Car Shopping/Financing

[Tina]

I'm going with a friend tomorrow to help her shop for a new car. She wants either a Toyota Rav4 or a Honda CRV. I think both are just slightly out of her price range with 5 year financing. Does anyone know anything about 6 year financing? Does the price have to be over a certain ceiling to get this? She can only afford a max of $350 per month. With her down payment, she would end up with a payment closer to $400 with a 5 year loan, but a 6 year would be much more manageable. Does anyone have any helpful info for us?

 

[Christine]

I'm going with a friend tomorrow to help her shop for a new car. She wants either a Toyota Rav4 or a Honda CRV. I think both are just slightly out of her price range with 5 year financing. Does anyone know anything about 6 year financing? Does the price have to be over a certain ceiling to get this? She can only afford a max of $350 per month. With her down payment, she would end up with a payment closer to $400 with a 5 year loan, but a 6 year would be much more manageable. Does anyone have any helpful info for us?

I don't think there is any ceiling on it. They offer it, I know that. The only drawback is that her interest rate will probably higher on that loan (maybe a 1/2 percent or something like that). Just have them run the numbers for her while she's there. She may find that it only saves her $30 a month or something like that. I believe in getting the shortest loan possible, but I understand if you cannot afford it. I'm always getting 5 year loans and I *hate* it. At least she is doing it on a Honda or a Toyota so her car will most likely "live" past the length of the loan. It's sad when people's cars die before the loan does.

 

[stinkerbelle]

I dunno if this is plausible...but what about taking the 4 or 5 year loan offered through the dealership financing...then getting another, better/longer loan through the bank?

(fyi - love my Rav4! I have the old style...not the new/bigger 06 version)

 

[caitycaity]

i would never do 6 year financing. heck, i'm uncomfortable with 5 year financing. jmho.

 

[Tina]

She's a single mom on a tight budget, so a $30 savings is a lot to her. I'm not even sure what sort of rate the dealership is offering right now. There are no promotions currently running on either vehicle. I think I'll start making some phone calls to banks and the dealership and see what I can find out. I'm pushing her toward the Rav4 because I just LLLOOOVVVEEE my 2004 Rav4 -- but now I want the new big one! If she gets one, than at least I can have fun riding in hers!!

 

[Tina]

She's a single mom on a tight budget, so a $30 savings is a lot to her. I'm not even sure what sort of rate the dealership is offering right now. There are no promotions currently running on either vehicle. I think I'll start making some phone calls to banks and the dealership and see what I can find out. I'm pushing her toward the Rav4 because I just LLLOOOVVVEEE my 2004 Rav4 -- but now I want the new big one! If she gets one, than at least I can have fun riding in hers!!

 

[mickman1962]

I'm sure it's not what she wants to hear, but if it were my friend I would try and convince her to buy something she could afford with a 4 year loan, 5 at the most.

 

[GoofyDad869]

How long before she wants to trade? If she'll keep it for 6 years, go for it. If not, especially if she'll trade in 2 or 3 years, she'd probably still be too far upside-down on financing.

 

[Tina]

She intends to keep the car for a very long time. Also, Toyota's hold their value pretty long as well. She looked at used Rav4's already and they weren't much cheaper than buying a new one.

 

[ead79]

I'm not sure about 6 year financing details, but she is much more likely to get a better rate at the dealership than at a bank. When I bought my Honda CRV (which I LOVE), the dealership financed it through American Honda Finance Corp. at a very competitive interest rate (4.9%--much better than a bank's offerings around here). The rate might be higher on a 6 year finance than a 5 however. Be sure she plans to keep the car for a long time though since she is likely to be upside down with the financing. Also, I'm not sure she'll be able to get a payment of around $350 on a CRV, even with a 6 year loan. My payment on the middle of the line CRV (financed at 4.9% for 5 years) is around $430/month.

 

[Tina]

I've already priced the Rav4 out at approx $21500 (Base model, 2WD, few upgrades) to include tax and tags. She's putting $1,000 down. A 5 year loan puts her near $400. 6 years puts her closer to $350.

 

[puffkin]

Did she double check her car insurance rates. What will they go up with this car? That could also influence her purchase and monthly payment she can afford.

 

[Lynn CC]

Does she belong to a credit union? If she does she can see what they are offering. Have her check her bank too, and apply for the best rate she can get outside the dealership. If she knows what she can get elsewhere, a lot of dealerships will MATCH the exact rate for you.
It pays to shop around, sometimes you can save over a % which is a lot over time!

 

[janette]

You have to be careful to shop for the car and financing separately. Don't let the dealership give you the price only in a monthly payment. You want to know the price you are getting the car for. Here's an article that touches on this subject Cheap Car Financing

Use the internet to shop for the car and financing to give you an idea of what prices and rates are available. http://www.edmunds.com/ has the prices and options available for all vehicles.

Maybe by using careful shopping for the best price on the car and the best financing she'll be able to get an affordable 5yr payment.

 

[ahutton]

Don't know if this will help or not, but maybe check into Capital One Auto Finance? You can do your paperwork online, and go to the dealer like a cash buyer. Way less likely to be taken advantage of and a very strong negotiating position. It was super easy too! We did it a year and a half ago and I'm very happy with the service and the rate.

 

[Toby'sFriend]

How long before she wants to trade? If she'll keep it for 6 years, go for it. If not, especially if she'll trade in 2 or 3 years, she'd probably still be too far upside-down on financing.
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Exactly. So she is a single Mom on a tight budget where another $30 a month means she can't afford the payments on this car.

So what will she do 15 months into the loan when she gets laid off from her job or she gets hurt and is on disability? She'll be stuck with an almost $400 a month car payment for a car that is worth probably $3,000 less than what she owes on it. Being a Single Mom, her risk of this is high because she doesn't have a 2nd wage earner in the house to back her up.

I don't know anything about 6 year financing other than to tell you pure Math says if she has to finance for 6 years, she most likely can't afford the car.

 

[can'twait]

Can she wait a few months and save up more towards the downpayment? A larger downpayment will make a big difference in the balance that has to be financed, and therefore the monthly payment. And she might be able to get an "end of model year" deal. I bought my Camry at the "used" Toyota shop for $3k less than the same model brand new across the street because it was a car used by the dealer for test drives. It was not abused by a previous owner, which is what scared me about used cars, it was just not brand spanking new, which didn't bother me. I did finance it for 5 years but hope to drive it for at least 10. I agree, used Toyotas hold their value and are not much less expensive than a brand new one, which is why we were going to buy a brand spanking new one until we looked at the "used" ones across the street.