Re: Vehicle financing interest rates?
The decision to buy new or used depends on how you are going to actually use the vehicle. The first year the average vehicle looses 30% of its retail value. The second year it loses another 20%. And every year after that it looses 10%. So yes, on average, you loose the biggest portion of your value in the first 2 years.
However, to some the warranty, that peace of mind, is worth the value loss. To some the prestige and just the smell of a new vehicle is worth the value loss. And for people on the road that can't afford down time, and put a lot of miles on a car, it is just part of the cost of doing business. So to each, there can be a valid reason for deciding to purchase new or used. I feel the biggest reason is, what can you afford and are comfortable with.
I grew up in the Dealership business. There are those in the industry, and the industry promotes it, that inflate the interest rate, add the insurances, etc. Anything to add to the cost of the vehicle. We were "known" as the high priced dealer in our area. But when a customer would let me explain the difference in our price to the one from the dealer down the road, they could see that although we were charging $200 more for the car, with the add ons (or should I say without the add ons), we were $800 less! Important thing is to compare apples to apples.
Basic information you need to know when buying a car:
Dealer invoice - is the cost the dealer must pay for the car. However, part of that cost is called "hold back" and the dealer will get 3% back either monthly, quarterly, or yearly, depending on program. If the dealer has to get the car from another dealership - he looses the 3%. That is why dealers will try to trade cars, not buy them outright.
When looking at a used car, it is not important what the selling price is - look at the bottom line price. Dealers inflate the selling price of used cars so they can give a higher trade in value for your used piece of junk that you think is worth $1500 more than it really is. Tell the dealer you want the straight sale price and if you decide to trade you understand you will only get wholesale for your vehicle. That will give you a more realistic view of what both vehicles are worth.
Be informed, but realize the dealer and salesman need to make a profit. If not, they won't be in business long. They don't ask you to work for nothing, have the same courtesy to them. However, that doesn't mean you should not get the best deal possible. I always appreciated the customers that came in and said, "You should make $600 or $500 on this sale, now let's work with cost figures and see if I can afford it.
Factory Auction Cars - many dealers will call these "Company Cars." Some are, some aren't. Some are lease vehicles that ahve come back to the company from Avis, Hertz, etc. Personally, I have had good experiences with these, both from a selling, and a buying end. You should be able to get a current model year car with under 15,000 miles on it for 30% less than new retail, or better. Let the company take the first year depreciation - not you. And you still get the remainder of the factory warranty, so if there is something wrong with the car, it will probably show up before the warranty is gone and it will be repaired at the factories expense.
In most instances (unless buying new) you can do better arranging your own financing. And when buying new, if there is an either rebate or low financing option, run the numbers before making the deal. You may be able to make smaller payments with the rebate and your own financing. However, ask the dealer for their best rate. Many times the bank will buy finance paper from them at a discounted rate than they would give an individual. This way the dealer can make 1/2% interest on the financing for sending it to the bank. However, if that becomes a deal breaker, they may be willing to give you that 1/2% or at least 1/4% better than the bank could give. It never hurts to ask - just don't demand.
Okay, enough for now. My fingers are getting tired.
