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Many (approaching most) new cars have active monitoring and reporting built in. It is inherently a security/tracking/repo device if the maker (and bank) chooses to use it that way. They can even watch for a pattern of non-use and come take it when it's 'safely' parked in the in-law's back alley.
Most used cars from bigger dealers have a security lock installed and can't be driven without inserting a dongle/chip card. They don't remove those, just disable them on sale.
This raises another question - how does one make a dealer remove it when a car is paid off (or bought with cash)?
I do not necessarily believe that old myth about new cars loosing a huge part of their value as soon as they are driven off the lot. I was out looking at trucks with a friend this weekend, she was wanting to buy something a year or two old (so she could get a great deal on an almost new truck)...well, we found lots of 2017 and 2018 trucks on lots...most had very low mileage, but none of them were 30-40% cheaper than new trucks!
They were somewhat cheaper, but not by much at all, from what I saw, the average was around $2K less than new.
I always buy new with 5 or 7 miles on it. Sometimes i pay cash for the whole vehicle and sometimes I use debt for building credit or maintaining credit for my real estate stuff.
There is always trade in value for a year or 2 year old vehicle that was well maintained.
Well, the loan for a car from a dealer is NOT a free market loan. All that low interest financing is subsidized by the manufacturers, unlike loans for houses (for example) which generally are free market loans.
When XYZ Mortgage Company writes you a mortgage and issues you the loan for your house, they have to charge enough interest to cover their cost of money and - in conjunction with mortgage insurance and your down payment - to cover their costs should you default. It's a pretty simple deal.
When GMAC writes you a car loan, the combination of the vehicle sales price, plus the interest on the loan, plus the down payment, plus the cost of option packages and dealer add-ons, plus the kickbacks from the extended warranty company to GMAC and/or the dealer and/or General Motors, plus the anticipated profit on after-sales service, plus subsidies from GM to GMAC and return of profits from GMAC to GM, plus probably a dozen other profit and cost centers that I haven't thought of, needs to cover the manufacturing and marketing cost of the vehicle, plus the cost of money for the several different entities that are taking short and long term loans to cover the costs related to converting iron ore and petroleum into the car you drive off the lot, plus the costs of repossessing the car and reselling it should you default on the loan.
So, it's very easy for ONE of those profit centers to make no money if the net result is that General Motors as a whole and/or the GMAC division make net profits.
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Quote:
Originally Posted by rstevens62
I do not necessarily believe that old myth about new cars loosing a huge part of their value as soon as they are driven off the lot. I was out looking at trucks with a friend this weekend, she was wanting to buy something a year or two old (so she could get a great deal on an almost new truck)...well, we found lots of 2017 and 2018 trucks on lots...most had very low mileage, but none of them were 30-40% cheaper than new trucks!
They were somewhat cheaper, but not by much at all, from what I saw, the average was around $2K less than new.
You shouldn't go by trucks, they tend to keep their value a lot better than cars. In fact I was initially considering used but went for new (2017 F150) for that reason. With the incentives and some negotiation I got the truck for $11k under sticker and that was only $2k more than a used year-old with 20,000 miles.
This raises another question - how does one make a dealer remove it when a car is paid off (or bought with cash)?
I think they just quit monitoring it. (They probably only “turn it on” when they want to repo the car). We bought a used car for cash, salesman said we could pay to have the chip activated to track it if the car got stolen (similar to OnStar). Said people with loans are required to purchase the tracking service for the life of the loan. I got the impression it was a one time payment, or was possibly baked into the price of the car.
One thing I really can't fully comprehend how you can get super low interest on Cars from 3rd Party Lenders. I have seen 0.99%, 1.99% APR form Banks, Credit Unions for New Cars. Furthermore, some allow no cash down, over 100% financing for Sales Tax, Extended Warranties, etc. It is also very easy to get approved for one.
The thing with New Cars you easily are losing 20-30% of the value as soon as its bought. It is a depreciating asset, which means you are easily underwater on your car loan.
My next problem is there is a couple another type of loans available for appreciating assets or one that doesn't depreciate as much. But those are hard to finance. I am talking about Home Mortage, land, real estate investment, home improvement, solar panels, pools, etc.
I can easily see someone being 50% underwater on a Car loan, which means the borrower will have pony up that much if car gets totaled. A car loan for financial institution seems to me at least more risky than real estate loans, possibly close to 'personal loans' or maybe even Credit cards.
Can some give me a detailed explanation of how the financial institution is justifying such low rates and great terms?
The 0%, 2% stuff is all factory financing. It's just a sales incentive same as $1,000 cash back incentives. Third-parties are generally more up around 3.5% now if you have excellent credit which is about on par with mortgages.
Mortgages are a lot more money. Typically you're talking hundreds of thousands of dollars and foreclosure is a lot more difficult and costly than repossessing a car so there's more diligence. Pools are almost worthless. They might increase the value of the house 20 cents on the dollar on the high end, can't be repossessed. All you can do is got to court for a judgement but if there's no money there's no money, which means a lien on the house is about all you've got. Same deal with other loans for home improvements. Granite counter tops and marble bathrooms might be 50 cents on the dollar instead of 20 cents, can't be repossessed.
Many (approaching most) new cars have active monitoring and reporting built in. It is inherently a security/tracking/repo device if the maker (and bank) chooses to use it that way. They can even watch for a pattern of non-use and come take it when it's 'safely' parked in the in-law's back alley.
Most used cars from bigger dealers have a security lock installed and can't be driven without inserting a dongle/chip card. They don't remove those, just disable them on sale.
That's not true at all. OnStar or similar services are on many cars nowadays. They aren't used in that way though. They'd either need a court order or prior authorization. That authorization is not normal on any OEM OnStar type services and they don't go to court orders for it. Even if criminal cases it's extremely difficult to get that order from a court. It's technically feasible but not the business model that OnStar or whatever uses. Even GM Financial would need a court order, which they would not seek in the first place, for OnStar to do that so it's not like Shady Autolenders Club is going to get OnStar to track the vehicle for a few hundred dollars. There's companies that do operate that way (Spireon, for example) but they're not OEM equipment.
If you've got a 400 credit score and buying form a buy here, pay here lot with a 18-26% interest rate, it's common to have GPS/lockouts. It's otherwise not. A regular dealership it's pretty rare still although not unheard of. Regular dealerships are entering more into the sub-subprime market space where trackers and ignition interrupts are the norm. They're not common in general.
I think they just quit monitoring it. (They probably only “turn it on” when they want to repo the car). We bought a used car for cash, salesman said we could pay to have the chip activated to track it if the car got stolen (similar to OnStar). Said people with loans are required to purchase the tracking service for the life of the loan. I got the impression it was a one time payment, or was possibly baked into the price of the car.
Or they just have you come in for a "complimentary inspection" or whatever and remove the device. They're not particularly expensive though, under $200. I mean, the type of places that use them are pretty cheap though so recovering them after the loan is paid off by offering a free inspection and maybe an oil change to get people in would be smart. For the ignition locks the customers are probably going to be pounding on the door to get them off as soon as they own the car anyway.
One thing I really can't fully comprehend how you can get super low interest on Cars from 3rd Party Lenders. I have seen 0.99%, 1.99% APR form Banks, Credit Unions for New Cars. Furthermore, some allow no cash down, over 100% financing for Sales Tax, Extended Warranties, etc. It is also very easy to get approved for one.
The thing with New Cars you easily are losing 20-30% of the value as soon as its bought. It is a depreciating asset, which means you are easily underwater on your car loan.
My next problem is there is a couple another type of loans available for appreciating assets or one that doesn't depreciate as much. But those are hard to finance. I am talking about Home Mortage, land, real estate investment, home improvement, solar panels, pools, etc.
I can easily see someone being 50% underwater on a Car loan, which means the borrower will have pony up that much if car gets totaled. A car loan for financial institution seems to me at least more risky than real estate loans, possibly close to 'personal loans' or maybe even Credit cards.
Can some give me a detailed explanation of how the financial institution is justifying such low rates and great terms?
New vehicles do not lose 20-30% of the value when you drive it off the lot.
You can't go pick up a house or solar panels like you can a car. Car loans are typically shorter term as well.
I can't see anyone being 50% underwater on any vehicle. That is about a 1 in a million shot.
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