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New Car Loan PenFed or Dealer
Old 08-04-2015, 12:21 PM   #1
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New Car Loan PenFed or Dealer

This is my first new car purchase, first car dealership purchase too. I am looking at the Subaru Crosstrek and seeing what financing and offers are available. I am wanting to be more educated before talking numbers with any dealer. So I've gotten pre-approved for a PenFed new car loan and now gotta decide dealer vs credit union.

-PenFed 48 months @ 1.49%.
-Subaru 48 months @ 1.49%.

So, which is better? Maybe the the PenFed is better because I wont have to deal with as many people at the dealership and be pressured to buy more add-ons. Or maybe the Subaru financing is better because the dealer will be able to discount the car more and make money on the financing.

Whats your thoughts on this?
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Old 08-04-2015, 12:37 PM   #2
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Originally Posted by StikyBoots View Post
This is my first new car purchase, first car dealership purchase too. I am looking at the Subaru Crosstrek and seeing what financing and offers are available. I am wanting to be more educated before talking numbers with any dealer. So I've gotten pre-approved for a PenFed new car loan and now gotta decide dealer vs credit union.

-PenFed 48 months @ 1.49%.
-Subaru 48 months @ 1.49%.

So, which is better? Maybe the the PenFed is better because I wont have to deal with as many people at the dealership and be pressured to buy more add-ons. Or maybe the Subaru financing is better because the dealer will be able to discount the car more and make money on the financing.

Whats your thoughts on this?
Dealers would rather you take their financing as they get a cut of it. It won't matter on the add ons, they try to sucker in all participants!
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Old 08-04-2015, 01:48 PM   #3
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Any 1.49% special APR rate you get from a Subaru dealership is going to be subvened by the dealer. Ask the dealer if you get your own money, will the price of the car be lower--since they're not buying down the interest rate. This is a program in some retail markets--not everywhere in the U.S. At least get your own money and demand they wave any Documentary Fees that are just a straight profit/rip off.
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Old 08-04-2015, 02:17 PM   #4
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I always negotiate the price of the car first without any discussion of financing. I do research what the financing options are, but typically pay cash for the car. The exception is when they offer something to finance the car with them above and beyond what was negotiated in the price. On our last purchase they offered to make the first two car payments if we used their financing with a rate of 0.9%. we took their offer and as soon as we saw the first two payments made by them (which were done at the same time about a week after the purchase) we paid off the balance.
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Old 08-05-2015, 07:34 PM   #5
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Check to see if you have to pay for life insurance (to cover the amount of the loan) with either the dealer or PenFed. One CU I've dealt with includes the insurance for free. That may save a few bucks.


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Old 08-05-2015, 07:59 PM   #6
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Also be aware that Subaru Financial is actually Chase, so if you don't like dealing with a large bank like Chase you might want to use PenFed.
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Old 08-06-2015, 06:18 AM   #7
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We just bought a new Crosstrek for my wife last November. She LOVES it. After negotiating the cash price of the car as low as they would possibly go, I suggested that we might be interested in financing at the dealership through Subaru if they could go even lower on price. They did, so we financed through them and I paid it off shortly thereafter. No hassle and it was very easy to pay it off when we wanted to. The financing was actually convenient in this case since it bridged the gap between when we bought it and when I received my bonus from MegaCorp.

They offered life insurance with the financing which I politely declined. Also, know the amount you want to finance, the interest rate you will be paying and the corresponding monthly payment given the years financed before you go in. That way you know if they try to add anything else into the payment. The young finance lad at the dealership never saw anyone calculate a monthly payment with a formula and a calculator before. He though the numbers just magically appeared on the computer screen.

PenFed was a major PITA when I tried to mortgage a house with them. In that case, I just paid cash for the house since PenFed was absolutely horrible to deal with. I imagine financing a car would be much easier.
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Old 08-06-2015, 07:44 AM   #8
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I'd go with the dealer since you'll save a lot of time and the hassle. Actually, my credit Union worked harder to sell me added cost items like life insurance, an extended service contract etc. than the dealer did. And, you can pay it off....no hassle.....not sure about PenFed. Either way you won't lose much.....why be hassled by both? Just know what you want to buy and say no to everything else.
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Old 08-08-2015, 02:45 PM   #9
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We got a 5-year extended warrantee from Penfed for very cheap when we financed our car with them. The car was a 3-year old BMW Z4 convertible, and I was afraid that any necessary dealer repairs are going to be rather expensive.

The dealer tried to get us to buy extended warrantee from him, which was 2 times the cost of the Penfed policy, plus it had a per-claim deductible, which the Penfed one had no dedictible.
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Old 08-09-2015, 09:06 AM   #10
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We got a 5-year extended warrantee from Penfed for very cheap when we financed our car with them. The car was a 3-year old BMW Z4 convertible, and I was afraid that any necessary dealer repairs are going to be rather expensive.

The dealer tried to get us to buy extended warrantee from him, which was 2 times the cost of the Penfed policy, plus it had a per-claim deductible, which the Penfed one had no dedictible.
BUT, wait until you need to use it. BMW generally pushes the dealer to sell a BMW backed factory warranty extention compared to a Penfed extended service contract.......I would bet, I could be wrong, that the Penfed service contract covers far fewer items. When you're buying a warranty extention you need to compare coverage as well as price.
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Old 08-09-2015, 09:51 AM   #11
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^^^^ These are not "warranty extensions" but unscheduled repair contracts.

These will not cover typical "wear items" such as brake pads and rotors, ignition parts, filters, fluids, tires, etc. Most of these contracts come with strict rules and deductibles. Keep in mind one must be able to show strict adherence to the factory maintenance schedule if making a claim for an unscheduled repair. Better know your maintenance schedule items and keep all receipts.
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Old 08-09-2015, 10:01 AM   #12
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Thanks for all the info and things to think about!

Good to hear that so many people love the Crosstrek! I drove one with a manual transmission a couple days ago. It felt underpowered to me, but I wasn't working the gears like I should have and I want to tow a 3000-3500 lb camper with it. (UK ratings give it 3500 towing capacity, US is 1500) So I'm hoping to find a Forester with a manual to test drive!

I think I'm tell the dealership I'm financing it through a bank, then during the negotiations offer to finance it through them for an additional cost reduction. If their getting kickbacks I might be able to save a little on my purchase price. If I use Penfed car buying I get a discounted rate of 0.99%. I they use Truecar.

I had not considered the life insurance costs, as a single person with no dependants I'm not sure I don't think anyone NEEDS the vehicle if I'm gone or would like it for that matter.

Some Subaru dealers offer an extended warranty with all new car purchases. I'll have to look into each warranty offered by the dealers and try to compare them and ascribed a value to them. One that I do not like is the free tires and batteries for life if you do all services through that dealer, I intend on continuing to do my own service. I'm not sure how well extended warranties work when the owner performs their own maintenance, it seems like it could give the dealer or warranty company an easy excuse to bill the customer.

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Old 08-09-2015, 10:10 AM   #13
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The Magnuson–Moss Act protects individuals who do their own maintenance on cars while the car is covered under the manufacturer's warranty. I'm not sure if the Act has any coverage if you are dealing with a third party repair contract (aka, "extended warranty, dealer or otherwise").

I suggest you review this summary of the act:

https://en.wikipedia.org/wiki/Magnus...s_Warranty_Act
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Old 08-09-2015, 10:11 AM   #14
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^^^^ These are not "warranty extensions" but unscheduled repair contracts.

These will not cover typical "wear items" such as brake pads and rotors, ignition parts, filters, fluids, tires, etc. Most of these contracts come with strict rules and deductibles. Keep in mind one must be able to show strict adherence to the factory maintenance schedule if making a claim for an unscheduled repair. Better know your maintenance schedule items and keep all receipts.
And leave out the part about towing a 3000 lb camper!

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Old 08-09-2015, 10:12 AM   #15
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And leave out the part about towing a 3000 lb camper!

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Good thinking!
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Old 08-09-2015, 12:36 PM   #16
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1.49% vs 1.49% looks to me like you have an excellent bargaining chip. Why not approach each entity and let the bidding begin?
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Old 08-09-2015, 11:49 PM   #17
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BUT, wait until you need to use it. BMW generally pushes the dealer to sell a BMW backed factory warranty extention compared to a Penfed extended service contract.......I would bet, I could be wrong, that the Penfed service contract covers far fewer items. When you're buying a warranty extention you need to compare coverage as well as price.
I worked for a major automobile manufacturer's captive finance company for 24 years, and I was the one to approve outside warranty companies. I strongly suggest only purchasing an Extended Service Plan (ESP) from a dealer that uses the manufacturer's program. They have vested interests in keeping you as a happy customer, and you won't worry that the ESP company will go out of business. Your car will be fixed right.

Outside ESP companies must be bonded and insured by a highly rated insurance company in order for it to be worth the paper the policy is printed on. Many ESP companies are not well capitalized, and uninsured. That may include dealer owned ESP companies of major national auto dealer groups. You simply don't want to do business with them.
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Old 08-10-2015, 08:29 AM   #18
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I actually looked at both warrantee contracts. Neither was from the manufacturer, they were both 3rd party. The one from Penfed had better coverage.
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Old 08-10-2015, 10:48 AM   #19
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Neither from BMW? Frankly, I wouldn't buy either one of them. I'm VERY surprised a BMW dealer would sell you anything but a BMW backed service contract.
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Old 08-11-2015, 06:30 AM   #20
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It wasn't a BMW dealer. The only BMW dealer is 50 miles away in the Big City.

The local Toyota (/Honda/Cadillac/Nissan/etc., etc., etc.) dealer would wholesale buy cars from lease companies that were coming off a 3-year lease. Sweet deal for them, they'd get them cheap and sell them for a very good price. First thing they showed you when you sat down was the Carfax sheet, and very little room for negotiating price.

I think they tried to make their money on the extended warrantees and the financing.
And the service department. I was recently in for some recall work on the Rav4, and they tried to tell me it was time for a brake system flush, battery service (on a 6-month old battery??), and a fuel system service, totaling around $400. Pretty good profit for $2 worth of brake fluid, wiping off the battery, and changing the $5 gas-line filter. While waiting, I overheard them (quietly) telling every customer in the waiting room the exact same thing.
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