Getting screwed at a car dealership

[treacheroustexan]

Well.. I'm sure I'm not the only one but maybe someone who has been in this situation can give me some advice? I took my 2000 Ford Focus to the honda dealership to see if I could trade it in and get the car I've been wanting, a 2013 honda crz. Keep in mind I am 21 years old with hardly any credit. I got approved for a loan, but a 16 percent interest and now I've been stuck with a 500 dollar a month payment. I haven't missed a payment and I am not struggling with money (well maybe a little but I can survive), and I just opened up a secured credit card to maybe help my credit and refinance later on. Other than the refinancing, is there ANYTHING I can do to bring my payment down at all?

 

[temple240]

Work on your credit and try again later. A new car loan at 16 percent is a horrible decision. In a few years you'll find that a loan like that will hold you back from things that are more important than a new car.

 

[treacheroustexan]

Yeah I realize now. They did a great job selling me the car and making it nearly impossible to say no. Never going to another car dealership again.

 

[westo2]

Yeah I realize now. They did a great job selling me the car and making it nearly impossible to say no. Never going to another car dealership again.

That's the wrong attitude too - car dealerships can be fine, you just need to know your stuff before going in. Research the model, research the incentives, check edmunds.com for the MSRP, Invoice and True Market Values. Be willing to walk. They want to sell you that car, make them work for it and get your deal. Also - every car salesmen on the planet is going to try and negotiate with you on the monthly payment. You shouldn't care what the monthly payment is, and if that is what is driving the deal, it means you probably can't afford it anyways. You are negotiating on the total cost of the car and the terms of the loan (and the trade in, if applicable). The dealer can make the monthly payment be as low as they need to to appease you - they simply just extend the term of the loan. Frankly, a 72 month term car loan should be criminal.

Car financing can be fine too, as long as you are careful about it - once you build your credit, many manufacturers are offering 0-0.9% on new cars. My highest car interest loan I've ever had is the one I currently have at 0.9%. I'm probably a bit odd, but I've gotten to the point where I actually enjoy the dance moves that go along with a new car purchase. The whole process has almost become like sport for me.

Ok - /lecture off.

Short of going through a refi - the only way to save some of the interest charges is to pay extra on the principal each month. Each extra dollar you apply towards that principal is one less dollar you are paying high interest on. Just check your loan contract to ensure there isn't a pre-payment penalty. Loan writers will slip that in sometimes.

You need to build a credit history - taking a secured credit card is a good start - you need to use the CC BUT ensure that you pay it off in full each and every month. Letting a balance carry each month is even worse than the car loan, as CCs usually carry a 19.9-24.9% APR.

If you've got a big loan hanging out there and not much credit history, I doubt you'll be able to get much out of a refi yet. A year from now? Perhaps.

 

[treacheroustexan]

That's the wrong attitude too - car dealerships can be fine, you just need to know your stuff before going in. Research the model, research the incentives, check edmunds.com for the MSRP, Invoice and True Market Values. Be willing to walk. They want to sell you that car, make them work for it and get your deal. Also - every car salesmen on the planet is going to try and negotiate with you on the monthly payment. You shouldn't care what the monthly payment is, and if that is what is driving the deal, it means you probably can't afford it anyways. You are negotiating on the total cost of the car and the terms of the loan (and the trade in, if applicable). The dealer can make the monthly payment be as low as they need to to appease you - they simply just extend the term of the loan. Frankly, a 72 month term car loan should be criminal.

Car financing can be fine too, as long as you are careful about it - once you build your credit, many manufacturers are offering 0-0.9% on new cars. My highest car interest loan I've ever had is the one I currently have at 0.9%. I'm probably a bit odd, but I've gotten to the point where I actually enjoy the dance moves that go along with a new car purchase. The whole process has almost become like sport for me.

Ok - /lecture off.

Short of going through a refi - the only way to save some of the interest charges is to pay extra on the principal each month. Each extra dollar you apply towards that principal is one less dollar you are paying high interest on. Just check your loan contract to ensure there isn't a pre-payment penalty. Loan writers will slip that in sometimes.

You need to build a credit history - taking a secured credit card is a good start - you need to use the CC BUT ensure that you pay it off in full each and every month. Letting a balance carry each month is even worse than the car loan, as CCs usually carry a 19.9-24.9% APR.

If you've got a big loan hanging out there and not much credit history, I doubt you'll be able to get much out of a refi yet. A year from now? Perhaps.

Never really looked at it the way you explained it. It just kinda sucks, after my car payment and school loans are paid I only bring home a little over 400 a week for everything else. I plan on building credit for a year or two and paying every spare dollar I can towards my loan and hopefully refi in a year or two like you said. Thanks for the advice.

 

[westo2]

Never really looked at it the way you explained it. It just kinda sucks, after my car payment and school loans are paid I only bring home a little over 400 a week for everything else. I plan on building credit for a year or two and paying every spare dollar I can towards my loan and hopefully refi in a year or two like you said. Thanks for the advice.

If you're still in school - I highly recommend signing up for a basic business/finance course if your school offers it. Something that gets into the mechanics of loans and finance - it can be a real asset as you go forward in life. IMO - a course like that should be mandatory at the HS level, before a person can get themselves in trouble with bad loans and debt. If you are full time, you should be able to just take it without paying any extra, a bonus to boot.

As I said - before you start making extra payments, check the terms of the loan or call the loan company to ensure that you aren't subject to an early payment penalty. If that's in place, it can more than offset the savings of making early payments.

 

[treacheroustexan]

Not in school anymore, but thanks! Il get with my bank before making any early payments. I'm kinda considering getting the car down a couple thousand by really sacrificing all of the money I have and seeing If I can sell it on my own and just buy a cheaper car now that I have SOME credit

 

[rpe290]

If you're still in school - I highly recommend signing up for a basic business/finance course if your school offers it. Something that gets into the mechanics of loans and finance - it can be a real asset as you go forward in life. IMO - a course like that should be mandatory at the HS level, before a person can get themselves in trouble with bad loans and debt. If you are full time, you should be able to just take it without paying any extra, a bonus to boot.

As I said - before you start making extra payments, check the terms of the loan or call the loan company to ensure that you aren't subject to an early payment penalty. If that's in place, it can more than offset the savings of making early payments.

I agree, and would add that none of it matters if you (this means you treacheroustexan) don't have DISCIPLINE. You obviously need to work on that given your (not so) grand idea to buy a new car while in school. Not judging you, it happens to almost everyone at some point in their young lives, maybe this instance is the one that helps you realize it!

Delayed gratification is not a bad thing

 

[Kirkwooder]

In the future, always shop for your financing before you go to the dealership. The dealers work deals with the bank and tack on interest points. The bank then splits the interest with the dealer.

If you have a bank that you do all your everyday banking with, ask them to take a look at your loan and see if they will refinance you now at a lower rate. But be sure to ask how it might affect your future credit.

And, here in NY a buyer has 3 days to back out of any auto sale! I don't know about OH but it might be worth checking into!

 

[westo2]

Not in school anymore, but thanks! Il get with my bank before making any early payments. I'm kinda considering getting the car down a couple thousand by really sacrificing all of the money I have and seeing If I can sell it on my own and just buy a cheaper car now that I have SOME credit

If it was a new car and you are able to make your payments - you should pursue the refi route before selling it and taking another loan. You've already taken that depreciation hit from new car to used car - so any savings from selling and buying a more affordable used car would probably be a wash with the depreciation hit.

IMO - the only reason to ever buy a new car is to take advantage of dealer financing options (0-0.9%). At those rates, the instant depreciation hit is offset slightly by the interest savings compared with a used car loan. And if you are buying a new car and aren't eligible for the top tier interest rates - you need to be looking at used.

Might be a good idea to stop into your bank, or check with a credit union just to see what they offer you. You may be able to get a better rate now. If you get approved, punch the numbers into an amortization calculator - http://www.calculator.net/amortization-calculator.html - and see how they compare with your terms now. There is no harm in asking.

 

[soccerdad]

Are u by any chance a member of a credit union? If so, go see them. We financed a Honda Pilot with Honda America about 6 years ago, simply so that we could drive the car home when we bought it. Within a month we had it financed at the CU at about half of Honda's rate. Dealerships make BIG money in their F & I (finance and insurance) offices with high interest rates and things you may not need like extended warranties. If they sold you an extra warranty you might consider cancelling it. See what other extras they might have loaded in. The credit union will give you a better rate 90% of the time. Good luck.

 

[Upthewazzu]

Well.. I'm sure I'm not the only one but maybe someone who has been in this situation can give me some advice? I took my 2000 Ford Focus to the honda dealership to see if I could trade it in and get the car I've been wanting, a 2013 honda crz. Keep in mind I am 21 years old with hardly any credit. I got approved for a loan, but a 16 percent interest and now I've been stuck with a 500 dollar a month payment.?

Good NIGHT. Is that even legal? My first piece of advice would be to avoid that Honda dealership for the rest of your life, they didn't do you a single favor. Second piece of advice is to refi that sucker ASAP. As others have said, try a credit union. Sometimes they won't be able to help if your credit is poor but you can get a better rate than that from somewhere.

 

[AlCophile]

You're not gonna like this, but check out Jason Kelly's "Financially Stupid People......." cheap on A'zon. I got a copy for 39 cents; shipping cost more! We've had about 8 new cars and many more used over the centuries, and the only reason we bought new was to keep the wife happy. I'm way too cheap.

 

[sandyeggoxj]

I bought my current pickup used but have a big loan. Went through my credit union and ended up with a 2.0% apr. Not bad. I had perfect credit but no history. Seems like most credit unions I see in the southwest are going even lower these days for vehicle loans.

 

[Zepth]

If you have a bank that you do all your everyday banking with, ask them to take a look at your loan and see if they will refinance you now at a lower rate. But be sure to ask how it might affect your future credit.

I agree entirely. After proving that you are capable of making the car payments in full in a timely fashion any major institute would be more than glad to take over the loan. They'll give you a way better rate because to them making 6% on a loan is better than making 0% on a loan they don't have.

Good NIGHT. Is that even legal? My first piece of advice would be to avoid that Honda dealership for the rest of your life, they didn't do you a single favor

I disagree with this. It isn't necessarily the fault of the dealer on this one, I had gone shopping at a VW dealership and they just called a bunch of different institutes on my behalf and gave me a list of rates. While it may not seem like it they did a favour by finding a lender and getting the loan approved starting on the road to having a credit rating. I do have a bitter feeling about taking advantage of the guy, and really just can't think of anything else on that "deal."

It is sad but not uncommon for lenders to automatically "no credit = bad with money." Not too long ago I saw on the news some people went shopping at Car Canada (one of the largest used car dealer networks) and got some ridiculous 18% rate with the pitch "with time and good payment schedule you should be able to get a better rate" which never came through. It's the same as the billboards "nobody declined credit!" which is an advertisement for upcoming screw jobs.

 

[MaxStout]

The thread title is a bit misleading. The dealer didn't screw you, unless they forced you to sign that loan agreement.

That said, chalk it up as a learning experience. That's not much consolation when you are shouldering $500/mo payments, but it's about the best you can do with the situation. Whatever you do, don't default on the loan. You are young and just starting to build up credit, don't ruin it. You could try to sell off the car and pay off the balance on the note if the payments are too much to manage. And 16% APR, while exorbitant, is by no means illegal. That's just what interest rates are set at for borrowers with little/no credit history who are, based on their actuarial data, a higher risk.

Next time, get the financing arranged through your bank or CU ahead of time, then go in and bargain. You might have a little more leverage in negotiations if you don't have to rely on their in-house financing.

 

[jmendez29]

I'm assuming you didn't get much for your Focus. And I'll also assume you didn't have much of anything to put as a down payment, effectively zero. If this is the case, then you're in a pretty crappy spot. At this point, being a college graduate, at least be smart enough to learn a lesson.

I would say- you got the car you want, and unless you really legitimately can't afford it, you'd be screwing yourself even more by getting rid of it and taking the hit on value. So, make the most of what you have and move on with it. If you don't bank at a credit union, you probably should. Maybe other people disagree, but in my perspective, the only reason anyone should use a bank as opposed to a CU, is if they have large quantities of money or do a LOT of transaction, such as a business. The people in a CU are more likely to take a personal look at your situation and give you whatever assistance they can. So get to a CU and explain your situation and see what they are willing to do to help. If the first place says they can't help, find another. Someone wants your business, and they will find a way to help your situation.

Aside from that, I would suggest getting a second job for a while. Even if it's only 10-15 hours a week, take that money and put it solely to paying off the principle. Keep paying the monthly payment out of your budget and pay the extra from the second job. And when you pay off the car, if you find the job tolerable or even enjoyable, keep doing the same thing for your student loans and whatever debt you have. Then do the same for saving up some extra cash. I used to work with an engineer who made around 70k who still worked the weekend farmers markets he worked in college because the extra cash he got helped pay his loans, AND he got a bunch of food for cheap because he got to know all the vendors pretty well. Something to think about...

Otherwise, don't beat yourself up too much. Very few people DON'T have some kind of significant financial misstep under their belt. This isn't enough to bankrupt you unless you let it. Get creative to get past this, learn a lesson or two, and apply them to the rest of your life. You'll be fine and we'll all be here rooting for you when you get it paid off.

 

[hunter_le five]

My girlfriend recently did something similar. She has no credit and ended up taking on an exorbitant loan rate like yours for a new car. I tried to tell her it was a bad idea, but she doesn't have much financial sense. She's not going broke as a result of her choice, but you could say that she's "treading water", and it really cuts into her financial maneuverability. Then again she doesn't pay rent (she lives with me), so if it weren't for that fact, her car probably would've been repossessed by now.

If I had been given the rate you did, honestly I would have walked away and looked for something a bit more modestly priced. The 16% interest rate is not at all surprising for someone with little to no credit - you have to look at it from their point of view, you are untested and a huge financial liability to them. However going for a less-new or lower-end car probably would've been more prudent given your credit situation.

But oh well, chalk it up to a learning experience and make the best of a bad situation. I would not try to sell the car unless I had to. Its value will depreciate fast, and you will likely find yourself trying to sell a car that has less value than what you still owe on it, and you might only hurt yourself more by selling it.

As others have recommended, make sure you make your payments (and on time) every month for a while, and build your credit by showing that you can handle the debt responsibly. Keep your credit card balances low. If you can afford to, pay a little extra each month to cut down on your long-term interest charges (but don't neglect your savings to do so). After a year, try refinancing with a credit union or bank. You can probably get your interest rate cut in half by that point if not better.

You may have entered into a bad deal, but you can come out ahead by really strengthening your credit if you play it right. Next time around I bet you won't get "screwed".

 

[dfc]

Am I the only one who's gotten burned more by a credit union than a bank?

Everyone keeps saying to go with a credit union, but I had to pay hundreds of extra dollars in order to cover a mistake by an incompetent moron who didn't know that AZ = Arizona and AR = Arkansas. Their response was "even though we screwed up and couldn't even send your bill to your correct state it's your responsibility to make payments". How the hell am I supposed to make payments when your retarded asses can't even send my mail to the correct state?! They even had my phone number on record and couldn't call me for several months? Eff credit unions.

 

[betarhoalphadelta]

One more point... Once you pay off that CRZ, KEEP IT!!!

There's no reason to buy a new car every 4 years just because you've paid it off. That Honda will last you 10 years or more... Life without car payments is much nicer than life with car payments!

 

[Yooper]

One more point... Once you pay off that CRZ, KEEP IT!!!

There's no reason to buy a new car every 4 years just because you've paid it off. That Honda will last you 10 years or more... Life without car payments is much nicer than life with car payments!

That's good advice. It's hard to do, though! So many of us want a shiny new car, and then are stuck in debt forever.

One thing that is very hard to do, but works well if you can do it is to make car payments (to yourself) once your car is paid off. I did that for 7 years the first time, and then I paid cash for my next three vehicles.

And when you walk into a dealership with a TrueCar report that shows the price you should pay, and with your checkbook, you will get the best deal. I just bought another car for my birthday for myself- and I paid 2% under invoice on a 2014 Jeep Wrangler. I also paid -0- in interest charges, and got about .5% on my savings while saving. The interest rates suck on savings accounts right now- but it's still a good deal to save and then pay cash.

I did this via email, as I'm not home right now, so I ordered my Jeep and it should be at the dealership in a week or two for me to pick up.

Then we negotiated the trade-in of my car separate- crucial to keep in mind to do that each and every time you buy a new (or used) car.

Don't let the dealer walk you through everything by hiding the details in "payments" and "financing". Sure, you can get fancy floor mats for only $7/month- but HELLO- over a 60 month loan that's $420- a whole payment! Ask for the total, out the door price- and then talk about financing if you must. Otherwise, go to your own bank or credit union and talk to them first about their rates. You may still decide to go with the dealer's financing- but never, ever, ever at 14%!

Getting there is difficult- it's easy to want a new car, but hard to commit to making $500 payments for years and years. If you can be disciplined and learn from this, you can get there.

One word about refinancing- do it if you can. BUT- don't take out more money when you refi, as then you'll be in worse shape than ever. You never want to owe more on a car than you could sell it for, as if something happens and it breaks down you'll be in serious trouble.

I'd go see a local credit union (love mine!) and see if you can refi this car loan to a lower rate and then suck it up and pay it off. Then you'll be in a better position.

 

[snowtires]

I bought a used truck thinking, no way could I afford a new one. Boy was I wrong, it turns out my truck was a ford! I cant afford either...

Sent from my SAMSUNG-SGH-I747 using Home Brew mobile app

 

[brewfreeordie]

Don't blame the dealer, and don't be too hard on yourself. Almost everyone learns this lesson the same way. Older folks love to preach about their supposed fiscal responsibility, but it's only from the other side of the looking glass. You could have bought a time share.....


I'm not a genius when it comes to money ("think of all the money I'll save by brewing my own beer!") but my attitude when buying anything is there's only one number that counts: How much does it cost? Get away from the payment mentality. It's tantamount to slavery.

Hold up on selling the car It's going to cost you 3k to sell it and you will lose 3k on the next deal. Try the refinancing route first as others have suggested. If you absolutely have to get out of it try to work with the dealer. Play the sob story and tell them all good things but you've got to get out from this. But don't let them roll you into another car without checking the numbers on the loan, as in how much you're paying for the privilege of lowering your payment. It's a dirty trick but I've seen people get royally screwed doing this.

Right away start paying the loan down. As soon as you show equity in the vehicle someone will take the risk of refinancing you.

 

[BreezyBrew]

Growing up you kind of have an idea about car "salesmen" and their slimy practices willing to take advantage of people. While it hasn't happened to me with a car, I can say that it did happen to me when buying my fiancés engagement ring. I did all the research I could, and because of time constraints I got screwed over. I was mad as hell and torn up about it. Finally I just came to the conclusion that I'm a good person and they are the sleezeballs that took advantage of me. Life goes on and I'll certainly make better decisions in the future.

 

[betarhoalphadelta]

Almost everyone learns this lesson the same way. Older folks love to preach about their supposed fiscal responsibility, but it's only from the other side of the looking glass.

Agreed. The lesson I learned from my motorcycle? "Don't finance toys. If you can't pay cash, you shouldn't buy it."

How did I learn that lesson? The hard way. Selling a crashed motorcycle for $400 less than I owed on it because I couldn't afford to keep up payments AND repair it at the same time...

 

[Darwin18]

OP - I went through a somewhat similar experience. I had recently graduated college and my college car completely died on me. I had a job at the time, but like most first jobs out of college it paid crap and I was mostly working there to get professional experience. My dad really pushed me hard towards getting a new Honda Civic. He even co-signed the loan with me, but I had so little money for a down payment that my interest rate was still very high, around 8%. That was back in 2006 when interest rates on loans were still high. My monthly payment ended up at $451.09 a month, a number that I'll never forget. That car payment turned me into such a cheap bastard for five years and it really made my life difficult at a time when I wasn't making very much money. It certainly made moving out and getting out my own much more difficult than it should have been. It took a few years but I finally got a much better paying job and was able to afford the payments and enjoy life for the last year or so of the loan.

The only positive that I can say is that the high monthly payment forced me to learn how to strictly live within a budget. Each month I barely had enough cash left over to maybe buy a recipe to brew with. It definitely was on mind when I went to buy a house a few years ago - I wanted to stay in a price range where I was comfortable paying the mortgage and having money left over at the end of the month to enjoy life with. If I could go back in time, I would definitely intervene and push myself to buy a pre-owned vehicle that was way less expensive than a new car, until I was able to get a better paying job.

I still have the car and it's turning nine this fall. I know that I need to get a new vehicle eventually, but I hate that car (stupid loan!!!) so much that I'll probably drive it into the ground just to get every last cent of that loan out of it. Perhaps I'm a bit bitter towards it....my next vehicle will be a pre-owned certified higher quality vehicle, and I'll put down a significant down payment. Lessons learned.

 

[treacheroustexan]

thanks for all of your advice everyone!

 

[johngaltsmotor]

Keep your chin up texan. There are lots of things in life that you look back on with 20/20 vision and kick yourself. In the end, what's done is done. What matters now is how you go forward. To quote GI Joe "knowing is half the battle." I too drove through a dealership to look. Then I told myself "you're not going to sign anything". Then an hour later I drove off in a new car

Keep working on building your credit - by paying on time, not having a credit counselor "help you". Secured credit is a good start. And auto-pay your bills to avoid late fees (as long as you know the money will be there, don't let overdraft fees get tacked on). Even setup a separate account that bills are paid from vs cash available so you can't "accidentally" screw yourself, and split your paycheck deposit between the two.

And for grins just pop into a few banks or CUs and ask to talk to someone about a loan. Tell them point blank where you stand and let them sell you to get your business. As others have said, they'd rather make 6% and gain a customer than let you walk. Now it's your chance to turn the tables - the car salesman had the advantage, but now you can take the advantage against the bank. Make the banks impress you with the deal they offer. Maybe it's just eliminating a monthly checking account fee or knocking off .2% for setting up auto-payments, but they've got quite a bit of leeway when it comes to earning new business.

I know a few guys who sell cars and they're great guys, but when they're working it's all about putting money in their pocket to help pay bills. Most of them don't see you as a trip to Tahiti, more like a trip to the orthodontist for their kids braces.

 

[kombat]

As mentioned, most of us have had similar experiences. My first car was a brand new VW Jetta that cost me $40,000 (in 1999 dollars!) and didn't even have leather seats. I paid full sticker price and financed it at 7.9%. My monthly payments were $656/month for 5 years. It got rear-ended and totaled before it was even paid off. That was a costly lesson, but I guess some of us have to learn these things the hard way for them to really stick.

Of course, the OP bought a shiny brand new sporty coupe that he can't afford. It's not the end of the world, you'll recover. In the meantime, at least enjoy the thing. I can't imagine what you're paying to insure that thing (21-year old male with a brand new 2-door sports coupe? Cha-ching!).

 

[Facinerous]

As soon as a buyer walks onto a car lot most car salesmen have a sales plan which they will implement in order to stack the odds in their favor.

First off is the good old trade in. You will never get a fair price for your trade in from a dealership from what you can get selling it yourself. This is a huge point for the dealership, as their turn around sale of that car will make them big money. You on the other hand will not get anything out of the trade in.

Second is the questions the salesman will ask you. "Whats your price range?" they may ask. Followed by an immediate "Up to..." If you answer $30k, and they ask up to, your mind will immediately start thinking about how you can extend your budget. Its subconscious, but it works in favor of the dealership. If your budget is $30k, but you can go up to $33k, thats an immediate $3k advantage that the salesman as over you now. If they ask you what your price range is, IMO the best response is "I don't know, show me what you have." Even if you do know.

Third is financing. Always goto a bank first and get pre-approved for a car loan at a particular value when you are looking for a car. When you goto a dealership and financing comes onto the table you have something that they will have to beat in order to get you to take the loan from them. You have to make them compete for you money. Often a dealership can not compete, and the bank loan will be the better offer.

Last is do your research first, know what you want to get before you walk onto the lot. Just because a sticker says a particular price doesn't mean thats what the dealership has to sell it for. You have the advantage here because you can walk off their lot anytime you want. You have an army of dealerships you can deal with, but for your sale they only have you. You can give them your phone number, tell them if they can meet your price for a particular car its sold. Then just leave. 90% of the time, they will call you back with a better price.

The last car I bought was a 2009 RAV 4. I did all the research set myself a price, and walked onto the lot. The sticker price was $32k, probably $35k after all the extra fees. I offered them $30k, out the door, all fees included in my offering price, including the sales tax. I gave the guy my phone number and told him to call me if he can meet that price. 4 hours later I got a phone call back, they asked me if I could go with $30,150. Right there I had a small savings off the sticker price, and a major savings off all the extras. I ended up driving off the lot with it for $30,050.

Some people are even more aggressive when it comes to buying a car. In my case I drove away satisfied with my purchase and never looked back.

I'm writing all this because its the salesman/dealerships job to get the best price they can for the car. They are not working for you. Its your job to stack the odds in your favor.

 

[Roadie]

I had a long detailed reply typed last week after you posted and then my internet went down and I lost it; have been meaning to respond ever since. You have gotten a lot of good advice on the thread with most pointing you the direction I was trying to tell you to go. Right now unless you have someone with good credit willing to co-sign for you then you are probably stuck for a little while paying the exorbitant interest on your car loan.

Sounds like you are trying to build credit from scratch so here is what I would do. Dump the secured credit card and go to a local credit union and open a checking/savings accounts. Get their debit Visa card for convenience. Have your checks direct deposited into your checking which in essence shows them how much you make over a period of time. Talk to them about a refi car loan and what their underwriters look for but you probably won't qualify quite yet for that kind of money. See if you qualify for a signature loan - maybe $500. If so, take $300 of that and put it into your savings account. Make all payments on that loan on time and do not have any NSF transactions. Although it's convenient to bank online I would go into the actual credit union to make your loan payments and transacting business. Get to know them. Always be courteous with them as you want to build a relationship with the credit union itself NOT with some credit card company. Allow some time to go by - maybe 6 months. Reapproach them about the refi car loan. At that point they will know you, they will see you still have your job, they will see that you've made all your loan payments on-time and at that point may be willing to take a little more risk with you. Continue to build on that relationship and sooner (hopefully) or later you'll be able to get what you want.

 

[Hello]

Solid advice has been given here but yes, you normally can refinance your loan. There will or should be options such as extending the time and lowering the interest rate to really reduce the payment or just lowering the interest rate, keeping the same time, and saving that way. I had some wiggle room to get a lower rate 2 years after I bought my truck. At 6% I knew I could get lower after 24 months of on-time payments. I elected to keep the term the same but I lowered the interest giving me some savings. Had I been in a rough position financially, I would have taken their $200 savings plan which was lower interest and an added year on my loan. The best choice is always to keep the same term but lower the rate but again, if your financial position has changed over time then perhaps adding a year to the contract will be useful. It all depends.

When buying I had something going for me; no state license. I had just moved and walked in with the intent to buy but the license kept me very grounded. Upon returning with the license I needed, I walked up to someone who looked slightly hungry to sell a car. After haggling, there was no way he was going to move on the price. I was already getting $6k off the sticker, which wasn't as much as I wanted off. I left, waited for the auto maker to post their annual report which was slated to reflect a loss, and then returned. At that point they want to sell me a car just a bit more. I ended up paying what I wanted so that at the end of my loan the total true cost of the truck was just slightly higher than their sticker price. I had a # in mind which acted as my tolerance so that I didn't walk out on a good deal by mistake or get into a bad position because they sat me right in front of that new shiny truck.

Buying a car is tough sometimes. These sales people aren't in the business to save you a dime but you will hopefully continue to pay, build your credit (no credit is similar to bad credit) and refinance that car to get your rate down to something a lot less criminal. And yes, I do think 16% for an automobile that cannot be seen as a recreational vehicle (motorcycle) is criminal.

 

[Roadie]

To buy a new car you need to know dealership cost though it's practically impossible to know the real number with incentives and holdbacks. They can sell below invoice and still make money a lot if the time. Put in the research to know what their cost is and your target price is usually a couple hundred bucks over that number.

I've also taken the time to build a relationship with the finance manager and always go to the same salesperson when we look to buy a car as we like Toyotas and have bought 5 of them now (my kids totaled some growing up) I still do my homework but it's almost too easy of a process now. The finance manager immediately tells me his best deal and asks if that's better than our credit union - usually yes but sometimes no. The salesperson gets the invoice out on whatever we want and usually says she'd take $300 over as her starting point. Arbitrarily picking a number to get off the sticker means nothing.


Almost Famous Brewing Company

 

[Rahahb]

Save some money and refinance the car.

Having said that, now I can lecture a bit.

Not all salesmen are crooks. I use to sell cars and never lied to anyone, or anything shady for that matter. If you bought at w/e price and at 16 percent, guess who that falls on? You got it. With no credit, you aren't going to get the best rate outside of a few exceptions. Some people are lucky to even get a loan at any rate.

My advice: don't bite off more than you can chew, live with your decisions(pay your bills), and play smarter next time.

EDIT: Looking at threads like this reminds me of how little I liked dealing with certain types of customers. lol

 

[Jukas]

One thing you should do right now if you haven't already is make sure your insurance offers gap coverage. The last thing you want is to find yourself in a situation where you owe more than your car is worth if you get in an accident, due to your high interest rate and instant depreciation hit.

 

[westo2]

As soon as a buyer walks onto a car lot most car salesmen have a sales plan which they will implement in order to stack the odds in their favor.

First off is the good old trade in. You will never get a fair price for your trade in from a dealership from what you can get selling it yourself. This is a huge point for the dealership, as their turn around sale of that car will make them big money. You on the other hand will not get anything out of the trade in.

Second is the questions the salesman will ask you. "Whats your price range?" they may ask. Followed by an immediate "Up to..." If you answer $30k, and they ask up to, your mind will immediately start thinking about how you can extend your budget. Its subconscious, but it works in favor of the dealership. If your budget is $30k, but you can go up to $33k, thats an immediate $3k advantage that the salesman as over you now. If they ask you what your price range is, IMO the best response is "I don't know, show me what you have." Even if you do know.

Third is financing. Always goto a bank first and get pre-approved for a car loan at a particular value when you are looking for a car. When you goto a dealership and financing comes onto the table you have something that they will have to beat in order to get you to take the loan from them. You have to make them compete for you money. Often a dealership can not compete, and the bank loan will be the better offer.

Last is do your research first, know what you want to get before you walk onto the lot. Just because a sticker says a particular price doesn't mean thats what the dealership has to sell it for. You have the advantage here because you can walk off their lot anytime you want. You have an army of dealerships you can deal with, but for your sale they only have you. You can give them your phone number, tell them if they can meet your price for a particular car its sold. Then just leave. 90% of the time, they will call you back with a better price.

The last car I bought was a 2009 RAV 4. I did all the research set myself a price, and walked onto the lot. The sticker price was $32k, probably $35k after all the extra fees. I offered them $30k, out the door, all fees included in my offering price, including the sales tax. I gave the guy my phone number and told him to call me if he can meet that price. 4 hours later I got a phone call back, they asked me if I could go with $30,150. Right there I had a small savings off the sticker price, and a major savings off all the extras. I ended up driving off the lot with it for $30,050.

Some people are even more aggressive when it comes to buying a car. In my case I drove away satisfied with my purchase and never looked back.

I'm writing all this because its the salesman/dealerships job to get the best price they can for the car. They are not working for you. Its your job to stack the odds in your favor.

Some caveats - Yes, you will get a better price doing a private party sale vs. a dealership, but in many states (NY for sure) - the price on the trade in is taken off of the price of the purchased vehicle for sales tax computation. So - for me locally, I need to get 8.75% more in a private party sale than my trade in would have gotten me at the dealer to break even. Add in the time and hassle of dealing with a private party sale and as long as you are firm in your negotiations, you can get pretty close between private party vs. trade in. My last trade in - I was able to get them within ~5-10% of what I knew I could get private party.

As far as securing bank financing prior to going to the dealer - necessary when buying used and can be useful for buying new - unless you are qualified for any manufacturer's incentive financing. Build your credit, wait for a 0% or near 0% financing offer, and then financing isn't even really part of the deal. As I said earlier - IMO, if you can't qualify for a manufacturer's incentive financing of 1.5% or less - you shouldn't be buying new. Those low or zero percent interest rates offset some of the depreciation hit you take on a new car. You shouldn't be taking that depreciation hit and paying high interest.

 

[DrunkleJon]

One thing you can also do is after you have paid your installments on time for a couple payments to the lending bank, call them up and see if you can renegotiate your rate. Most banks are understanding and if you prove that you are not a deadbeat and pay what you owe or more on time (or even early) they can often give you a break.

Credit card companies do this all the time. If you miss payments your APR skyrockets, if you call them up they drop them if you are in good standing.