Daspyda

iTrader: (1)

The reason for this is, as a "BHPH" dealer, the "interest" is front-loaded. Customer pays a down payment - typically close to what the dealer has in the car - and they make payments. If it gets repo'd - most probably - the customer forfeits any equity and the car is resold. The dealer holds the title. The same car can be "sold" several times...

If the dealer can get financing for the customer, and the customer has "sub-prime" credit, the dealer may have to pay a fee to the lender for them to extend financing.

In some cases, you can negotiate a "cash" price.

However, keep in mind that - in many cases - these cars are the rejects at the auction houses and the quality is dubious, at best.

Johnhav430

It's weird to finance something this old....I belong to the largest CU in the country, and the rate would be 3.49%, which imho is very unfavorable....how much higher would it be at a local bank, or national bank? That's what truly makes us a developed nation, the ability to obtain capital....even to the north of us many folks pay cash or debit for larger ticket items.

Bob04

I don't think anybody is buying a 430 for an investment. In the end, they are all depreciating assets. But I don't see the bottom dropping out of their values unless something like the housing financial crisis happens in the auto loan industry. The values will continue to creep lower every year, with the high mileage cars being on the low end and the lower mileage cars remaining on the high end of valuations. Like-new, ultra low mileage cars will command a premium as they get more rare if sellers are willing to wait for the right buyer.

BradTank

I don't know how it will effect used car prices across the board, but basically every financial institution has said there is a sub prime auto loan bubble being popped right now and it's very similar to the housing bubble.

Bob04

It's been happening for a couple of years now. If you bought a new car in 2014 or 2015, it's value had tanked due to all the loose credit and incentives for new cars. The effect on 10 year old cars far less pronounced. I think the endgame will be auto credit tightening and hurting the new car market. People won't be able to roll into new loans easier and will stay in cars longer. Not good for the new car industry. Used car prices will be affected, but it will be nowhere near as dramatic as what happened in the house market. Might even be a boost for cheap cars that can be purchased for cash, much like the housing crash was a boost for rentals. Who knows? If something bizarre does happen and used car values drop by 50%, it won't hurt by feelings. There are a couple of rides I'd like to pick up on the cheap for cash. S550 and Tesla Model S would be at the top of my list. But I don't see it happening.

Johnhav430

I've been looking at '14+'s online, more of a fantasy. I would not be paying cash, but about 60% down, and the rest for 36 mos. @ 1.99%. Then again, I know it would not be wise in my current situation anyway, I just go through the motions...but something as old as a LS430, yes, cash...it's going on 12 y.o., why borrow at 3.49%, or put your house on the line, did I mention it's 12 y.o.? (I think my heloc creeped up to 3.25%, that's like 3/4% this year--I let it sit with a $0 bal, that rate is high)

tallcaguy

Sub prime autos are generally lower quality, higher mileage. I don't see a crash in that market having much impact on high quality, well maintained luxury cars. Are 15 year old, used luxury cars a good investment? LOL not. However 04-06 430's seem to be holding value a little longer. The cost of anything comparable these days is a factor. Interesting that years later, 430's still get mentioned in lists of great used cars to own.

jimbosr1

i remember when a good interest rate was 12% on a car loan and 8.5% on your CD's.

Bob04

You must be really young.

JffGRY706

my first car loan during Jimmy Carter's presidency was almost 18%

jimbosr1

my first car loan was on a 69 dodge charger rt 440.damm i wish i kept that one.
we have been spoiled with the loan interest and beat to death with the savings rate.

tallcaguy

Totally agree Current loan rates are bargain basement.

Johnhav430

Why thank you!

I honestly think we need to look at debt as a bad thing, at least this is what I'll teach my 3 y.o. Why is it we don't feel good about getting a $15k new roof on the house, yet are willing to spend $60k on a car with zero down and that makes us feel great?

Now, when I bought my first car, a 1998 Maxima, I borrowed 75% for 60 mos. Wasn't the best decision, but it was my first new car. the interest was 5.9% and I took the full 60 mos. to pay it off. That made NMAC a nice amount on the interest. I tell myself today, never again would I borrow for 60 mos. And never again will I put so little down. 50% and 36 mos. or better, at the CU's best rate, which is 1.99% today, and should be going up. 60% is better. 75% to 100% superb. Cash is king! btw I only earn 1.2% in my GS account, and at the time I bought the LS430, only 1.05%.

tallcaguy

Being frugal is a great idea. Saving money is good (if it makes 6-7%). However debt isn't automatically "bad". For instance, a loan for a rental property (especially back there!) can make money. Taking a loan to fix up your house (if you plan to sell) can be "good" debt. Using a credit card is "debt". However, If you can pay it off every month, it's "free" money. Rather than "good" or "bad" debt, I think "smart" debt is a better term.

Johnhav430

Agree, but things tend to be one-sided at times. For example, I told my buddy, I'm not sure we'll ever get our dream house, which is simply a cookie-cutter 3500 sq. ft. McMansion, with a 3 car garage. NO BIG DEAL, people buy and live in these things all the time. The problem is, it cost 1 mil. where I live, and 1.6 mil. where my wife wants to move to. My buddy says let me tell you it's totally overrated. We had one in SC that cost $400k, one in FLA, and we have moved 5 times in the last 10 years. We have lost money on 3 houses that we will never in our lifetime be able to recoup. So he tells me to be satisfied that I have no mortgage (I do have a first lien position home equity, and a heloc in the 2nd position with $0), and will have no payment in 6 years. They just did a 30 yr. 2 yrs. ago in their current house, which is gorgeous. His two teen daughters have a bathroom 3x the size of our master. So one could say his debt is good--but it may never be paid off, just cashed out. Many say, look, I have to live, so debt is an instrument, I have to use it. I understand....but when it comes to cars, I don't think it's that good...and certainly not on LS430s, imho....

p.s. I agree on the pay off the credit card every month and grab the 2-5% cash rewards.....my bill has been as large as 6k in a month and it's daunting....but I tell myself it's getting paid off and I'm earning 2% cash...