Getting your own financing on a car loan?

[bettymae1121]

My one and only car purchase was in '98 and I financed through the dealership, so I have no idea how this all works!

My '98 car will likey have to be replaced in the next 2-3 years (I think sooner, DH thinks he can keep it running, we'll see). Just to get a feel for what kind of used cars are in our budget and what auto rates look like, yesterday I looked at some used cars online and checked my bank (Chase) for loan rates. I just want to see what the payments will look like.

Anyway, my question is...if I get my own financing rather than going through the dealer...how does that work exactly? Do I go to the bank, apply for the loan for the amount I think I'll need, then go car shopping, pick out a car, get the exactly loan amount, and then go back to the bank to close the loan and get the check to give to the dealer? Or do I go car shopping first, pick out a car and put it on "hold", get the exact loan amount I need for it, and then go apply for the loan?

It seems to me getting approved the the loan first is the way to go, but like I said, I'm clueless! I just want to do all the research I need ahead of time so I know exactly what to do if/when my '98 dies on us and we need to go car shopping in a hurry. Hopefully it won't die and when we are ready to replace it, we can do it on our own schedule, but I want a plan of attack if it doesn't work out that way.

 

[ConnieB]

Many banks will let you apply online...and can approve you in minutes. Then they'll provide a letter for you to print and show the dealer (AFTER you have negotiated the price of course). It shows that you were approved for X amount and gives instructions for the dealer to get paid directly from the bank.


But...I have another suggestion. You say that your car is working now but you feel it will need to be replaced in 2-3 years. Why not start making those loan payments now......but to YOU. Open up an interest bearing account (I suggest ING.com's orange account). Then every month make a deposit as though you were paying an actual loan. Be ruthless and don't allow yourself to skip a payment. Period. Put any extra money into that account too, even little amounts like the $3 rebate etc. We put our pocket change into a bucket and when it's full we deposit. You'll be AMAZED how quickly this adds up!

Then....in 2 years when it's time to purchase that next car...you may find that you have enough to pay cash or to be able to buy a nicer car because you have savings set aside for it.

At first this "loan" payment may seem difficult, but stick with it and you are likely to find you are able to adjust your expenses to afford it. Just like you'll have to do in a couple years, right. In 2 years when you buy that car for cash you're going to be so happy that you aren't paying interest! But don't stop there, because you know THAT car will eventually need to be replaced, so keep up the "loan" payment to yourself and the next time you need a car, you'll again have cash.

The amount of interest you will save is HUGE.

 

[holycow]

Do you have a credit union? They are really the way to go. So helpful and usually great rates.

They will help you through the whole process. Go in and get approved. Go buy your car and let them know who you are going through.

We've also purchased a car through the dealership THEN went to the credit union (we have had an account with them for years).

Good luck!

 

[Darcy03231]

Many banks will let you apply online...and can approve you in minutes. Then they'll provide a letter for you to print and show the dealer (AFTER you have negotiated the price of course). It shows that you were approved for X amount and gives instructions for the dealer to get paid directly from the bank.


But...I have another suggestion. You say that your car is working now but you feel it will need to be replaced in 2-3 years. Why not start making those loan payments now......but to YOU. Open up an interest bearing account (I suggest ING.com's orange account). Then every month make a deposit as though you were paying an actual loan. Be ruthless and don't allow yourself to skip a payment. Period. Put any extra money into that account too, even little amounts like the $3 rebate etc. We put our pocket change into a bucket and when it's full we deposit. You'll be AMAZED how quickly this adds up!

Then....in 2 years when it's time to purchase that next car...you may find that you have enough to pay cash or to be able to buy a nicer car because you have savings set aside for it.

At first this "loan" payment may seem difficult, but stick with it and you are likely to find you are able to adjust your expenses to afford it. Just like you'll have to do in a couple years, right. In 2 years when you buy that car for cash you're going to be so happy that you aren't paying interest! But don't stop there, because you know THAT car will eventually need to be replaced, so keep up the "loan" payment to yourself and the next time you need a car, you'll again have cash.

The amount of interest you will save is HUGE.

I agree! Once I paid my car off I continued to make those monthly payments into a separate "car" savings account. When the time came for me to replace it (last summer), I was able to take advantage of the Cash for Clunkers program and buy a brand new car for cash! It was a great feeling and I still didn't use all the cash I saved. I continue to keep making that payment into savings so I'll never have a car payment again.

 

[bettymae1121]

We're in the process of debt paydown and savings building. The goal is to have the CC's paid off and then save up enough for either a large downpayment or enough to buy an inexpensive (but still sound) used car with cash. But since I don't know for sure if the car is going to last long enough for all of that to happen, I wanted to find out how car financing worked when you do it yourself vs. going through the dealership.

I don't want a loan if I can avoid it, but my car may die before we can get our finances to where we want them, so I'm doing some reasearch in advance, just incase. Fore warned is fore armed, as they say!

 

[spiceycat]

Do you have a credit union? They are really the way to go. So helpful and usually great rates.

They will help you through the whole process. Go in and get approved. Go buy your car and let them know who you are going through.

I agree completely.

the credit union will definitely get you a better interest rate and most of the time they don't charge you for paying the loan off early.

 

[tlbwriter]

When I bought my last car, I went through Capital One's auto loan program. You apply online for an amount "up to" the maximum you want to spend, and they send you a blank check. Then you take that check to the dealership, buy your car, and the amount of the check is the amount of your loan. It was very easy and at the time their rates matched my credit union.

 

[msmama]

I agree with a Credit Union if you can swing it.

When I bought my car, I shopped around and found the car I wanted (with the stuff I wanted), called the CU and they actually called around and found me the best deal (and then sent me a check).

That way, when I walked into the dealer, I had the check and didn't have to do ANY haggling.

I would imagine more banks have this, too if you did some checking.

I also know Costco has some car buying deal though I've never researched it.

 

[bumbershoot]

You say that your car is working now but you feel it will need to be replaced in 2-3 years. Why not start making those loan payments now......but to YOU. Open up an interest bearing account (I suggest ING.com's orange account). Then every month make a deposit as though you were paying an actual loan. Be ruthless and don't allow yourself to skip a payment. Period. Put any extra money into that account too, even little amounts like the $3 rebate etc. We put our pocket change into a bucket and when it's full we deposit. You'll be AMAZED how quickly this adds up!

Then....in 2 years when it's time to purchase that next car...you may find that you have enough to pay cash or to be able to buy a nicer car because you have savings set aside for it.

At first this "loan" payment may seem difficult, but stick with it and you are likely to find you are able to adjust your expenses to afford it. Just like you'll have to do in a couple years, right. In 2 years when you buy that car for cash you're going to be so happy that you aren't paying interest! But don't stop there, because you know THAT car will eventually need to be replaced, so keep up the "loan" payment to yourself and the next time you need a car, you'll again have cash.

The amount of interest you will save is HUGE.

I agree with all of this.

OP since you're paying off your other debt it does complicate things, but I can't help but think that you should think about doing the above, even if it's not as much as it would be.

the credit union will definitely get you a better interest rate and most of the time they don't charge you for paying the loan off early.

FWIW, neither does Chase.

Had a car loan through them with an interest rate that bordered on usury, but even with 20.25% interest (b/c hubby had zero credit, nothing good, nothing bad, just flat out NOTHING in his name) they didn't care when we started paying it off quickly. As long as I never did a same-day payment ($10 fee for that), it wasn't a problem to pay it down early. Finished it up in 35 months (1st 2 years paid "normally", last 11 months we were intense about it) when the loan was for over 5 years.

But from what I've read, credit unions are better with interest.

 

[LIFERBABE]

I got a preapproval check from our credit union. It was up to a certain amount. I could fill it in and sign it.
Took the check to the dealership and GMAC (Ally) was offering an additional $1000 off if we used their financing. Let them run the numbers and they gave us a lower rate than what the credit union had approved us for, so we went with GMAC.

We made 1 payment to GMAC and my credit union offered an even lower rate and since our vehicle is still considered new, I am refinancing with our credit union. No penalty for paying off early with GMAC and we keep all our incentives.

We used USAA car buying service to price our vehicle and we received $750 off for being USAA members.

In all we received almost $9000 in incentives and the vehicle is worth $3k more than what we purchased it for.

 

[JENOS]

I also agree with capital one auto finance. Depending on your credit they might have you summit pay stubs and other proof of identity. They have really good rates (beginning of the year I was approved at 2.54% for a 2009 Tahoe) but they older the car the higher the rates . The process is as follows;

1)You summit your application
2)If approved they will send you a blank check
3)Take the check to a reputable dealer (no mom and pop corner dealerships and no private party) and buy the car you want.

takes about a week total from start to check in hand

It is my second time around using them and have not had any problems, but when I did research on them people complained how quick they were to call you for being one day late.

 

[tlbwriter]

It is my second time around using them and have not had any problems, but when I did research on them people complained how quick they were to call you for being one day late.

I got a discounted rate for having automated payments. I'm leery of those in general, due to things that have happened, but I didn't have any issues with Capital One.

 

[bettymae1121]

I like CapOne's blank check deal, but they've got a much higher rate than Chase at the moment (5% vs 2.8%). Of course that's right now, could be different if/when I'm ready to shop for loans.

Anyway, thanks for all the advice. Sounds like it will work like I thought it would, apply for the loan in the amount I think I'll need, then once I have a car I go back to the bank and close it with the final numbers.

Hopefully we won't need a loan at all, I just wanted to get a feel for things so we'd be prepared if it's needed. Thanks again!