Warning About Dealers And Their Pricing

[ovrszd]

Very true. I think the solution is for people to avoid taking loans that they can't afford.

Good friend of mine is a car salesman. He says one in ten customers asks the price of the vehicle. None ask the total financed cost of the vehicle. Nine ask the monthly payment amount.

 

[2manyrocks]

I'd say the majority of people do not understand the financial effects of compound interest. They are focused on whether they can make the monthly payment. They do not understand how all of this affects them financially over a period of even 4-5 years.

IMO, this is a failure of the education system. Financial decision making has a lot to do with a person's lifetime well being, and yet students are not being provided with an understanding of basic finance skills. This isn't helped by textbooks that focus on mathematic calculations instead of teaching concepts and practical application which could be due to people in academics being lacking in real world experience, ie, specifically the kind of things being posted here that really go on in real life.

Around the 2008 time frame, people who were accustomed to making good money sometimes found themselves having to file bankruptcy, particularly those who got caught up in making money flipping real estate and suddenly the bottom dropped out on them.

Then's there's another group who get thrown a curve like illness, high medical bills, unexpected loss of job.

Then there are a few elderly who just don't have enough retirement income or assets to make it.

But there is also a group of repeat filers who know how to use chapter 13 to get themselves a lower car loan. They predictably file a new case about each time they get another car.

 

[ovrszd]

My friend also says 95% of the new vehicles he sells are financed. Imagine that. Consumers buying something they cannot pay for up front. What's this World coming to.....

 

[Diggin It]

Mid 80's sometime, went to a big name Dodge dealership, wandered the used car lot. Not single price painted on windshields, all $X/mo.

Went inside, asked sales rep, 'how much is that car, cash price?'

Reply, '$x/mo'.

Re-stated, 'how much total, in full?'

Same reply '$x/mo'.

Me getting annoyed ... 'I have other financing to pay in full, now what is the full cash price?'

'We don't do that.'

I left.


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Got a new CC a month or two back. Promo rate, 0% interest for 15 months. I've put some bigger stuff on there in recent weeks. I have 15 months to pay it off at no cost to me. No end balloon either. I'm using stuff today I haven't even made the first payment on yet. I could have bought it all in cash, with a check, or on an existing CC to be paid off at the end of the month.

This allows me to add extra to the tractor loan to pay it off earlier and save interest.

 

[Hay Dude]

Usually, people who chastise other people for financing a vehicle are too simple to understand that sum of money could be invested to make more money than the interest paid on the vehicle.
Works very well for my situation. Sometimes I finance, sometimes I dont.

Also, vehicle financing helps build credit towards bigger things, like mortgages or business lines of credit.

If I plunk down $50k on a car when interest rates are low, thats $50k I cant use to invest in real estate that can pay me back a heck of a lot more than I pay in 2% interest on a car loan for 36 months.

 

[Jstpssng]

My friend also says 95% of the new vehicles he sells are financed. Imagine that. Consumers buying something they cannot pay for up front. What's this World coming to.....

Sometimes it's better from a financial point of view, even if you can afford to pay cash. That's also an oft discussed subject when talking about 0% financing for tractors. At the end of the day the person who knows their situation best is the one making the deal.
Personally though, it's one thing to finance because you need the item and don't have the cash on hand. It's another to buy every option available, and taking out a loan for the entire thing.

 

[2manyrocks]

You're sophisticated enough to use that low interest car loan as another source of credit to fund returns elsewhere.

That's not the usual case where people get in a car loan, pay a lot of interest, the car wears out, and then they are back needing another car loan for that next car to replace the one that just wore out.

Auto makers and dealers want this kind of repeat business. It wouldn't surprise me if the push towards hybrid vehicles may also be geared towards generating repeat business. Specifically, those hybrid battery packs are going to wear out in 5-7 years. They are either going to be unavailable or priced to push people into new vehicles.

 

[ovrszd]

Sometimes it's better from a financial point of view, even if you can afford to pay cash. That's also an oft discussed subject when talking about 0% financing for tractors. At the end of the day the person who knows their situation best is the one making the deal.
Personally though, it's one thing to finance because you need the item and don't have the cash on hand. It's another to buy every option available, and taking out a loan for the entire thing.

The latter is what he's referring to.

 

[ovrszd]

You're sophisticated enough to use that low interest car loan as another source of credit to fund returns elsewhere.

That's not the usual case where people get in a car loan, pay a lot of interest, the car wears out, and then they are back needing another car loan for that next car to replace the one that just wore out.

Auto makers and dealers want this kind of repeat business. It wouldn't surprise me if the push towards hybrid vehicles may also be geared towards generating repeat business. Specifically, those hybrid battery packs are going to wear out in 5-7 years. They are either going to be unavailable or priced to push people into new vehicles.

Again, my salesman friend says the most common trade-ins occur within a month or so of the end of the finance contract.

 

[JethroB]

Decades ago a friend of mine said he expected to always have a car payment. He said it was built into his mental budget. Nothing too fancy or rarely new. Intelligent well educated fellow making a very good income . Maybe it was how he was raised. I still don’t get it.