sorry guys, I’ve got customers all over the showroom, I’ll put something up as soon as I get free
And no where is that more apparent than in the morgage mess right now. I couldn’t believe how much my wife and I pre-qualified for when we were shopping for our house. Had we taken a loan for anywhere near the full amount they would give us we’d be living in an empty house and sharing one beater vehicle while eating cat food and government cheese. But man, would we have a sweet house.
The best part of all this was the simple quote of, “just because you’re approved for it doesn’t mean you can afford it”.
I’m sure it will be more fun to come in and correct mis-information than put it up ahead of time anyway :cjerk:
:word: That’s worked well for the industry hasn’t it?
But that is a whole 'nother animal I suppose.
I guess you should really read the post then. 
I say this because I counsel against over extending on a few occasions.
To answer your three questions so far:
If the interest rate on the loan is higher than the interest you could make elsewhere, you will lose money by financing, no?
Correct generally. And it is covered in the OP.
Anywhere in there did he mention that if you’re having trouble getting approved for the loan then you should take a long hard look at whether or not you can actually afford it?
Yes, I mentioned & covered it. A few times in a couple of ways. And, because this is nyspeed, I “cliffed” it, and highlighted a one-liner about it in red.
I see what you’re saying from a true financial planning perspective, I just worry that people on here will misinterperet this…
I cannot change this, and can only offer counsel against it.
Yes, I mentioned this as well.
As far as the financial planning aspect of it, I touched on that briefly. See the second post in thread.
Amen. And I couldnt agree more.
In 2003 me & a few cohorts (in HEQ sales at the time) made friendly wagers on how long it would be before the cracks shown through. We figured when the ARMs adjusted, people would start faltering badly.
We honestly had no idea it would be as bad as it was / is.
When the wife & I were house shopping a couple yrs ago, I told her what our limit was, no matter what. When she saw the prequal amounts, she lit up & I had to actually argue her down… and we don’t argue often.
To go one further, as far as the cash is king aspect… here is a copy & paste from a PM I sent thismorning:
The allure of paying for a car in cash is probably very short sighted, it seems. Maybe too old fashioned… oh well. What you said about it makes complete sense, although in the back of my mind I knew it to be true anyways.
Well cash is still king, but most of us don’t have 30k disposable assets.Even if you have 30k sitting around, it should be invested in CDs at the least, if not a investment or brokerage account.
If that is the case, you’d prolly have really strong credit as well…
furthermore meaning that you could prolly get rock bottom finance rates…
which in turn means that you would finance the car…because you’d be paying 1% int rates while you’re earning 6 - 9% on the cash.
Circle of life for the affluent.
Must be nice, right?
I’m expecting that… it’d the internet. 
This is why I stopped bothering with public threads on this topic in general.
Luckily the wife and I had sat down ahead of time and put down every single expense we could think of in Excel, factored in some money for investments, entertainment and left a cushion for emergencies. Based on all that it was pretty clear what we could really afford so when the prequal amount came back we both just laughed about it. Sure, we both briefly thought about buying that waterfront 3000 sq/ft on GI, or building that dream log home out on 10+ acres in the country, but knew it wasn’t REALLY in our budget.
And that’s why I have issues with the calls for the government to step in and help all these people with their mortgage problems. Maybe if every time a news station said “government” it was replaced with “taxpayer” people would think more about it.
You spent more than you could afford.
You went with an ARM instead of traditional fixed to squeeze every cent you could from the bank, knowing that eventually that rate would go up.
You didn’t do your homework when making the biggest purchase of your life.
But I am supposed to let you use my tax dollars so you don’t have to lose your home and be forced to move into something you can afford?
That pisses me off to no end. Yes there is a need to protect people from predatory lending, but over extending yourself is hardly the same as falling victim to predatory lending (scams against the old, etc)
Now, see, there is my huge gripe with all this mess…
The headlines that state “SUBPRIME MESS!! ZOMG!!” have nothing to do with the actual problem of redlining
But Joe Blow doesn’t know that or care, they accept whatever american idol feeds them.
Meh.
Oh, and this thread is not about mortgages… mortgages are another animal - same family, different species.
oh, and I’ll work on unformatting the OPs for you walter.
:tup: to helping people become more financially literate. good thread.
its really scary how financially uneducated people between the ages of 18 and 30 are.
Sorry, for :deadhorse2:but this one bugs me…
I know the posts arelonger then the usual “OMG BOOBIES” threads, but if folks would read it… it is the antithesis of what you’re saying here Fry.
I say that “if you have to ask, you should finance” in the same vein that people say “if you have to ask, you can’t afford it pal”.
If you have $30k in disposable assets, you know what to do, and this thread would be remedial. Now how many forum members here have net liquid assets of $300k or better? Two, maybe three?
Naw I read it, and I see what you’re saying. As a whole this is fantastic information. I just know from experience how easy it is to pick out select pieces of information that enable you to do what you “want.”
But yes, the info you’re giving is good advice as far as I know. I’m sure it’s sound information too.
Eh, true. As with all things on NYSpeed I spose.
:walter:
DEALERS PERSPECTIVE:
Never go to a bank and get a loan to buy a car!! The bank borrows their money from the Federal govt. and loans it to you at a higher rate than they borrow it for in order for them to make money. They also lend it to dealers indirectly and mark up the rates as well but not as much as they would if you walked in the door and asked for a loan. The key is that dealers can give you a better rate from the same bank because its our discretion on how much we mark up the rate to the customer. That means that if I like you, you get a better rate.
Another important aspect is that an approval is not a guarantee, many approvals have stipulations such as proof of income, proof of residence (so they can repo the car if necesary), references, caps on how high a payment they will approve etc. The biggest culprit of this is the online bank approval, the thing that looks like a check but isn’t. Capital One started this a few years ago and has done very wel because of it. WE DO NOT ACCEPT THEM AT OUR STORES. PERIOD. They are a Bank Draft, not a check and have many stipulations so do not be fooled by them because you could screw yourself
What goes into the equation:
Everything Nikkuk said in the OP is absolutely true except for the average credit score is much lower than 720, its more like 670.
Just remember that dealers can negotiate the terms of the loan with the bank on most occasions so we can be very flexible with the consumer. That does not mean that if you haven’t paid a bill on time in 3 years and owe 10,000 more on your car than what its worth your going to get approved.
how much flexibility is there in the rate? for example, i have a credit score of ~800 and a low DTI % (under 40%). I didnt even realize i could negotiate the rate… so i am paying 5.9%. i guess i should have asked, i didnt even realize this could be done.
Absolutely True. I used to know a few people in indirect lending (dealer network), and thats about the sum of it.
They are a Bank Draft, not a check and have many stipulations so do not be fooled by them because you could screw yourself
Also true, there are alot of stips to these (and a few other online companies). I touched on em briefly with the age & mileage limits, though I know some online lenders require further items, I didn’t want to get into advertising or reviewing them all.
In the end, it’s still best to negotiate with the dealer (IF YOU’RE BUYING FROM ONE) most of the time.
Basically the dealers work with the banks in volume, so they get a little to alot of leeway.
:tup:
it all depends on what the dealer gets the rate from the bank at.
ex. bank wholesales the rate to the dealer for 6% and we sell it to you for 8%, we have a 2 point bump which translates into xxxx dollars, you can negotiate that rate down to the “buy rate” of 6% and the dealer would get a flat fee, say $150
(the maximum the rate can be bumped is 2.5% for 60 month loans and 2% for 72 month loans)
that sums up this whole thread, and thats not because I’m a dealer, its because thats the truth