OT: Paying cash for a new car, tips?

[LJohnny]

Originally Posted by Davist

I was going to pay cash for one of our cars, I ended up financing, as they had an extra $1k discount, then paid it off the next month or so, so be aware of that also.

My understanding is that once going through dealership financing, they get their interest (in full for the loan term) no matter how quickly you pay after signing. I think financing through a credit union-type institution allows for interest to be paid at the rate of the agreement until the loan is paid, ie if paid before the term of the loan, paid interest amount paid will be lower.

[rice rocket]

Originally Posted by LJohnny

My understanding is that once going through dealership financing, they get their interest (in full for the loan term) no matter how quickly you pay after signing. I think financing through a credit union-type institution allows for interest to be paid at the rate of the agreement until the loan is paid, ie if paid before the term of the loan, paid interest amount paid will be lower.

This is bad info.

[Dave]

I have paid cash for nearly every car I've owned in the last 30 years. There are times when a significant discount is offered if the car is financed. Typically only 3-4 payments are required and interest can't be jacked up beyond normal levels, so some savings is still realized with financing. We did this with the two 2022 Hyundai cars that we bought, back when supplies were short.

One way to ensure a decent trade-in value is to get a quote from one of the companies that offers to buy cars. If the trade offer is too low, sell the old car, rather than trade it.

[Turkle]

Originally Posted by AngryScientist

Find the car you want and then deal with the internet sales manager on the phone. Do t go into the dealership until the deal is done and it’s time to pick up the car.

This is EXACTLY what I did when I purchased my latest vehicle. I negotiated everything on the phone first, including cash price. Then I showed up at the dealership and test-drove it to make sure everything was above board. It was, and I paid cash right there.

It was surprisingly and pleasantly hassle-free. No drama.

Got a darn fine price on it too, based on what I saw elsewhere.

[LJohnny]

Originally Posted by rice rocket

This is bad info.

Perhaps it changed, and may depend on location and timeframe from my last market research on car loan. When we purchased our last car, about 5 yrs ago, all dealerships that we checked the payment terms had an “early payment penalty” that basically prorated the interest for the term to the time of the loan close up. Maybe things have changed? This was not the case for the interest payments at the CU.
If the above not accurate any more or does not apply to all markets, no intention to misinform, just sharing my experience. OK

[yngpunk]

Originally Posted by Dave

I have paid cash for nearly every car I've owned in the last 30 years. There are times when a significant discount is offered if the car is financed. Typically only 3-4 payments are required and interest can't be jacked up beyond normal levels, so some savings is still realized with financing. We did this with the two 2022 Hyundai cars that we bought, back when supplies were short.

One way to ensure a decent trade-in value is to get a quote from one of the companies that offers to buy cars. If the trade offer is too low, sell the old car, rather than trade it.

One should make sure to read the loan documents to ensure that there is no pre-pay penalty, despite what the dealership finance person might say. They may tell you need to make 3-4 payments before re-financing or paying off the loan, but often this isn't the case...you can re-finance/pay-off immediately. The 3-4 payments is typically to allow time for the dealership to get their incentive from the bank...I'd be surprised if any loan without a pre-payment penalty stipulates that you need to make 3-4 payments first. Never believe what the finance person says is on the paperwork without first reading the paperwork yourself.

Also, see how much they'd let you put on a rewards credit card...usually a couple thousand max, but still points/cash back to you.

[old fat man]

Ryun or any others here that are in the business - are you willing to provide a pain free, forum member purchasing experience? I absolutely despise the car buying process and have found nearly every dealership within 100 miles of me to be unpleasant to deal with.

[Ralph]

On my wife's last car, got ready to pay cash, then sales manager stuck his head in and said there was an extra $500 discount on vehicle price if I financed. Simple interest on balance. I asked how many payments did I need to pay before paying it off. He said do at least 2, and that's what I did. So be alert to that.

[Ozz]

Originally Posted by superbowlpats

If paying cash most dealers will insist on a bank aka certified check or wire transfer. There are some pretty reasonable interest rate deals out there if you dont want a ton of cash tied up in your new car. I just got .9% for 36 months on a new 23 Honda Ridgeline.

I believe car dealers have anti-money laundering requirements they have to adhere to....which is why they want a bank check or wire transfer...most seem to prefer wires these days since bank checks can be forged.

[rice rocket]

Originally Posted by LJohnny

Perhaps it changed, and may depend on location and timeframe from my last market research on car loan. When we purchased our last car, about 5 yrs ago, all dealerships that we checked the payment terms had an “early payment penalty” that basically prorated the interest for the term to the time of the loan close up. Maybe things have changed? This was not the case for the interest payments at the CU.
If the above not accurate any more or does not apply to all markets, no intention to misinform, just sharing my experience. OK

Sorry, shouldn't have quoted your whole post.

But the dealer isn't making 100% of the interest on a loan, with the bank servicing it for free and carrying 100% of the risk. The dealer makes an origination fee, which is a fraction of the total loan value.

[Ryun]

Originally Posted by old fat man

Ryun or any others here that are in the business - are you willing to provide a pain free, forum member purchasing experience? I absolutely despise the car buying process and have found nearly every dealership within 100 miles of me to be unpleasant to deal with.

Absolutely. I have a Honda store in Jacksonville Florida but I can also facilitate other brands thru my contacts at other brands and stores.(Although I am retiring in 90 days so act fast lol)
I can also let you know if it makes sense to ship a car with the associated cost.
Transport has gotten a bit more expensive and some brands/models just don't have the margin to make some long distance transactions cost effective for the consumer.

Some banks will have a small processing fee for very early termination usually in the ballpark of $35-50 but all auto loans are simple interest so you only pay for the interest used. Leasing of course is a different animal altogether.

[fmradio516]

I havent listened to this in over 5 years, but i remember it being very informative about the car salesmen world. Worth a listen...

https://www.thisamericanlife.org/513/129-cars

[OtayBW]

I've purchased a couple of vehicles using cash only and by going through the Internet sales manager. I personally would not disclose anything about my preferred method of payment until some hard number is reached. If that's not sufficient to arrive at a fair negotiated price, or if there are some rebates that are not available to me based on a cash purchase, I'm moving on. A bank check has always worked for me.

[benb]

Originally Posted by Peter P.

The rule of thumb is to keep discussions about trade-in separate from the purchase price of the vehicle.

A good way to force this is to call/email and do as much of your negotiation on the price of the new car remotely. Then they never even see your "trade" if you even have one.

You can spread your net far and wide and actively play the dealerships off each other.

I would basically be in the same situation next time I buy a car. I want to keep my Subaru going till I can give it to my son, and if I don't want to I will have no need to take a loan.

But if loans are out there at 0% or 0.9% and investment returns are great I'll get a loan. Several times I chose the car I bought back when I did need a loan based on which one I could get a great rate on. 2 out of the 4 cars I've owned I managed to get a 0.9% rate.

[Davist]

Originally Posted by LJohnny

My understanding is that once going through dealership financing, they get their interest (in full for the loan term) no matter how quickly you pay after signing. I think financing through a credit union-type institution allows for interest to be paid at the rate of the agreement until the loan is paid, ie if paid before the term of the loan, paid interest amount paid will be lower.

No, no prepayment penalty, I did read the contract before signing.