Car financing for newbies

[FStop7]

Originally Posted by cbs21

Hello, I need help with financing.

So I'm a young guy and I just purchased my first car and there's this thing called interest where the bank basically steals my money. Who the F invented this concept, seriously. As a first time interest payer, this is a tough concept to swallow. Next time, I'm paying in full with cash, hopefully. Anyway, I had some questions about the best way to go about paying as little interest as possible.

First of all, can someone explain what principal and interest here are in terms of the statement below it.


I'm making more than I need to make payments. And say, I will pay off the car 1 year early with options a and b below, which one is the best way?

a) just put everything I get into paying the car as soon as i get paychecks and stuff (and keep ~$1000 for savings)? Would that lower each monthly payment (principal??) and thus reduce the interest each month?

or does it not matter

b) just save money in a CD or money market account for about 2-3 years and then hopefully get some interest on that (probably a pathetic amount) and just pay off the car all at once a year early?

I have 6% interest and about 27000 left, only two months in.

And this is why it should be illegal for high schools not to teach students the basics of managing their finances.

Interest exists so the bank can make money. Do you think it's a charity?

And interest rates are just about as low as they ever have been in the history of this country. Back in the 80s or early 90s you would be lucky to have an 11% APR on a car loan, with perfect credit.

[HappyNDing]

So when your purchase contract stated "14.9% interest", did you take it to mean that you will now garner 14.9% more interest from the opposite sex while driving a BMW?

[CantDrv55]

[CollinsE90]

OP, you're an idiot

[Seminole]

How the heck do you not understand the concept of interest on a loan, but you understand interest on a CD. Its the same damn thing, but in reverse...


IMO....

[Sara]

$100 bucks in interest a month? Sheesh mine is only 19 bucks!

[Freakazoid]

Originally Posted by Sara504

$100 bucks in interest a month? Sheesh mine is only 19 bucks!

Guessing by his age could be a 10% interest rate... on a 30 grand car.. 3 grand a year, divide by 12... there you go, over 100 bucks . I'm a little curious how you only have 19? You get a sweet finance rate? Or is your balance that low?

granted these are HORRIBLE numbers to any finance major. but it tells close enough.
My interest on my house is ridiculous

[Sara]

Originally Posted by Freakazoid

Guessing by his age could be a 10% interest rate... on a 30 grand car.. 3 grand a year, divide by 12... there you go, over 100 bucks . I'm a little curious how you only have 19? You get a sweet finance rate? Or is your balance that low?

granted these are HORRIBLE numbers to any finance major. but it tells close enough.
My interest on my house is ridiculous

I was 21 when I financed my 30k car. No co-signer. These are my payments.

[FStop7]

Not for nothing but I hope folks realize that the dollar amount of interest you pay varies from month to month.

[Sara]

Originally Posted by FStop7

Not for nothing but I hope folks realize that the dollar amount of interest you pay varies from month to month.

yeah only by like 50 cents or so for me.

[CollinsE90]

Originally Posted by FStop7

Not for nothing but I hope folks realize that the dollar amount of interest you pay varies from month to month.

i was just about to say that, the interest differs from time to time but it all adds up the same...im guessing she got the car from the dealer on like a .9% special, but they got their money up front, and thats why the who 0-1% deals are a joke and people fall for them

you might get super low interest, but they add the couple thousand to the sale price to make up for the low interest...dealers get their money regardless, just put a bow on top to make people think they are giving you a deal

[Sara]

Originally Posted by CollinsE90

i was just about to say that, the interest differs from time to time but it all adds up the same...im guessing she got the car from the dealer on like a .9% special, but they got their money up front, and thats why the who 0-1% deals are a joke and people fall for them

you might get super low interest, but they add the couple thousand to the sale price to make up for the low interest...dealers get their money regardless, just put a bow on top to make people think they are giving you a deal

Its a good thing my salesman didnt add thousands to the sale and actually took off 2,700.

[Freakazoid]

Originally Posted by Sara504

Its a good thing my salesman didnt add thousands to the sale and actually took off 2,700.

mind if I ask if you got a special APR and/or how far along are you in your car payments? (impressively low interest )

[Freakazoid]

Originally Posted by Sara504

yeah only by like 50 cents or so for me.

right, interest will only slowly decrease. yes it varies but not by much

[Freakazoid]

Originally Posted by CollinsE90

i was just about to say that, the interest differs from time to time but it all adds up the same...im guessing she got the car from the dealer on like a .9% special, but they got their money up front, and thats why the who 0-1% deals are a joke and people fall for them

you might get super low interest, but they add the couple thousand to the sale price to make up for the low interest...dealers get their money regardless, just put a bow on top to make people think they are giving you a deal

not always, depends on alot of things.... when they have APR specials sometimes there's no cash alternative... it's just an APR special to get people to finance more.

(i.e. hey it's 1% interest, I'll just finance everything! - as compared to down payment of 10-20%).

[Sara]

Originally Posted by Freakazoid

mind if I ask if you got a special APR and/or how far along are you in your car payments? (impressively low interest )

I originally was going to do 3.9% but before I signed the papers I had an emergency and had to leave town. When I got back, I actually got a call from BMW of Murray and they told me they re worked my loan and wanted me to sign at 0.9% interest so thats what we did. Reduced total cost by $6,000 also shortened it by one year. I bought it two Christmas' ago. I know my salesmen on a personal level so I get taken very well care of. I had so much going on in my life at the time of sale I cant exactly remember the conversation we had or why it changed but I'm glad it did.

[CollinsE90]

Originally Posted by Freakazoid

not always, depends on alot of things.... when they have APR specials sometimes there's no cash alternative... it's just an APR special to get people to finance more.

(i.e. hey it's 1% interest, I'll just finance everything! - as compared to down payment of 10-20%).

yea but that 1% doesnt make them a whole lot of money, the extra money they add to the price of the car is what makes them money, the 1% is just a sales tool to get you to buy a car that you couldnt usually afford with 10%

[Freakazoid]

Originally Posted by Sara504

I originally was going to do 3.9% but before I signed the papers I had an emergency and had to leave town. When I got back, I actually got a call from BMW of Murray and they told me they re worked my loan and wanted me to sign at 0.9% interest so thats what we did. I bought it two Christmas' ago. I know my salesmen on a personal level so I get taken very well care of. I had so much going on in my life at the time of sale I cant exactly remember the conversation we had or why it changed but I'm glad it did.

wow, that's freaking awesome... no idea how you pulled .9% at 21 but geezus, nice I woulda killed for that APR with the car I had when I was 21.

see everything happens for a reason!

[Freakazoid]

Originally Posted by CollinsE90

yea but that 1% doesnt make them a whole lot of money, the extra money they add to the price of the car is what makes them money, the 1% is just a sales tool to get you to buy a car that you couldnt usually afford with 10%

that's very true too... which is why you should never deal with monthly payments, and only deal with the final price you're paying.

That certainly drives me nuts at dealerships... I don't give a damn what the monthly payments are, let's negotiate the final cost.

[CollinsE90]

Originally Posted by Sara504

Its a good thing my salesman didnt add thousands to the sale and actually took off 2,700.

the money was added on before you even walked into the door, and he knocked some off to make you feel special, dealers dont make deals that arent profitable contrair to what you think...just because you "think" he hooked you up, doesnt make it true...they do that so you will buy

[CollinsE90]

Originally Posted by Freakazoid

that's very true too... which is why you should never deal with monthly payments, and only deal with the final price you're paying.

That certainly drives me nuts at dealerships... I don't give a damn what the monthly payments are, let's negotiate the final cost.

and dont negotiate final price as how much they will knock off, negotiate how much you are paying above invoice

[CollinsE90]

Originally Posted by Sara504

You dont know anything about my sale.

you dont know anything about your sale, no pussy in this world can make a dealer lose money...bottom line is the owner of the dealer who pays the guy you "know" makes the rules, i love how people really think they got the deal of a lifetime because of who they know, even employees that buy cars still pay for cars that make them profit, just not as much as we do