Paying for a new car

[ERD50]

I thought rebate for cash or the 2.9 loan..and no rebate for 0 ...

Yes, I put the question mark in, I'm really not sure. Looking back, I think you are right, but I guess if I got a $1500 rebate for paying cash, I'd call it an $18,500 car?

So it's (?):

$18,500 cash

$18,500 with a 2.9% 5 year loan

and

$18,500 plus $1,500 in 'points' (using mortgage terms) for a 0% 5 year loan?
or could say:
$20,000 for a 0% 5 year loan?

Maybe OP can confirm.

-ERD50

 

[BrianB]

Thanks everyone for the helpful comments. What we're looking at is a Kia Soul Plus.

We have concluded that the $1500 rebate is better than the 0% loan rate, and we can put down about 20% or $3500 then take the dealer financing for the balance. Payment will be under $300 and we will try to fit it into our budget.

If we need more non-taxable spending money we will sell from our after-tax account. We can rebuild that in the future, but we can't contribute to our Roth accounts other than conversions.

We hopped into our (other) car & went to dealer #1, just 10 miles away. Price on exactly what we wanted $19600 total out-the-door.

Dealer #2 (30 miles away, in the opposite direction), has the identical vehicle same colors & options for $18200 total out-the-door.

We will tell the closer dealer what the other quoted, but I'm not counting on them being able to match it.

I don't understand the reason for the difference, but $1400 seems to make it worth the longer drive!

 

[Dash man]

Thanks everyone for the helpful comments. What we're looking at is a Kia Soul Plus.

We have concluded that the $1500 rebate is better than the 0% loan rate, and we can put down about 20% or $3500 then take the dealer financing for the balance. Payment will be under $300 and we will try to fit it into our budget.

If we need more non-taxable spending money we will sell from our after-tax account. We can rebuild that in the future, but we can't contribute to our Roth accounts other than conversions.

We hopped into our (other) car & went to dealer #1, just 10 miles away. Price on exactly what we wanted $19600 total out-the-door.

Dealer #2 (30 miles away, in the opposite direction), has the identical vehicle same colors & options for $18200 total out-the-door.

We will tell the closer dealer what the other quoted, but I'm not counting on them being able to match it.

I don't understand the reason for the difference, but $1400 seems to make it worth the longer drive!

You should be able to negotiate about $2150 off the MSRP price on a Kia Soul.

 

[Bamaman]

When buying a car, cash is king. The 0% financing deals are just a scam to sell you a car at higher prices. You can get much better deals if you research what others are paying for all cash deals and pre-negotiate a price with the dealers internet sales person. It costs dealers money to carry inventory and they have monthly sales objectives to meet. Granted they don't like all cash buyers, but they sometimes need them to meet their objectives.

It sounds reasonable that if the low or zero APR program is not taken, the dealer could sell the car cheaper because he is taking a cash incentive in lieu of the low/zero financing. But that is not always the case. Sometimes yes, sometimes no. When I got my 2018 Camry, it was 1.9% or nothing.

You are right that it costs dealers every day to have a car sitting on their.lot in the form of wholesale floor plan interest and insurance charges. But the manufacturer usually pays the interest for the first 45 days--credited back to their Parts account. Fast inventory turnover is required to minimize wholesale interest expenses. If a dealer is aggressive on retail pricing, he can move'em fast and pretty much avoid interest in the cars sitting there. It is like walking a tightrope.

One trick is finding that dealer wanting to compete for my business by being a high inventory turnover operation. Every retail market usually has such a dealer, and that is who I do business with.

 

[BrianB]

You should be able to negotiate about $2150 off the MSRP price on a Kia Soul.

In rounded numbers:

MSRP = $20400 (plus $895 "destination"?) per kia.com

Best dealer price = $16900 (plus $1300 tax / license / document fees = $18200)

So we're getting $3500 off MSRP. Looks like a decent deal!

 

[Freedom56]

It sounds reasonable that if the low or zero APR program is not taken, the dealer could sell the car cheaper because he is taking a cash incentive in lieu of the low/zero financing. But that is not always the case. Sometimes yes, sometimes no. When I got my 2018 Camry, it was 1.9% or nothing.

You are right that it costs dealers every day to have a car sitting on their.lot in the form of wholesale floor plan interest and insurance charges. But the manufacturer usually pays the interest for the first 45 days--credited back to their Parts account. Fast inventory turnover is required to minimize wholesale interest expenses. If a dealer is aggressive on retail pricing, he can move'em fast and pretty much avoid interest in the cars sitting there. It is like walking a tightrope.

One trick is finding that dealer wanting to compete for my business by being a high inventory turnover operation. Every retail market usually has such a dealer, and that is who I do business with.

California is a pretty competitive market especially in the Los Angeles area. There are a lot of auto forums that pass around cash prices paid for cars and who has inventory and is willing to deal. A lot of engineers who work in technology loathe the idea of borrowing money to buy a car. For example, when I was shopping for a car I contacted the internet sales person at Autonation Honda. I was looking for a Honda Accord EXL V6. The MSRP out the door at the time was $29,998 plus tax. The person told me that they could take $2200 off the price for a cash deal. It was February and I was in no rush to buy so I told her to contact me when they wanted to deal. Later in the year ( end of November), one of our engineers where I worked informed me that Autonation Honda dealers in San Jose, CA were selling Accord EXL V6 models for $23,800 cash plus tax. I contacted our local Autonation Honda and asked if they could match the San Jose dealer pricing. They did even better. My out the door price including sales tax was $25,557 (sales tax is 9.25% in our area) plus they threw in 12 free oil changes and tire rotations but I had to buy it before the end of the month. They had 18 in inventory so I got the exterior and interior color I wanted at a great price. I also got a similar deal when buying my wife her Nissan 370Z in April a few years ago. If a dealer wants to move inventory, they will.

 

[Dawg52]

One trick is finding that dealer wanting to compete for my business by being a high inventory turnover operation. Every retail market usually has such a dealer, and that is who I do business with.

In the past I seemed to get good deals from dealers in smallish towns nearby. That hasn't been the case on my last couple of purchases. A good friend of mind works at one and he wouldn't budge much at all off sticker. He must be selling to someone tho. I moved on. So yes.....higher inventory operations appears to be the way to go.

 

[pjigar]

I would pick 2.9%, 5 year loan. Two reasons:
1. I expect my portfolio return to beat 2.9%
2. Tax efficiency

You just have to break the mental barrier of higher monthly expense. Keep an eye on the big picture which is total (after-tax) return on the portfolio.

 

[Gotadimple]

In rounded numbers:

MSRP = $20400 (plus $895 "destination"?) per kia.com

Best dealer price = $16900 (plus $1300 tax / license / document fees = $18200)

So we're getting $3500 off MSRP. Looks like a decent deal!

That's good. As Bamaman said, it depends on the dealer.


I did use dealer competition to get a better price on a car closer to me. The closer dealer offered their internet price plus tax/license/document fee. The dealer 10 miles further away had the same car (different color, equipped exactly the same for $270 less). There were only 4 cars in this area with the exact same trim level - new 2017 models. 3 of them on the closer dealer lot, who is also the volume dealer in the state.


I asked for $500 reduction on the internet price and got it. I also mentioned all cash and a final check within 6 days of signing the purchase agreement.


- Rita

 

[albundyz]

I have a similar need with a completely different solution. In 2 years, we will need to replace our current car. IMO, cash flow is king. The difference between the value of our used car and the new car is about $15,000. So, I plan to get a HELOC for $15K for 20 years. Monthly payment at 6% is $107/month. so, I get a new car for $107 a month. Yeah, I know your response, but I'm getting 7 years of cash flow benefit. (figure the car to last 7 years) I'll be in a different situation in 7 years.

 

[BrianB]

OP here. We went with the dealer 30 miles away and got the car (Kia Soul Plus) for a final price of $18266 including tax, license, and document fee. Sticker price on the window was $21450.

We went with a 72 month loan to have the lowest required monthly payment, and I estimate if we can put $500 extra per month it will be paid in under two years. (My fear-of-debt showing again!)

Thanks everyone for the comments & advice.

 

[ERD50]

OP here. We went with the dealer 30 miles away and got the car (Kia Soul Plus) for a final price of $18266 including tax, license, and document fee. Sticker price on the window was $21450.

We went with a 72 month loan to have the lowest required monthly payment, and I estimate if we can put $500 extra per month it will be paid in under two years. (My fear-of-debt showing again!)

Thanks everyone for the comments & advice.

What was the loan rate? - ERD50

 

[rayvt]

When buying a car, cash is king. .... You can get much better deals if you research what others are paying for all cash deals ...

You again?

Cash may be king in some situations, but it isn't when buying a car from a dealer. The dealer gets his money whether you write a check or sign a car loan. In fact, if you finance the car through a credit union, he literally gets a check, just written by the CU instead of you.

Every time we've bought a car, the price gets negotiated FIRST, and only then does the "how will you pay?" enters the picture.