It's been a while since I've started a car thread

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just saying that if you're credit score is 750 or higher you should get better than 4.5%, unless you're getting a benz or rolls.
 
cjericho said:
just saying that if you're credit score is 750 or higher you should get better than 4.5%, unless you're getting a benz or rolls.
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The negative equity on the Neon being rolled into the loan was the reason for the higher rate.
Looks like I'll have to do it again, too.
 
I thought you said you could pay it off. Skip buying a car and go to financial counseling. Buy a bus pass and get a job at Wal-Mart. Doubt the pay is much different.

If you do buy a car, we all know what type of deal it will be. You'll be good for another 2-3 threads on the new car that will break down in a year or two.
 
Smallpotatoes said:
How is that even legal?
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Let's say that the prevailing (i.e., market) interest rate for a given borrower for a given term (let's say 36 months), down payment, etc., is 3.5%. Let's further say that the dealership is offering 1% financing for that same term length, down payment, etc.

Our hypothetical buyer takes the dealership up on its 1% offer and finances $10,000 for 36 months. The actual net present value of that string of payments, discounted at the proper market rate, is $9,626.65. The difference in the purchase price ($373.35) is the equivalent of prepaid interest, but that interest doesn't show up on the finance contract. The contract says our hypothetical buyer is paying 1%, but in reality he's paying 3.5%.
 
doctorquant said:
Let's say that the prevailing (i.e., market) interest rate for a given borrower for a given term (let's say 36 months), down payment, etc., is 3.5%. Let's further say that the dealership is offering 1% financing for that same term length, down payment, etc.

Our hypothetical buyer takes the dealership up on its 1% offer and finances $10,000 for 36 months. The actual net present value of that string of payments, discounted at the proper market rate, is $9,626.65. The difference in the purchase price ($373.35) is the equivalent of prepaid interest, but that interest doesn't show up on the finance contract. The contract says our hypothetical buyer is paying 1%, but in reality he's paying 3.5%.
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1) You know I have to point this out. ... Cause I am me. :) There is maybe a prevailing interest rate, but I take issue with calling it a "market" rate, given that interest rates are being heavily administered, which keeps them from being actual market rates -- i.e. a product of price discovery.
2) In reality, there wouldn't even be a prevailing rate -- at least a single prevalaing rate -- because interest rates in an actual market are a function of risk: duration risk, default risk, call risk, etc. In an unskewed market, you could expect any single lending rate to reflect the specific risks of that specific loan. I might be offered my 3 year loan at 5 percent. You might get your 2 year loan at 7 percent.
3) I have no experience with this kind of financing, so I'll take your word for it. But unless they don't accept your downpayment as an actual payment -- and write it into a promissory note as something other than a payment -- how can it be prepaid interest? A downpayment is principal. Interest is interest. If the promissory note says that you are prepaying interest, not making a down payment, and you don't understand the terms of what you just agreed to, it's on you, right? And if they actually call it a down payment, and you agree to a down payment, isn't it fraud?
 
Ragu, you're quibbling over the fine print. Remember, sp is the guy who was paying 25-30 percent interest on the Neon.
 
Don't know about the rest of you all, but I am ready for some new boots stories.
 
The Big Ragu said:
1) You know I have to point this out. ... Cause I am me. :) There is maybe a prevailing interest rate, but I take issue with calling it a "market" rate, given that interest rates are being heavily administered, which keeps them from being actual market rates -- i.e. a product of price discovery.
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Right, but really not germane to the hypothetical, which was intended to illuminate what I might call "hidden" actual interest.

2) In reality, there wouldn't even be a prevailing rate -- at least a single prevalaing rate -- because interest rates in an actual market are a function of risk: duration risk, default risk, call risk, etc. In an unskewed market, you could expect any single lending rate to reflect the specific risks of that specific loan. I might be offered my 3 year loan at 5 percent. You might get your 2 year loan at 7 percent.
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Indeed, but I noted that reality in specifying "for a given borrower" ...

3) I have no experience with this kind of financing, so I'll take your word for it. But unless they don't accept your downpayment as an actual payment -- and write it into a promissory note as something other than a payment -- how can it be prepaid interest? A downpayment is principal. Interest is interest. If the promissory note says that you are prepaying interest, not making a down payment, and you don't understand the terms of what you just agreed to, it's on you, right? And if they actually call it a down payment, and you agree to a down payment, isn't it fraud?
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Probably to make it clearer, you can just think about it this way: Suppose the dealer is offering 0% financing at a sales price of $10,000. If you pay cash up front, though, I guaran-damn-tee you you can get that car for less than $10,000. However much extra you have to pay to get the 0% financing is in essence prepaid interest.

When you're talking about car-buying and car-financing, there are so many ways the "real" rate is hidden from the consumer it's not even funny. The contract may say 3% or 4%, but it would easily be the case that the effective rate is far higher than that.
 
I feel bad that we are ganging up on smallp.

Seems like the board at least should be able to provide him with a nasty legalish letter to the insurance company, a financial whiz to accompany him to the dealer, an in-dash espresso machine, a free pedicure and some of that good green stuff.
 
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JohnHammond said:
See a financial counselor. You're not helping your cause by lying to yourself.
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How am I lyiug to myself?
And how, exactly did someone arrive at the 29 percent number on the Neon?
What probably more likely is that I just took a wild guess at certain numbers because I couldn't tell you the exact number without looking it up and my guess was way off.
 
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Work in a cannery in Alaska. No need for a car, and your room and board is take care of.
 
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