Author Topic: 0% financing? (Read 5701 times)

Faustie · « **on:** March 20, 2006, 03:27:02 pm »

I've been carefully reading all the new purchase advice and feel pretty well-armed to take on my local sales guy. The 1 question I have is about dealer financing. The predominant advice to is avoid dealer financing and set up your own, as the dealer makes cash on that. For a dealer offering 0% financing on 48 months, where's the trap? Is that a manufacturer's deal that I should take advantage of, or is it a dealer scam I should avoid? I'm able to get the usual financing from the bank (@ prime), but why would I?

My plan was to use the bank line of credit to borrow a sum to put down, then use the 0% to finance the balance, playing those 2 sums to get a monthly payment I can live with.

I'm a bit confused between the dealer financing and the manufacturer incentives I guess and how these can work to my advantage. Any tips are appreciated!

Panzer · « **Reply #1 on:** March 20, 2006, 03:40:56 pm »

In some cases (GM), having the car financed elsewhere and paying the dealership cash gets you a lower purchase price than having the vehicle financed through the dealership itself. The trick is to make sure whatever money you save by paying cash ends up being more (or worse case scenario, the same) than the interest fees you'd get charged by the bank (or whichever institution you're borrowing from).

AVToller · « **Reply #2 on:** March 20, 2006, 04:59:56 pm »

The predominant advice to is avoid dealer financing and set up your own, as the dealer makes cash on that.

Welcome to the forum. Hope you will stick around and enjoy the insanity.

To me, the statement I quoted is irrelevant. I don't object to the dealer making money on my financing. If I go to a bank, a credit union, or Vinnie at the pool hall, they are all going to make money on the financing. The only thing that should be relevant to you is YOUR bottom line. If your TOTAL cost is lower by accepting discounts in lieu of 0% financing, go that way. If accepting 0% financing gives you the lowest NET cost, accept it and don't worry who is making what.

neil · « **Reply #3 on:** March 20, 2006, 05:36:19 pm »

Quote from: Faustie on March 20, 2006, 03:27:02 pm

I've been carefully reading all the new purchase advice and feel pretty well-armed to take on my local sales guy. The 1 question I have is about dealer financing. The predominant advice to is avoid dealer financing and set up your own, as the dealer makes cash on that. For a dealer offering 0% financing on 48 months, where's the trap? Is that a manufacturer's deal that I should take advantage of, or is it a dealer scam I should avoid? I'm able to get the usual financing from the bank (@ prime), but why would I?

My plan was to use the bank line of credit to borrow a sum to put down, then use the 0% to finance the balance, playing those 2 sums to get a monthly payment I can live with.

I'm a bit confused between the dealer financing and the manufacturer incentives I guess and how these can work to my advantage. Any tips are appreciated!

There are no scams on the 0%, and the dealer makes nothing if that is your choice.

Find out if there are rebates in lieu of the rates. In some cases the rebate is greater than the interest savings. For example on the Hyundai sonata. $3000 in lieu of the 0%. Over a 48 month term the "real" cost of borrowing is 6.8% on a $23k vehicle.

If you don't have a decent rebate available on your model, I'd forego using your LOC. It makes no sense to tie it up when you get the money for free from the mfgr.

In general LOC's are a worse option than many know. Speaking in general terms and not specific to your circumstance, 80% of people have no idea what the terms of the LOC are. I had a fellow about 2 years ago that put a $30k car on his line. He was back a month later in a panic because the payment was massive. Dealer finance would have been about $500, but he didn't know his LOC was 3% minimum repayment, or $900!!! If your case is Prime 5.5 is a darn good rate right now, most don't have an unsecured line at prime, most are p+2 or P+3. Interest rates are expected to continue to rise, p+2 is no better than a dealer can offer right now, and the CSA from the dealer will be a fixed rate, secure against future increases.
Also, you may want to keep your line available incase of an emergency as opposed to tying it up with a depreciating asset.

articsteve · « **Reply #4 on:** March 20, 2006, 06:51:12 pm »

What specific car are you thinking about financing?

Panzer · « **Reply #5 on:** March 21, 2006, 01:25:46 pm »

Quote from: AVToller on March 20, 2006, 04:59:56 pm

Welcome to the forum. Hope you will stick around and enjoy the insanity.

Yeah... *twitch* wElCoMe AbOaRd! *twitch*

Quote from: AVToller on March 20, 2006, 04:59:56 pm

If I go to a bank, a credit union, or Vinnie at the pool hall, they are all going to make money on the financing.

But Vinnie's the only one who'll actually break your legs and/or put 'em in a brand new pair of cement shoes if you fail to make a monthly payment...

Quote from: AVToller on March 20, 2006, 04:59:56 pm

The only thing that should be relevant to you is YOUR bottom line.

Faustie · « **Reply #6 on:** March 21, 2006, 04:55:20 pm »

Wow. Thanks a ton for the feedback! Very pragmatic insights.
I'm actually looking at the 2007 Entourage minivan by Hyundai. It was meant to hit the lots here in Calgary this week, but I haven't seen signs yet in the papers, despite assurances from the local dealer. I'll need the extra seat by the summer, so no hurry. I just want to get all my facts and my gameplan sorted before I go.

On a related note. I drive a '79 Delta 88 I'd like to trade in. Obviously, I just want them to take it off my hands for $500-1000 and save me the hassle of selling privately. What do you guys think my odds are? Any tips?

Cheers,
Faustie

AVToller · « **Reply #7 on:** March 21, 2006, 05:06:06 pm »

I'm sure they won't charge you more than $300 to dispose of it!!

neil · « **Reply #8 on:** March 21, 2006, 05:06:27 pm »

Faustie, I wouldn't hold my breath for 0% on that for a few months.

neil · « **Reply #9 on:** March 21, 2006, 05:07:18 pm »

Quote from: AVToller on March 21, 2006, 05:06:06 pm

I'm sure they won't charge you more than $300 to dispose of it!!

Yeah, those cars double in value depending on the position of the fuel guage.

Faustie · « **Reply #10 on:** March 21, 2006, 05:57:58 pm »

Come on guys - she's a classic! Did I mention the Landau roof and the leaky fuel pump? A collector's item!

AVToller · « **Reply #11 on:** March 21, 2006, 06:11:27 pm »

OK, $400 to dispose of it!

articsteve · « **Reply #12 on:** March 21, 2006, 07:38:11 pm »

On a related note. I drive a '79 Delta 88 I'd like to trade in. Obviously, I just want them to take it off my hands for $500-1000 and save me the hassle of selling privately. What do you guys think my odds are? Any tips?

Any money the dealer gives you for that 88 will just come off any discounts that you may get off the new vehicle.

What are wreckers paying for scrap in Calgary?

Doc Otis · « **Reply #13 on:** March 22, 2006, 12:50:32 am »

Boy, did I find the right thread. Considering buying a new Hyundai Elantra or Santa Fe (I want a used 2003 in either model, but slim pickings for good deals right now...), and I have a '95 Pontiac Firefly w/260,000 k to get rid of.

What ARE they paying for scrap in Calgary these days? Probably less than the new clutch I had installed a couple of weeks ago.

Faustie · « **Reply #14 on:** March 22, 2006, 03:24:20 pm »

It's kind of a strange market. These old, but very common (read: lots of wrecker parts around) vehicles seem to have a bit of a following out west here. I've only got 146kms on my Delta 88, so I could sell it with the leaky fuel pump and broken speedometer for $400-$500. Fix these and get $700, or get it certified (probably have to do the ball joints, tie rods) and get close to $2000.
Scrap? Lucky to get $20...

Panzer · « **Reply #15 on:** March 22, 2006, 03:41:39 pm »

Quote from: Doc Otis on March 22, 2006, 12:50:32 am

Boy, did I find the right thread. Considering buying a new Hyundai Elantra or Santa Fe (I want a used 2003 in either model, but slim pickings for good deals right now...), and I have a '95 Pontiac Firefly w/260,000 k to get rid of.

I traded my '94 Firefly sedan last year for a grand. 5-speed manual, 180,000 kms, non-working rear right door, crack in windshield and stank of oil.

But the aftermarket cassette player was still working!

neil · « **Reply #16 on:** March 23, 2006, 01:10:45 pm »

Faustie, I got the rates today for Entourage:

24 36 48 60 72

1.9 1.9 2.9 4.9 6.9

articsteve · « **Reply #17 on:** March 23, 2006, 01:27:23 pm »

Quote from: Faustie on March 22, 2006, 03:24:20 pm

It's kind of a strange market. These old, but very common (read: lots of wrecker parts around) vehicles seem to have a bit of a following out west here. I've only got 146kms on my Delta 88, so I could sell it with the leaky fuel pump and broken speedometer for $400-$500. Fix these and get $700, or get it certified (probably have to do the ball joints, tie rods) and get close to $2000.
Scrap? Lucky to get $20...

Well I'd go ahead and sell it uncertified then. Those were indeed the good old days for repair costs particularly on rear drive carbed 6 or 8 cylinder GMs. That fuel pump costs about 25 bucks and takes 10 minutes to install. Driving with a fuel leak at the motor of any kind is poking fate.

Scrap? Lucky to get $20...

$200. here in southern Ontario for a car. The Chinese are shipping crushed cars back home via Hamilton.

Faustie · « **Reply #18 on:** March 24, 2006, 05:17:59 pm »

Neil - thanks very much. Hyundai Can told me a couple weeks before they hit calgary. My painfully pragmatic wife is wondering why we'd pay for new, so I may be looking instead at used Sedonas, older Odysseys. I'll have the the numbers and sort out what we're really willing to pay.

ArcticSteve - Duly noted about the fuel pump. But I save so much on beer with all those gas fumes pouring into the cab

My mechanic pal sounds like he may be willing to give me $700 and do the work himself to realize any upside, which I'd be happy with. But you're right - not a repair you want to flirt with too long.

Thanks guys - keep y'all posted on how we proceed.

Doc Otis · « **Reply #19 on:** March 24, 2006, 05:30:45 pm »

Cruised into a Hyundai dealer today for a first look and an test haggle for the Santa Fe.

In lieu of the 0% financing, I can get a $3000 rebate, plus I qualify for the grad rebate of $750, which knocks the price down nicely off the bat.

The $3750 in rebates are sponsored by Hyundai, and shouldn't take anything out of the dealer's pocket correct? This should leave me some room deal down from the MSRP, although that bottom line is already starting to look better.

ADDED: Just joined CCC and wasn't particularily impressed with the report I got.... the wholesale price is only $1098 lower than the MSRP (ignoring all the above rebates). In the "special prices" area, a Dealer Markup of $800 is applied, for a whopping savings of $298 off the MSRP. There must be more haggle room than this on a HYUNDAI; in fact, the sales person I dealt with today gave me the impression (as is his job) that there'd be more room to move, although I resisted getting into numbers on a first visit.

There's got to be a way to get that $1545 Freight and PDI; the dealer was coy about giving out a breakdown on the individual fee amounts before discussing the rest of the numbers.

I'd appreciate some dealer feedback on how valuable to the dealer an end-of-month or end-of-week sale is (generally), since I could pick this car up by the end of March if necessary, and don't mind helping the salesperson/dealer put a little extra in their pocket if it will save me a buck or two. Time to launch a cross-dealer quote campaign...

I'm probably going to leave my PoStiac out of the deal, although I've already given the salesperson some idea of the mechanical issues it has, and what I'd need to get out of it to consider a trade in. There's still some value in it as a parts car or possibly a project for a mechanic, so there's no point letting them give me an inflated trade-in value instead of a straight price discount.