
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Old 07-29-2020, 10:29 AM   #54
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I've seen this with many lenders. On the one hand, it's completely stupid. On the other, pre-payments are merely setting you up for a smaller future payment or even being able to "miss" a payment. What I have never tried to find out, though, is whether having that money in-hand early does anything to reduce the accruing interest. If not, then it's not a good way to deal with them and the money should just be deposited into your own savings account until you want to make a "bulk" principle payment.
You mean paying before the due date? I read somewhere sometime ago that it does, I'll let you know as I'm making the payments 5 days before due date, but it's been 10 days past due date without my statement.

If you mean if paying more reduces the amount of interest rather than paying the car faster, then it does, I'm pretty sure there is someone more experienced than I am that can give you an explanation that's not an overly gross simplification.

$1000 loan, $200 payment, $100 goes towards interest, $900 left and you get charged interest in this
$1000 loan, $200 payment + extra $50, $100 goes towards interest, $850 left and you get charged interest in this

Or something among those lines, either way, compounding interest is annoying, just playing the same amount split bi-weekly means you will pay less interest over the life of the loan.
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Old 07-29-2020, 10:33 AM   #55
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You mean paying before the due date? I read somewhere sometime ago that it does, I'll let you know as I'm making the payments 5 days before due date, but it's been 10 days past due date without my statement.

If you mean if paying more reduces the amount of interest rather than paying the car faster, then it does, I'm pretty sure there is someone more experienced than I am that can give you an explanation that's not an overly gross simplification.

$1000 loan, $200 payment, $100 goes towards interest, $900 left and you get charged interest in this
$1000 loan, $200 payment + extra $50, $100 goes towards interest, $850 left and you get charged interest in this

Or something among those lines, either way, compounding interest is annoying, just playing the same amount split bi-weekly means you will pay less interest over the life of the loan.
When you pay early, that [usually] does reduce your total amount of interest paid because the amount paid to principle reduces the principle amount earlier in the cycle. However, the way that some banks amortize your loan, what ultimately matters is the principle balance on a specific day of the month as opposed to compounding interest daily.

In your example, you are assuming that the extra $50 is paid toward principle. From your previous post, some lenders do not do this automatically and apply the money directly toward your "next payment" amount. Unless that money is directly credited to the principle amount, it very well may NOT reduce your overall interest liability as it will not slow down the rate of compounding.
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Old 07-29-2020, 10:40 AM   #56
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Originally Posted by ember1205 View Post
I've always followed the following premise when it comes to over-paying and/or paying early...

If I am able to pay more than the scheduled amount, or can pay ahead of time, I don't. Instead, I put that money into a savings account with a higher yield and let it work for me. As long as the interest rate that I am earning is either better than, or only slightly less than, the interest rate of the loan, putting that money away helps me to build a financial cushion should I need it during the course of the loan.

Once I have enough money saved up from doing the above to where I can pay the loan off in full, I do so.

And remember: If you ever have to choose between making a car payment or paying rent, make the car payment. You can live in your car but you can't drive your house. lol
I went to school for finance, so I understand the principal (pun kind or intended) behind it all. Though most people, myself included, aren't that disciplined with money. It's just not worth the extra time and effort over setting up recurring payments/savings. At the end of the day, I am still better off financially if I overpay on my loans than if I spent it elsewhere. I think I'm only paying an extra like $5 a week, so we're not talking a large sum of money anyway.
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