Used car Financing, dealership Vs home equity line.

[scottmandue]

Yet more kanoodleing over buying a used car...

We have set our budget at $10K and buying in Portland OR. car is for my wife and her 16 YO daughter.

Home equity:

Pro - We get the title, lower insurance (however I am a little worried about getting minimal insurance with a teen driver)

Con - High interest rate, US bank is quoting me 6.9% for a loan. the rate I got on the Hyundai (four years ago) is 5%. I have checked with two other banks and that seems to be the best rate I can get, they will go down to 5.9% on $20K but I don't want to spend that much.

Financing used car thru a dealership:

Pro - lower interest rate.

Con - have to deal with weasel car salesman (apologies to the salesmen here on the BBS), have to get full coverage.

Don't know if it is worth 2% to avoid the hassle of going to a dealership?

Also buying ANY used car... even from a private party is a gamble.

Wife thinks we should get the $10K with the bank then go to the dealership and see if they will give us a better rate. If they do give us a better deal just turn around and give the $10K back to the bank... I'm pretty sure the bank will make us pay some kind of penalty for doing that.

What think ye?

[island911]

Here's a thought; buy w/o debt. ...save money and THEN buy. --I know, that's just crazy-talk, when there exists a complicated expensive way to have it NOW! :-/

[jyl]

If budget is $10K, seems you're buying a used car, whatever the financing route.

One financing route offers a lower rate and doesn't encumber your home. Dealing w/ the car salesman is a few hours of hassle, quickly forgotten. W/ a teen driver, you want plenty of liability and UI insurance anyway, so the cost difference is just collision/comprehensive. I'd use the dealer financing.

Why not replace the water pump on the 944 and simply use that for the time being, spend $500 instead of $10K? Are you in PDX now? Is the 944 in PDX? We could get a couple of Pelicans together and get that water pump changed out in an afternoon, with time out for beer.

[m21sniper]

A home equity line is the much wiser way to go IMO, for a variety of reasons.

[island911]

+1 to John.

the economy is not going to be getting better any time soon. In fact that future $10k will likely feel more like $20k+ as dollars become even harder to come by.

[masraum]

From what I've read, Car Dealerships are out to make money. If you negotiate a low price for the car, they make their money on the financing, if you negotiate something like a particular monthly payment, then they make their money through the bottom line and financing.

Better to get financing somewhere else, and then negotiate the bottom line on the car, I would think, but then I don't like haggling.

[pwd72s]

Originally Posted by island911

Here's a thought; buy w/o debt. ...save money and THEN buy. --I know, that's just crazy-talk, when there exists a complicated expensive way to have it NOW! :-/

Kudos... Financial happiness is when you pay no interest. Joy is when others pay interest to you.

[GH85Carrera]

Originally Posted by island911

+1 to John.

the economy is not going to be getting better any time soon. In fact that future $10k will likely feel more like $20k+ as dollars become even harder to come by.

+1 to John as well. Leave your home equity alone.

[911Freak]

You don't mention local credit unions or your Bank for car loans, why?

Have you checked with your bank?

Not a member of a C/U? No biggie, they'll sign you up with a car loan if you open a $25 checking account. The dealer will shop your loan to a C/U and this is what they'll require to finance you, so you might as well shop a C/U yourself...

The best rates I've seen are through local credit unions or USAA..

Don't be intimidated by the car dealers, they have access to more Lenders and as long as you refuse to sign until you see the financing approval letter (faxed to the dealership into the F&I dept where you sign your contract) you won't get screwed.

Often dealers will mark up the finance rate to make a little more $$ on the deal...Check and double check everything! Double check the vin# as well...

I assume you know how to buy a used car; (research the trade in value vs private party vs retail, average price the car your interested in is selling for in your area etc etc)

Don't buy the 1st car you like or on the 1st day you drive.

The "take away close" works for buyers not just the dealership...

Dealers will run 3x at you for their price (even if they drop it a little, stick to your fair price at least until they've made these 3 runs at you).

The 1st who talks loses etc. (when they show you the 4 square or pencil sheet with price and payment etc, don't say anything until the salesman speaks, odds are he'll go back to the manager and start negotiating down the price for you!

Again, hold out, don't talk 1st when they show you the pencil sheet. just shake your head and wait for the salesman to flinch....

Don't buy payment, buy price, don't buy interest rate, you know what you qualify for.

Don't let them give a reason to bump a rate after seeing your approval (did I say demand to see your approval?), don't buy gap insurance on an older car unless you aren't putting any money down and are financing 100% (you are putting money down right? even 10% makes a difference), don't buy an extended warranty unless they sell it to you for $100 over cost...even then you have tools right?

Read everything.... Check ALL the numbers, take notes when your negotiating the price, don't sign anything until your satisfied and in the F&I Dept!

When your car is being delivered check the vin# Make sure it's got a full tank of gas, it's clean, etc.

Hope this helps.. I've worked in a dealership in the F&I dept as well as for the Banks selling money to dealerships... this is how it's done. It's amazing how people don't ask questions or even verify the #'s when signing a loan commitment!!! Seen it a thousand times....

Good luck!

[sammyg2]

How long would it take you to pay back the equity loan?
that is important.

My buddy refinanced his house a few years ago (30 year fixed) and bought a new chebby yukon with the money he pulled out.
He was all happy about having a new SUV that was all bought and paid for. Yeah, I know.

I 'splained to him that he does have a car payment and that he will be paying for that SUV for the next 30 years. Looooooooonggggg after it is dead and gone he will still be paying for it.
He basically said that's crazy talk.

Sharp as a beachball that guy ....

[911Freak]

Originally Posted by GH85Carrera

+1 to John as well. Leave your home equity alone.

+100

I've seen this a lot as well, but buying a car with your home equity is poor financial strategy for many reasons. I've done the mortgage banker thing to and have seen way to many people put them selves in a financial pickle buying depreciating assets with their home, resist!

Best strategy is to buy with cash, but leveraging is OK IF you pay it off early. As little as 10% extra in monthly payment can cut months if not years off of a note.

PM me for examples if you want...

[stomachmonkey]

HELOC interest can be taken as a mortgage expense for any purpose up to $100,000.

In other words the interest is deductible.

[GH85Carrera]

Yea, the interest on 10 grand at 5% is not going to be much to deduct.

[911Freak]

Originally Posted by stomachmonkey

HELOC interest can be taken as a mortgage expense for any purpose up to $100,000.

In other words the interest is deductible.

True, but how many people that buy cars, boats, toys etc with their equity lines have the discipline to not go crazy? I've seen very very few people who know how to leverage their HELOCs correctly. First starts with the car for her, then one for him, then a remodel then a trip... Then back to me to borrow more money..

Didn't we learn anything the last 7 years about borrowing against our homes?

Buy an investment property, an appreciating asset with HELOC not a car........

sorry, rant over

[Hugh R]

We bought a vehicle with a HELOC, but paid it off completly in three years. It's the only thing we put on it.

[masraum]

Yes, if you have to finance, use a credit union.

[scottmandue]

Originally Posted by island911

Here's a thought; buy w/o debt. ...save money and THEN buy. --I know, that's just crazy-talk, when there exists a complicated expensive way to have it NOW! :-/

I agree with the above, in a perfect world that is the best way to go, however she is driving a 1996 Nissan pickup truck that is on it's last legs and costing us money in repairs. Also a mini pickup is not the most practical vehicle for the rainy north west. Something with a backseat and a trunk would be much more user friendly.

Originally Posted by masraum

From what I've read, Car Dealerships are out to make money. If you negotiate a low price for the car, they make their money on the financing, if you negotiate something like a particular monthly payment, then they make their money through the bottom line and financing.

Better to get financing somewhere else, and then negotiate the bottom line on the car, I would think, but then I don't like haggling.

Also agree with this, I also hate haggleing and it is obvious that a dealership has to pay for their overhead. If I get the home equity line we will probably buy from a private party.

Originally Posted by jyl

If budget is $10K, seems you're buying a used car, whatever the financing route.

One financing route offers a lower rate and doesn't encumber your home. Dealing w/ the car salesman is a few hours of hassle, quickly forgotten. W/ a teen driver, you want plenty of liability and UI insurance anyway, so the cost difference is just collision/comprehensive. I'd use the dealer financing.

Why not replace the water pump on the 944 and simply use that for the time being, spend $500 instead of $10K? Are you in PDX now? Is the 944 in PDX? We could get a couple of Pelicans together and get that water pump changed out in an afternoon, with time out for beer.

944 is in Los Angeles, I have a 2005 Hyundai as my daily driver, yes I live in Los Angeles and she lives in Portland... confusing I know but that is another thread.

I am a member of USAA and they quote me the same 6.9% on a fixed rate home equity line of credit. I have talked to two other banks and after the dog and pony show the numbers always end up the same.

[vash]

i say go to a credit union and shop for a loan. leave your home out of it.

[Justin@Athens]

I STRONGLY suggest going to a credit union as well. USAA should do you better than 6.9% on a plain used vehicle loan--leave the home equity out of the picture.

[scottmandue]

I'm only putting $10K on the home equity line. I am not asking for $500K on a $250K house.

And I am only buying a used car... I am not blowing money on a boat and a plasma flat screen and a airplane... just a used car... period.

Yes, cash is always better... but we don't have $10K cash sitting around.

Bottom line, with a HELOC I have cash in hand to negotiate with a private party and walk away with a pink slip.

With an auto loan they won't issue a check until I submit a VIN, make, model, mileage, etc. Good luck getting a private party to hold the car until you can get the loan processed. Plus after the fact they will hold the pink slip and demand full insurance.