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You are not financing over 100%, it is essetially reducing the amount of the trade in applied towards the new car purchase. I've never done it, but don't see why you could not ask for cash back.
For example, new car is $25K, trade is say $15K. Put $10K of the trade towards the new car as a down payment and get $5K cash back. Finance $15K at a cheap rate and you are getting the additional $5K loan at a cheap rate, maybe even zero.
One problem I see is that the delaer isn't actually giving you what he's showing you on the trade. In other words, in the scenario you laid out, on the books the dealer is probably only giving $12K for the trade toward a $22K purchase. The additional $3K is fluff that's built in to the price because people like to see a big allowance for their trade.
Which doesn't mean it couldn't be done, but you have to realize that you're not really getting what you think you're getting so you may not be able to pull out as much as you think you should be able to.
A person would be better off selling their car for $13K private party and buying the car outright for $22K. But I get that some people don't want to deal with that.
I'm curious if anyone has ever had a dealer give them cash back while trading in a vehicle on the purchase of a new car. I wanted to trade in my SUV and borrow more than the difference with the new vehicle price to take advantage of the cheap financing.
Long story short the salesman said that was fine, then the finance department tried to give me the run around. I figured this was a pretty common request so I wanted to see what everyone thought. I'd appreciate any info.
Thanks,
new to the forum
It depends on the dealer, on your credit, and on your negotiating skills!
Better yet, don't trade the vehicle in, take it to CarMax and get more than the dealer would offer and put down as much of it that you want to.
I just purchased a new car last month. Dealer offered me $5k, CarMax offered me $6k, and I sold it privately for $8k. If you want to be smart with your money, be smart with your money..!
I'd bring up that if the vehicle happens to be totalled in the near future, and insurance pays you a depreciated amount, you still might be on the hook making payments on the difference because of the extra money financed.
You basically build negative equity in from the start.
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I did that once in my younger, less fluid days (1990). Traded in a paid off vehicle for $10k, took $7k of it in a check to pay off my wife's car, the rest down on a new one for $25k. The new loan was a lower interest rate so we
had only the one loan for though a higher payment amount but a nice new car and the other paid off.
One problem I see is that the delaer isn't actually giving you what he's showing you on the trade. In other words, in the scenario you laid out, on the books the dealer is probably only giving $12K for the trade toward a $22K purchase. The additional $3K is fluff that's built in to the price because people like to see a big allowance for their trade.
Which doesn't mean it couldn't be done, but you have to realize that you're not really getting what you think you're getting so you may not be able to pull out as much as you think you should be able to.
A person would be better off selling their car for $13K private party and buying the car outright for $22K. But I get that some people don't want to deal with that.
In some states the sales tax on the vehicle you purchase is reduced by the taxable value of your trade-in. This money is lost if you sell outright. Also, if you want to find out how much your trade is REALLY worth, negotiate price FIRST, then bring in your trade-in.
In some states the sales tax on the vehicle you purchase is reduced by the taxable value of your trade-in. This money is lost if you sell outright.
Is paying sales tax really the only thing to be considered?
Let's say the sales tax rate is 6% (pretty typical).
If the dealer shows you $15K toward a $25K purchase price you will pay sales tax on $10K, or $600, for a total cash outlay of $10,600.
If you can buy the car outright for $22K you will pay sales tax on the full amount, or $1320. So you do pay more in sales tax. But, if you can sell your old car in a private-party sale for $15K your total cash outlay will be just $8,320 ($22K+$1,320-$15K).
To me it makes more sense to spend less total that to worry solely about how much you will pay in sales tax, but that's just me.
Quote:
Also, if you want to find out how much your trade is REALLY worth, negotiate price FIRST, then bring in your trade-in.
This is correct. Some people will tell you that you will get a better deal by doing this, but all the dealer does in this case is take the extra "fluff" that they generally add to both sides of the deal off the table.
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