School Me on Financing a Vehicle

Hi all, long-time lurker, first-time poster here.

I'm looking to buy a certified used Honda from a Calgary dealer and I'm considering financing it. Up until now I've always bought cash or used my own line of credit so I don't know what to expect from the sales process or a financing contract...

I see 0% financing offered on ads sometimes... what's the catch? If they don't charge me interest, how do they recoup the interest they lose on the sale? Does the dealer just make sure they sell the car for a higher price? Penalties for late payments? Repo the vehicle with little excuse?

Can you share what surprised you about financing a vehicle, what went well and what didn't, and what I should watch out for?

For example, what's a typical financing rate and for how many months? And what are some common terms... e.g. how much down, and what happens if you miss a payment? Are the agreements typically "open" if I'm not happy and want to pay off the whole thing early? And what happens if I want to sell the car before I've paid it off?

I know how to read a contract but I won't know what details are typical and what aren't, and I'm sure the sales staff will do their best to use my inexperience to their advantage.

Financing is pretty simple if you follow the number one rule: negotiate on an out-the-door price and do your own math. They like to play the "monthly payments" game because most people are idiots that don't think about the total cost, they just want to be able to afford it month to month.

Financing rates go up to 7 years (96 months) now. If you can't pay off the car in several years, you probably shouldn't own it IMHO, or if it's over 50% of your income but I digress. That said, loans are typically open meaning you can pay them off fully without penalty.

I'll leave it to others to add to it; I've only ever bought one new vehicle in my life and that was in 2012 for $26000 at 2.99%.

Be wary that the advertised low financing rate or 0% rate may not apply to used stock. In the end they are making a sale and hopefully more money via services/repairs down the road.

Financing rates on used vehicles are usually worse than offered on new.

Also, #1 rule of any vehicle purchase is that you negotiate the full purchase price of the vehicle. Never negotiate the payment.

I did zero percent financing when I bought my truck, and the way it was structured, I didn’t get as much discount off the price and it only applies to new vehicles from what I’ve seen in the past. This was my experience with Dodge Ram, so when you see an advertised discount for 20% off, usually you do not get 0% financing on that. But when I bought I was still able to get 5k off and 0%, and if you time it right and buy a current or previous year model at their year end you can get a better discount with the 0%.

Edit: I was only able to get 5k off the price not 8k, I forgot about my trade in for 3k.

Play their game. Find out what you want to pay and then work that back into monthly payments. Salespeople suck with that math, so if you start moving that payment around, their head goes all a tizzy. They just assume that whatever monthly payment you propose will work in their favour. Even their "manager" usually can't figure out the math.

You can even totally bullshit them as a result.

"Well I can't afford that payment, how about x-20% instead? You're still going to make a lot of money because I'm agreeing to pay monthly and the interest rate is still the same."

* salesperson's head melts *

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Originally Posted by rx7boi

Financing is pretty simple if you follow the number one rule: negotiate on an out-the-door price and do your own math. They like to play the "monthly payments" game because most people are idiots that don't think about the total cost, they just want to be able to afford it month to month.

Financing rates go up to 7 years (96 months) now. If you can't pay off the car in several years, you probably shouldn't own it IMHO, or if it's over 50% of your income but I digress. That said, loans are typically open meaning you can pay them off fully without penalty.

I'll leave it to others to add to it; I've only ever bought one new vehicle in my life and that was in 2012 for $26000 at 2.99%.

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7 years is 84 months
8 years is 96 months

Just saying

Touche haha. Meant to type 8 years.

#marth

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Originally Posted by ExtraSlow

Also, #1 rule of any vehicle purchase is that you negotiate the full purchase price of the vehicle. Never negotiate the payment.

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This...!!

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coal notes

-0% Is usually not offered on used vehicles. If it is its usually padded into the final price.
-0% on new stock is OAC and you need really good credit to even likely qualify.
-There is always a cash back incentive (1000-5000k) if you pay cash money for it.

My expierence. Found truck I liked MSRP 54k dealer had it listed at 38,500. That was the cash purchase price which included a 1500 cash back incentive and the employee pricing. I was originally planning on paying cash for the truck but crunched some numbers and a 0% 40k loan for 8 years worked out to be make much more sense than the 1500 cash incentive by quite a bit. Of course they offered me the cash incentive price but @ a 5.99% rate(LOL) 1800 in interest in the first year.

moral of the story find out what your option are and crunch some numbers. If you suck at math there are lots of calculators on line.

Aye when I was looking for a new truck last year I went to Ford first who had employee pricing going on at the time, however the interest rate was garbage and negated any savings by the employee pricing event. I tried to break down a comparison of the current financing/payments compared to a price at 0% financing to our salesman but he wasn't understanding or having any of it.

So I left and went to a GMC dealership who had 0% financing going on, which worked out to be a better deal all around as far as payments/vehicle itself/and my old trucks trade in value as well.

When shopping for the womans new vehicle, a CR-V, we originally were checking out used models on the lot but once we got into numbers it was more worthwhile/beneficial to buy new with 0.9% financing and getting full warranty as well. Used vehicles were offered with like 5-6% interest rates if I recall correctly.

All of the numbers can be manipulated a hundred different ways, so the most important metric to look at is total cost of ownership (TCO).

There's no such thing as free money... You're paying for that 0% rate one way or another.

Technically, any dealer out there from a giant franchise store to a dirt lot, could offer 0% or 1.9%, or whatever, but the cost of buying down the rate will be built into the price of the vehicle.

Thanks for the opinions, everyone.

I was in a similar position as you when I bought my current car. I had never financed a car in my life, always just bought used cars for cash. In fact when I bought my current car new I was actually going to look at a used one they had advertised but it had sold before I got there.

I ended up financing a brand new one as they were offering decent discounts (late in the year and still lots of inventory to move) AND 0% financing. If it wasn't for the 0% financing I wouldn't have done it. I can't stomach paying interest on a liability that depreciates like a car. And always negotiate the total price, not the monthly payments.

The finance guy sends your application to the lender (in my case it was TD Auto finance) and then calls you either that day or the day after to tell you if it went through. Then you'll have the joy of going into to see him to sign the papers and get a barrage of upsell stuff like extended warranty etc. I declined all of that.

That's how it went down in my experience anyway.

Good luck!

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Originally Posted by 2Legit2Quit

Aye when I was looking for a new truck last year I went to Ford first who had employee pricing going on at the time, however the interest rate was garbage and negated any savings by the employee pricing event. I tried to break down a comparison of the current financing/payments compared to a price at 0% financing to our salesman but he wasn't understanding or having any of it.

So I left and went to a GMC dealership who had 0% financing going on, which worked out to be a better deal all around as far as payments/vehicle itself/and my old trucks trade in value as well.

When shopping for the womans new vehicle, a CR-V, we originally were checking out used models on the lot but once we got into numbers it was more worthwhile/beneficial to buy new with 0.9% financing and getting full warranty as well. Used vehicles were offered with like 5-6% interest rates if I recall correctly.

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Employee pricing at Ford isn't a very good time to get most F150s unless you pay cash. The very base trims might be close as the total percentage discount is larger now. There are better deals rest of the year for finance and lease for most trims though.

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Originally Posted by redblack

Getting a good price and interest rate is only the first hurdle. Then you get past on to the finance guy who will push extended warranties, protection packages, miracle sprays, rust proofing, etc. Those suit bro’s need to eat too!!

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The finance guys are the ones you really need to watch out for lol