Financing a car?
Posted by Lolloloko18@reddit | askcarguys | View on Reddit | 14 comments
Hey everyone! I want to finance a car, most likely a Mazda 3. I’m located in CT. The 2024 version with around 30k miles they go for around 18,500-19,000$. I’m selling my current car for 6k and I already have 10k in cash. The rest of the money id rather not touch since I’m investing it. My question is how should I approach the dealership? Should I put the minimum amount down try to get the best rate and then the first month pay a BIG chunk of money so the payments get lower? Or what would the best approach be? Also for the loan better from the bank or from the dealer?
Thank you guys!
caroulos123@reddit
Yes, why not put the minimum down to lock in the best rate then drop a big payment the first month after to shrink the balance fast. Banks in CT usually beat the dealer on rates for a Mazda 3 anyway. I got good car loans doing it that way and kept everything easy with my cash and trade-in.
Bulocoo@reddit
The payments won't get lower. Just the split among interest and principle changes.
I read that you have $6K + $10k to buy a $19k car. So finance $3k?
Why? Use the other savings you mentioned.
As far as strategy. Get your preapproved bank loan. I always say, "I haven't decided on financing. You can soft run my credit if you like but I want to focus on the best OTD price."
Then when I am happy I usually put $5k on my debit card and a check for around $25k. My car price target is always around $30k
Lolloloko18@reddit (OP)
Got it! Thanks for the reply. So technically I have 9k in cash now but haven’t sold my jeep yet, which I’ll try to get around 6k for it but I don’t know how long will it take to sell that. Should I get the pre-approved loan from the bank and tell them how much is it or should I first ask the best rate they can give me from the dealer, and then after say the bank one? I have a 750 credit score. Haven’t a checked with a credit union yet to see what the % would be
Bulocoo@reddit
No tell your bank you are financing $10k of a $20k car. They should give you tentative approval for up to that amount. Give or take.
They will give you the details where to send the deal paperwork (direct from the dealer). My CU approved my deal in like an hour from the dealer hitting send.
Sell your old car then drop the $6k on the loan. If its a 36 month loan you'll have about 12 months or less left.
Lolloloko18@reddit (OP)
Got it! Question before that should I bring down the price of the car as much as possible? So I know realistically the out the door price of the car or should I get the rate of the bank first and then after talk with the dealer
Bulocoo@reddit
Once you have approval then yes. Negotiate like crazy. Whatever the final deal is gets emailed to the CU.
So approved for $10k and you get the car for $17k. Now its up to you. You can do $9 in cash and finance $8.
They send a loan approval to the CU for 8.
Or you could say - Write it for $10k loan and I'll pay $7 in cash.
That's what you tellnthe dealer.
IAteTonysLoMein@reddit
If you decide to sell yourcar privately, put down the 10k and get financing set up. Once you sell your old car, throw it at the loan, but be sure to apply it to the principle - it won't lower the payments, but it will shorten the life of the loan and the interest you pay by a significant amount.
TiFist@reddit
Get a pre-qualified loan before going to the dealer so you have a base line for "can be no worse than this." If you have a credit union that's even better and their rates may beat manufacturer rates (by a lot sometimes.)
Don't ever negotiate on how you want to pay or how much you want to pay per month. Settle on a price first before negotiating financing.
Lolloloko18@reddit (OP)
Thank you for that. My car has only an estimate of 2k with the dealer but I think I’ll be able to sell it around 6k if I sell privately so that’s what I was thinking on doing. So biggest thing you are saying is get a pre-approval somewhere else, see if dealer can match or beat and if they do, go with them. And then instead of talking about monthly talk only about out the door price and then after figure out the best option for me to just pay? Did I understand correctly
TiFist@reddit
One thing that's not always obvious for new buyers is that when you trade in a car, you only pay tax on the difference between the new car and the trade in value.
I don't think it's realistic to close a $4,000 gap in pricing, so we'll just have to see how that negotiation goes. If the dealer is low-balling you you should be prepared to negotiate hard on that, but it may just be that they don't want your trade and that low balling you is because of that. They have power to negotiate on both bringing the price of your trade up as well as the price of the car down. If they're within a few hundred $$$ the tax advantage of trading in probably means you will break even for zero risk/zero effort.
If you get a quote from CarMax that will also set a floor for that part of the negotiation. Just threaten to sell it to car max if they won't value you trade at that.
--
If you have a credit union (ideal) or a bank (usually not as good) and ask for pre-approval for a car they can say "you can borrow such and such for whatever % over whatever term." You don't have to take the loan out at that point. Maybe your bank charges you 7%. If the dealer wants 9% then either ask them to match your bank or tell them you'll just go with the bank. *usually* they want you to finance through them and they might have more flexibility on the deal but if not you have a worst-case number from the bank.
--
When you talk about the sale.
You : "I'm thinking about trading in, and I'm looking for this car to come in around (give them a number lower than what you actually think you should pay), what's your out the door price"
Dealer: "Are you going to be financing? What kind of monthly payments are you looking for?"
You: "I have some options on how I'd like to pay so I just want to see how the total price looks."
(At this point you negotiate the price "Out the door" including taxes and fees and get ready to fight all the extra BS that the dealer wants to tack on. Any government fees are ones they have to charge. Any other "documentation fees" or "car prep charges" are them padding extra profit. They'll often try to tack on extra features like a $400 "nitrogen fill" for the tires (it costs them virtually nothing to fill the tires with nitrogen.)
Then when you agree on a price you can work with the financing person to set the terms of your loan, and you can play with how much you put down and the length of the loan to get the payments you want.
If you are doing this with the bank, they should give you some ball-park numbers to begin with and they'll guide you through the process (the financing at the dealer will just take the bank's info and check.)
They'll also probably try to bundle warranties and services at this point. What you do with that is up to you. Generally dealer-only warranties are bad but if it's a Mazda warranty for example, it's up to your consideration. You don't have to go through them and it's often not a good deal just be prepared for them to talk about it.
If you go into the process saying "I want to pay $350 a month" or whatever it's like walking in with a giant red tattoo across your forehead that says "SUCKER."
Financing people can make *any* monthly payment happen. That's how you end up with an 84 month loan on a used car at 19% and you're still upside down 6 years later. Don't do this.
Good luck!
Lolloloko18@reddit (OP)
Thanks a lot for all that information! Definitely super helpful! I’ll keep you posted on how the negotiation goes! I was also thinking on leveraging on some other similar cars in the area and go back and forth between dealers and let them fight for the best price but unfortunately there isn’t a lot with that amount of miles for that year so will definitely keep looking around and see if I find more. Also this one I was looking at it’s also on cargurus but it says it’s been there for 300 days and 120 days at the dealer so that might give me some leverage too
TiFist@reddit
Knowing that it's sitting at the dealer is super helpful to know. There also may be a reason why that doesn't show up in pictures like it has a bad smell or something
Lolloloko18@reddit (OP)
Got it thanks! Will keep you posted
naterpotater246@reddit
It doesn't hurt to get estimates from a couple different banks to see where you can get the best interest rate. Also, whatever you decide to do, you should haggle with them a little to see if you can get the price down. Most big dealerships are willing to haggle with you to make the sale. Not so much small used car dealers or Carmax, though.