So I went to a Ford dealership a few months back just to pass time and to find the answer to a question I had about a new Mustang GT. Well anyway, a salesman started talking to me and he said that me being 19 with little to no credit I needed a job making $1600 and have been there for atleast 6 months and need to put a small down payment down. Well I have all 3 now and just wondering how true that is. They have alot of knowledgeable people on this site and I thought someone here could help me.

 

Rule 1 - don't believe ANYTHING a car salesperson says without independent verification or it being in WRITING.

Rule 2 - salespeople will give you a line about hot financing and how you can 'make it happen' but they don't care about putting you in debt for years and years with outrageous interest payments which they won't explain.

Rule 3 - see rule 1.

 

i agree. dont trust the dealers. they either have no idea what they are talking about or are trying to milk you for all they can.

 

Join a credit union (or Costco) and get a preapproved loan for slightly more than you expect to pay (including TTL but less any down payment). Negotiate for the car, then hand them a check. That way they're not constantly trying to tweak the numbers to get you a $25 monthly payment at 72% interest (I'm exaggerating, but it can be almost that bad).

Above all, if the salesman (or the finance guy, for that matter) even MENTIONS a monthly payment, warn him the first time. If he says it again, leave the dealership without saying another word. You do NOT want to deal with anybody who's trying to fit you into a particular payment amount.

 

Well, there is some truth here to both sides. In general, when you sign a promissory note to make a payment for X number of dollars each month for the car (which, at 19, you can legally do as an adult), as long as you can, and do, make the payments, it is generally not the salesman's or dealership's buisness where the money comes from. You could be selling drugs for the Columbian Cartel or spying for Osama Ben Laden, for all they care.

But there is also another side to this. If you DON'T make the payments for any reason, then, of course, after a certain grace period dictated by state law, if it was a bank or credit union that lent you the money, they will reposess the car and then have to turn around and sell it, auction it, donate it or dispose of it (after all, what is the bank going to do with a used Mustang?...banks deal in money, not cars).

But if it is a dealer loan you are applying for, it's an even stickier case, because, then, not only are you still obliged to make the payments, but the dealer itself is actually giving you the money for the car, though usually it is not the dealer's money directly......it is a bank-financed loan THROUGH the dealership, using the dealer's own bank. In some cases, like with GMAC or Ford Credit, the manufacturer itself, not the dealership, is giving you the loan. Now, if you then don't make the payments, the dealership will reposess it, but is then stuck with the car, and whatever wear and damage it may have if you have driven it hard or abused it (as V8 Mustang drivers often do, but I'm not saying you will) and then they have to repair it, refurbish it, and, if possible, sell it on the used car market, sometimes for a loss of money.

So, if you are applying for a dealer or manufacturer-supplied loan, the dealer has some incentive to see that you will be able to make the payments....THEY will be stuck with a prematurely reposessed car if you don't.

 

Thanks for the info everyone. I think I'm going to go this week and talk about to the salesman again. I wouldn't mind a used car so I might be able to get a better deal on one.

Would it be easier to lease or finance it in my situation. I know when you finance a car you have to trade it in or re-finance it after 2-3 years(or how ever long). Am I close to being right?

 

No. When you finance a car, in most cases it is good for anywhere from 2 to 6 years....your monthly payment will depend on your down payment, the amount financed, the length of the loan, and your interest rate. In general, longer loans mean higher interest rates.....the dealership or bank obviously wants the money paid back as soon as possible. Financing a used car, for reasons I myself have never completely understood, usually is at higher rates than for new cars.

In leasing, your monthly lease payment is dependent on the car's sticker price, the amount you put down, and the car's residual value (the amount that the manufacturer THINKS it will be worth in 2-4 years after depreciation, 2-4 years being the typical lease term. When you lease, you don't really own the car, and, in effect, are renting it for the lease term. You have mileage limits....typically 10,000-15,000 miles a year, and wear-and-tear clauses. So, of you bring it back at the end of the term with body damage, scratches over a certain length, broken glass, stained-up carpets, etc..... (the exact conditions are spelled out in the lease contract) or put too many miles on it, you might have to pay an additional fee. Leasing, though, could be a good idea, if you are diligent about taking care of your car, and don't drive a lot of miles....it allows you, in some cases, to drive home in a more expensive car than you could afford to buy outright or finance, and if you use the car in buisness, you can deduct the lease payments off of your taxes.

 

Used car loans are considered higher risk than new car loans which is why the rate is higher. On a used car (loan) there is a higher chance the car will have some mechanical problems or break down and the person will not want to or not have enough money to fix it, subsequently stop making the payments and just let it get repo'd.

 

Thanks. I knew that it was associated with greater risk, but wasn't quite sure how.

 

You're welcome