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I have a question. . If I buy a $25,000 car and I give a down payment of $7,000 .. That I will pay in 4 years on a 2.9% apr .. what will be the percentage that the dealer will get...
That's quite a difference. But yes, as has been pointed out: Used cars are pretty bad collateral and won't get manufacturer-backed loans. (Got 0.9% on mine - I was ready to pay cash, but...)
I have a question. . If I buy a $25,000 car and I give a down payment of $7,000 .. That I will pay in 4 years on a 2.9% apr .. what will be the percentage that the dealer will get...
The dealer gets their profit from the sale - immediately, since by funding the loan, the lender pays the dealer in full. This is calculated by sale price minus invoice plus manufacturer incentives, as well as their other profit boosters like trade-ins, extra warranties, snake oil etc. Most dealers are themselves borrowing the money to keep the cars on the lot, so they have to pay their interest nut to their lender as well.
Then since you financed, they get a "finder's fee" for providing business to the lender. Depending on the lender, it may be in their interest to have a higher or lower down payment; the offer they make to you will be based on what the lender wants and you are within your rights to reject or modify it.
I have a question. . If I buy a $25,000 car and I give a down payment of $7,000 .. That I will pay in 4 years on a 2.9% apr .. what will be the percentage that the dealer will get...
Does it matter?
The dealership will get the spread between what the bank offered them "wholesale" and what you agreed to in the sale. So, if the dealer received the loan from the bank at 0.9%, then he makes 2%, if he got it at 2.5% then he makes .4%, and so on.
Location: East of Seattle since 1992, 615' Elevation, Zone 8b - originally from SF Bay Area
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When the dealer offers financing, the interest rate is part of the negotiation process. If you come in with an offer and ask for payments under $300, they will most likely have a fairly high interest rate over a long period to meet that. They have a lot of flexibility in both term and interest rate, though some of that depends on your credit. If you go in offering a price and an interest rate, you are limiting their flexibility and less likely to have both met, but if successful will get a better deal. For me it's better to just go in with financing already arranged with the credit union and only have to negotiate the price and perhaps trade-in amount.
I got into it with my bank over this very issue. I wanted to refi my 2008 because I was honestly willing to cut the payment to 1/3 and extend it out 4 years. Personal choice. THey told me the interest rate would be 8% on the car. I was like "WTF!" I have perfect credit and payment history on other loans through that same institution, and that default risk shouldnt be associated with the age of the car if I have good credit. She insisted that default risk WAS correlated with the age of a car. I was like...so youre telling me if someones car dies they will just stop paying on the loan. She said yes. I said then how do they qualify for a new car loan. She couldnt answer. I honestly think its just a way for banks to screw over poor people as they are usually the ones asking for a <10k car loan.
Those rates suck.
I can get 1.99% for 52 months on a 6 year old car thru my CU.
You miss the point -- the spread between used and new car loans and that anything under 2.9% is subvented.
But as someone pointed out, maybe it wasnt like that 4 years ago -- this is what I get for responding to a zombie thread.
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