Refinancing Your Car

Paid off or house and credit rating dropped 15 points as we no longer have a mortgage, go figure.

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I think it is wise to shop for a loan as carefully as you shop for a car. Arrange for the loan ahead of time. You can make the negotiations simple. When you have picked out the car in your price range, then say to the sales person: This is all very simple. You have a car and I have some money. What we need to figure out is how much of my money it will take to buy your car.
Dealers like to sell the financing, the credit insurance on the financing, extended warranties, etc. Make it clear that you are only buying a car.

When I finished my taxes with Turbotax, they wanted to show me my credit report so I clicked on it. No surprise but a substantial portion of it is paying on time. If you don’t make any payments, there is nothing to judge whether or not the payments are on time. Of course back in the olden days, the local Credit Bureau kept track of all this and clipped newspaper articles etc. for you local file. Now that its gone global, they have to come up with something whether it makes sense or not. There’s a lot of money in credit reports.

Use a credit union, unless the dealer is offering a low rate, and even then try to negotiate the price down and try the credit union. As for refinancing, my credit union is offering a 3.24% rate on refi’s, and a .5 percentage point reduction if you do it in April or May. That can be a substantial savings to you. This is money decision, not a moral decision.

My neighbor was looking through the papers in his glove box to find the odometer reading when he bought his used truck. He showed me the loan document, the purchase price was about $12,000. On the right side of the document it clearly showed the annual percentage rate of 18% and the total amount of payments to be $18,900. For that much he could have bought a new truck.

These numbers don’t mean anything to some people.

I don’t believe that he has any credit problems, he has been living in his house for more than 20 years and employed at the post office for 20 years.

When I bought my first new car in 1968, I was 17, had a checking account, a savings account, and a good job. I financed the car for 3 years with Chrysler financial. Since then, I have rarely kept a car longer than the loan or lease. The payment is simply one line item in my transportation budget. Sure, I’ve paid a few bucks in interest, but less than what I would have lost in earnings using my own cash. Being in debt doesn’t cause me to lose a minute of sleep.

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Heh heh. I used to do a net worth calculation every year after doing my taxes. As I recall at 17 I had a net worth of about positive $3000 in 1966. Then it all went south and by 21 I had a negative net worth of about $3000. I rarely do a net worth calculation now. I’ve always been interested in finance, business, and accounting but still I attribute some of my policies to my old high school general business teacher, Mr. Meyer. We used to call him Crazy Meyer but I have come to respect him and wish everyone could be exposed to similar. We called him crazy because everyone kept a little book to keep track of everything they spent (even a penny in the parking meter back then). He was 7 cents off once and spent all night looking for the error. I suppose teachers then made about $3 an hour so he spent prolly $20 in time wasted looking for a 7 cent error in his book.

In another instance, discussing confidentiality issues in business, he canceled a loan for a new car. Why? He was buying a car and financing it through the local bank. The son of the banker commented to him about his new car. He felt this was a breech of confidentiality by the bank by discussing business transactions outside of the bank.

Some of these lessons have stuck with me over the years.

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If your investments have outperformed the interest you’ve paid on loans, that’s the smart move. Not many of us can say that though.

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I like to modify this slightly. “The first thing we need to do is to agree on the price of the car. We can discuss financing later.”

Dealerships are sometimes willing to go lower if they think they stand to make money by getting you to finance through them.

Once we’ve agreed on a price and they want to finance it, I then say “I’m pre-approved at my credit union. If you can beat their percentage, we’ll talk.”

And I will not tell them what percentage I got, because then they’ll just go down .1% from that no matter how low they can actually go. I’ll tell them to make their best possible offer because if it’s not lower than what I’ve already got, I will not be screwing around with a bunch of negotiations and will just let my CU issue the loan. I actually got 1% knocked off doing that once, though most of the time your CU will either be better or so close to the dealership’s offer that it doesn’t make sense to bother.

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I had a 1.9 car loan ad deal from my credit union. Acura wanted 2.9 but had a program to match competitive rates so matched the 1.9%. No muss no fuss. Gotta read the fine print though. If one of us dies, they want the whole thing. I assume it’s just lawyer boiler plate. How would they know and why would they care? We’ve dealt with them before and no problems as well as GM. Plus I don’t necessarily like local people in our little town by the lake knowing my business. I’d rather deal with someone in Kalifornia that doesn’t go to our church.

@shadowfax I agree with you. It’s best that the dealer does not know how you will pay for the car.