buying & financing a car: 101


scottsee
09-25-2004, 11:01 PM
Buying a car at a dealership: 101

this was written for a specific person, car and situation. with that in mind, i hope this can help somone with their next buying decision.

I would go down to the deaership and tell them you are looking at 2 or 3 other cars, what-ever, specific years your looking for and have no intention of buying a car "today". Ask if they do carfax (they all do), and let the salesman give you a presentation, if you see any blemishes, dents, scratches, paint ware, tire ware make sure to touch them, donít say anything, but just lightly touch them, and nod your head, do it while you in a conversation with the salesman, so he paying attention to you, and will see you. Go over the car really well inside and out, take your time. Reamber, if your polite, and curdious, youíll get a whole hell of a lot more then if youíre a dick! Let the salesman feel heís in control. Thatís important, the second he feels like heís not in control, heíll dissiper and come back with someone else. Build a good repore with the salesman, talk about everything but the car with him.

If heís a good salesman heíll bypass every objection you through out at him, and go through the entire call selling process the dealership hired him to do with every customer. Never forget to ask for a different salesman if you need to, if you do that, youíll know youíll end up with a professional, or at least one thatís preatty experienced. Its easiest if you just call the dealership, and ask for the sale manger, tell him your coming down to look at it, because your comparing it to a couple others. If you have the balls, thatís my suggestion. If you do that, heíll automaticly put you with the best salesperson he has.

When you get to drive the car, make sure to get comfortable, ajust your mirrors, and take it on the freeway, to check all the gears. once youíve got comfortable with the car, head back, when you get out of the car, go over it again, and ask for the carfax. That gives the salesperson time to explain to the manager that you donít want to buy today, there are some things that you donít like about the car, you have several to go look at, but you would like a carfax because itís something you might be interested in (your creating doubt about the sale), . 9-10 times the manager will come out to meet you, unless itís a good salesman, or you might get turned to a closer, depending on the dealership. Get a cup of coffe, and sit down. Let them try and earn your business by asking ďwhat ifĒ questions. Just keep telling them you need to see the carfax before you make a decision, besides. Once you have it, go over it to see how many registerd owners their has been, and if it was registed locally, and if your lucky enough to be at the dealership that sold it new, ask for service records, or make them commit to telling you if the 60k service has been done to it.

The key to negotiation is not to let the saleman know your even slightly interested in buying the car. There are many many different negotiation tatics, the best one I can suggest is, be nice, curtious, plessent, and stick with your ďrealistic #ís donít ask for something you know you wont get. Reamber. If the ever thought they could get more then 12500 they would have asked. Make it easy for them to try and close you, or let them think they are. Take your coffee, over to a desk in the showroom, sit down and read the carfax. Eventually youíll have to tell them what you want to do, finance wise, just say ďunder 300Ē donít forget to bring up the thing you want looked at or fixed. Dealerships typicly have body shops beating their doors down looking for business. So the repairs are a lot less then you think. Example. I had a trade come in with a scratched up bumper, a soft dent on the hood, and one on each door the size of silver dollar, and it cost $200 to fix it all. So stick with your offers they wont be eating as much profit in fixing the probles as you think!. As soon as they get a slight intrest out of you, theíll get some paperwork out and start fiddling with #ís. their there to sell a car, so anything on paper is better then nothing. reamber its important to let the salesman feel like heís slowing you down, and convincing you to look a #ís. so be patient, it will take a lot of time to get to a bottem end figure. Reamber this. There is no bottem line, they could sell the car to you for whatever they want to, for a profit or a loss. Thatís why its important to be nice, no one wants to give a good deal to a dick. I donít!!!

It will probably take some time on the 4 square, with out knowing what your becon score, or credit profile, I cant tell you what % your liable to get, or if your even qualified. Theirs a lot to know about credit, thatís why there are finance manages at dealerships. Thatís why you shouldnít fill out a credit application untell you work out a price on the car. Just tell them your pre-approved at your credit union or something. Tell them its a decent rate, but you donít reamber exactly what. If you stick in there and let the salesman hang himself by talking the price down, youíll end up getting a good deal. It normaly takes a couple times back and forth from the desk to get what you want. Donít hesitate to stand up and tell them if your not getting what you want that ďyour going to sit on the figuresĒ because you told them up front you wernt going to buy today. If you havenít demanded anything theyíll normaly cave, unless its an unrealistic, a less then what they paid deal. Never the less, if you do leave, call back 2 hours later and ask if they can do the deal, for what you wanted to originally. thatís how Iíve seen latterly 100ís of people get good deals. If I were you, after sitting down with the dealership, after they asked ďwhat would it take to earn your business, right now, today,Ē offer wholesale + t&l.
Tell them you would buy and drive the car home today if they could do that and take care of anything unsettling. Thatís where I would start. Good luck.


Its hard to answer that question without typing my fingers tell they blister. Lets start with the principals of financing. The type of loan you are trying to apply for is an installment loan i.e. Mortgage, equity lines of credit, boat, cars ect. There are several others, the most common is the revolving loan (credit cards). They show up on your credit report as ďRĒ for revolving. Installment show up as ďIĒ. The most important thing to reamber when applying for revolving credit (Abercrombie, visa, fred myers) is, you are knocked credit scores buy applying for them, and applying for them in general can be detrimental to your over all credit profile. That might be a dramatic of the truth, but to keep things into perspective, the less you apply for revolving credit the better!!!
This isnít the case when it comes to installment loans. The financial intuition understand that you are going to be doing a lot of shopping when you plan on purchasing a car or home, so they donít actual dock you a point or two every time you sit down with joe shmo (wasnít that a stupid ass show!) to seeing what kind of deal they can give you on that fancy new car, or what kind of rate the bank can get you for your new boat. The credit scoring on installment loans works in the way in which you are allowed to pull your credit (from installment loan institutions; car lots, banks) as many times as you like within a 30 day period without being knocked points in the same manner as explained above, you are only knocked 1-2 points on your beacon score (explain in a second) within that 30 day period no matter how many times you do so. Now remember that every instition you submit credit to will show up under the inquiries box on your credit file, and the explanation subsection of your credit will mention you might have ďto many inquiries within 12 month periodĒ so, its good to keep things in check, and not pull your credit furiously. The thing that banks are looking for is Stability. You are a risk to them, its like applying for a job, if you can get away with not listing all the jobs that sucked ass, the better off you are when they look at the past employment and donít see 5 jobs in the last 3 months. Its all about stability, and being able to make your payments on time (get there in a minuet)
A huge principal of financing job time, they want to make sure you have the funds to make your payment. Its best to have at least 2 years on your current job, of worked in the same profession for at least 2 years. Another is DTI (debt to income) with someone who doesnít have any credit, that doesnít mean squat, credits sucks ass. You cant get credit or have good credit without being in debt! So kind of a catch 22. typically banks want to see less the 25% dti & total dti with your new car @ or less than 36%, that can change dependent on your beacon score and overall credit profile. But the biggest overall, most critically important step to having good credit is to Pay your Fucking bills on time! For every missed payment, 30 day late, as they appear on your credit will cost you 9 months of your life to get your rating back to where it was before you had your head lodged in your ass, and forgot, or didnít want to pay it because they were rude, or you didnít think you had to, or what ever. Just reamber, banks donít care what excuse you have, if its on there, its on their. So even if they ARE lying and you donít owe someone $ pay it. It just gets worse if it goes to 60 days late or 90 days late. And it really fucks you if you donít pay it at all, and it gets R9 or I9 ďcharge offĒ thatís where they write you off on their taxes as a loss, and thatís bad, if R9ís and I9ís were venereal disease it would be a aids, syphilis, gonorrhea, herpes, crabs, and genital warts all wrapped up in a little neat bow.
Some other important things are how many open credit cards you have, and what your balances are, how long you have had them open, how many payments you have made on time. a rule of thumb is, the less credit cards you have the better! 30% of your beacon score is based on the overall balance of you credit cards, if your credit cards are more the 50% of their credit limit, pay it down to at least 50, if not a lower %. The reason is; itís important to make reasonable payments for a long piord of time. when you finance a car, they want to see 24-36 months of on time bill payments, to see that your use to being on a monthly payment schedule. They want to see that your good at making payments, not paying the damn thing off, because they wont make any intrest on your ass! No Ding Ding! So, credit card stability and payment history is important.

Aww yes the beacon score. Developed by fair Isaac. A # scoring system devised between the # 350 and 850. Iíve never seen anything lower then a 382, if you by chance are reading this and have a beacon score of 382 or less, please e-mail it to me, because I would like to frame it!! Any way. Beacon scoreing is the most strait forward aspect of financing. www.myfico.com is a great place to read up on beacon scores, and they even have calculators that you can pull your credit, and use different scenarios to calculate what your beacon score might be if you pay off all your credit cards, or file bankrupts. Itís a neat tool, but they require you pay $12 to pull your credit, and even more for some packages. On thing to know is, your beacon score is always different, and when your credit is pulled, its just a snapshot of what your credit looks like at that inherent time.
So. If 350 is bad, and 850 is awesome (never seen anything over 840) whats average? how can you tell what kind of rate you can get, how do you know if someone is giving you their best rate? Thatís right lending instutions can hold points on you from your qualifying buy rates, and charge you .25 to 3 points above what you could get!
Well the answer the my first question is dependent on where you live. But the national average is 678. when you pull your credit with www.experian.com wich is one of the 2 major credit reporting bureaus you can do a zip code statistics on what the average beacon score is where you live, itís kindaí cool, but again they want $. Assholes. But typically if your 730 or higher, with no derogatory credit (pay your bills on time) have no charge offs ďr9 or I9, bankrupsy, and your have good job time, and low dti, your what they call an Automatic approval for the best rates available for the lending financing institution.

Ok. Now to directly answer your question. im going to assume your young, going off your profile. Im just going to assume for the moment you have little credit. Wich is a big problem for people, because when they do turn 18, they think they can go out and buy anything because their 18. im not saying ANYTHING bad about you, or anyone else, honestly, im just frustrated that the Single most important aspect in your life for the next 60 years, they donít even teach in fucking highschool. Im not going to go off here, but I could because I hate just about everyting, and this is a biggie to me!
Newer cars are easer to finance because if you default on your loan, their easyer to sell. So typically the newer cars, have lower intrest rates, I was ďluckyĒ to get my 96 gsx for 10.99% with 112k on it. Where my 2002 elantra is only 5.6%. the bank wants to cover its own ass, because itís a risk to lend you the $ on an older car, because if you donít pay it, their stuck. So reamber when your shopping for a used car and you can get financed on it, you absolutely, positively CAN buy that new car you want instead!
Sorry dropedloeclipse99, theirs just sooooo much, and im cutting out a lot to save time. So, assuming you have little or no credit, and donít have the kind of job time, debt to income, exc. Yes, you will need a co-signer. Now there are banks out there that will actually finance you if you have ďno creditĒ, their tough to come buy, but my friend did it, it was out of some little credit union in the Midwest. He had been working for 3 years, and lived at home, and put 2000 down. So, you can see why its important to have good stedy job time. Ps. The morons paying 20.99% apr. on a 72 month loan. Hahahahha, I would just walk where I wanted to go for that.
Now lets look at the car you want to buy. Most lending instutions go off of a book value weather its Kelly Blue Book, or NADA for used cars. New cars are easy, they work off invoice. But for the scenario lets go off the 99 gst eclipse, fully loaded 45k. It carries a NADA book of $10,025 trade & $12,075 retail (when written). So now that the value is established, no matter what the dealership or persons ridicules asking price is (people are proud of their pieces of shit), you have the baseboard to your ďstructureĒ for the car deal.
Most credit unions use NADA, and most federal banks use Kelly. For shits and giggles im going to use NADA for this example. so, if you find someone who had all the requirements, and is over 730 beacon, what ever bank, credit union, gypsy what ever, will decised to go through to get the loan, a Loan to Value % on the car will be established. Loan = whats the most $ the dealership sell the car for. Value = trade in value (10,025) ps. Its never retail value. They determine value in the amount of risk there taking if you defaulted in your loan, and they needed to sell it as a repo at the auction, or even in their parking lot. So its always based on wholesale trade in value. Someone with a 730 automatic approval will qualify for the highest loan to value available from the lending instution. They have proven they pay their bills, so their less of a risk. Ive seen loan to values at 145% on new cars, but in this case you would be looking at roughly $14,000 for that gst fully loaded at 145% loan to value.
Now, for the realistic scenario. Take someone who has had a late payment or two (we all have) has good job time, good, or ok debit to income, and has a credit score of lets say 620. a little below average. That lending instution will look at their beacon score sheet find what term you wants (ie 1 year 2year upto 6years) and find the corresponding annual percentage rate (APR) try and reamber that the best intrest rates are short term financing, 36 months, 48 months. And they raise the rate the longer term you go. they look at the specific car and decide if itís a reasonable risk to take, or if your trying to buy something they donít feel comfortable lending $ for, or your underqulified to buy, like a 740i bmw. But in this scenario their ok with all that stuff, and they give a loan to value of 90%. That means to get that 99 gst, assuming you read my post on how to buy a car, and you got a great deal, you will need to come up with ďXĒ amount of $ just to get the deal financed, or bought. If you talked them down to $10,999, that means at 90% (that includes tax & lic by the way) you would need to come up with. Errr about $2900 to cover the difference for a down payment. Tricky, aint it.
So a normal rate with a 610 is about 7-15% depending on the other little stuff thatís in the credit profile, and what bank your going with. So @ 11% with a price of $10,999 @ 60 months, or 5 years, you should be about $239.14. maybe a better rate @ 42 months @ 9% and be $273.71.
Now its very uncommon for a legitimate dealership to carry their own papers, or in other words, not use other lending instutions as financing options, because itís a big hastle to lend your own $ and typically id a dealer does lend carry their own paper, the HIGH ass intrest rates, and piece of shit cars. Most ďpot lotsĒ or tiny used car lots carry their own paper, because the cars they sell, no one will finance. So when you fill out a credit application at the Mitsu dealership or where ever, and you work out all the #ís and commit to buying the car at blaa blaa blaa they pull your credit, decide what bank would like you the best, to get you the best intrest rate, so they can rip your ass in on the back end, by holding points, and get you done. Every bank, and every credit union has their own individual criteria and rates for your specific credit, its sad to say, but this is true. Normaly 99% of the time the dealerships will have better chances of getting you better interest rates then you do. If their being honest and not fucking ya of course buy giving you the actual buy rate, or close to it, . the reasion why is because every dealership has a big ass book on the sales desk, that contains all the interest rate charts for every bank, or credit union they do business with, so, they can tell you up front what they ďthinkĒ they can get you for a rate. See, if the banks gave you all their rates up front, they would have no chance of holding points on you, and it would be easy to shop all the rates, and that would drive the prime rate down, and we would all be buying cars and homes for 3.99 % @ 60 months. Bad for the economy by the way.
So what is holding points? Well if you have a buy rate of 6.45% apr and they hold 3 points and sign you up at 9.45, they (dealership) is making 3% each year on you. Gay, huu, on top of that, its legal. So when your looking to buy a car by get financed, pull your credit, look at the beacon score, call up a couple loan officers at different banks and ask them what the minimum requirements are for and automobile loan. Most minimum requirements are:
1 years on the job, $1,800 month
1 year residency (having a mortgage is best)
4 revolving or installment debt with 1 being a high term credit limit of 1500 or more
no derogatory (late payments) within the last 6 months
10% down 530-650
5% down 650 -700
0% down 710+
after that, compare interest rates, and get prequlified at your credit union, or bank, and then see if the dealership can beat the rate. Ps. (hehe) donít forget to lie when the dealership asks what rate your getting. If you were pre-approved at 7.5% apr, tell them you were pre-approved at 6.5, and see if they can match it or beat it. Thatís the best way of going about financing, in my opinion

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