Financing/Buying advice?

Byron Sexton

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Hello

I am wondering what to do first. here is the deal I am looking to buy a CTR soon, and i have a good down payment. I want to finance the rest

I was given advice to not give the dealer the down payment finance the whole car loan for instance $37,950 + TTT and fees from the dealer. Then give the down payment in a lump sum to whomever I finance with ie credit union apply it to the principle of the loan.

Is this the right thing to do?

Also when do i apply for financing? before i start the car search or after i get an offer from the dealer + my Down payment or not and i am interested in completing the deal?
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VarmintCong

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Hmm, not sure there's any difference between giving the down payment to the dealer or giving it to the credit union. I think more important is how much to put down, that depends on the interest rate imo. If it's 1.9% or less I'd probably put as little down as possible, no point tying up that cash in a car.
 

Zeffy94

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The downpayment reduces your monthly payment because the loan amount would be smaller as a result. Paying down principle would pay the loan off faster but you would have a higher payment still unless you refi'd.

I would get pre-approved for credit/financing before you negotiate. The dealers always want you to finance through them so if you have a decent rate they may give you a better rate if you go through them.
 

MaxPower

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The advice about the down payment is...odd. I can think of a couple scenarios in which it make sense to finance the entire cost of the car (spectacularly good interest rate, for example) but generally this seems like a bad idea. You'll be making considerably higher monthly payments until you're able to refinance. I just don't see the point. Who gave you this advice? Someone with a financial background?

I would get pre-approved for credit/financing before you negotiate. The dealers always want you to finance through them so if you have a decent rate they may give you a better rate if you go through them.
I agree with this completely. Always get pre-approved before walking into the dealer. For one thing, this minimizes surprises. The dealer may try to play games with the financing, claiming that you don't qualify for their best rates and then offering you a high-interest loan. But if you already have a pre-approval in hand, you can confidently tell them to take a hike. Also: dealers get kickbacks from their own financing company, so they might try to beat your pre-approved rate. Either way, you win.

tl;dr - a pre-approval doesn't commit you to anything, and it gives you additional options that could help in your negotiations.
 

Phy

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Get pre approved through your CU. I would put the down payment in first and finance the rest. It could help your credit score a bit to do it the other way, but I'd rather have the lower payments. Once you get pre approved you find the car, get the OTD price with vin# (bill of sale type thing?) then go back to the CU and get the actual loan.

The dealer may want some cash to hold the car for you, especially if they have to find it.

EDIT: you can also skip the pre approval if you aren't worried about the financing and go straight to getting the OTD price then getting the loan.
 

Shred

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Did the dealer give you that information about the down payment? When I was purchasing mine, I had a few issues because I was putting more down. I have a denial slip from a bank that reads, as I understand it, that the value of the loan was too low compared to the price of the vehicle. I have to re-read it, maybe I missed a word but it's water under the bridge at this point.

Dealers make money off the interest you pay, should you finance through Honda. The more you pay monthly, the higher that becomes which means more money in their pocket. I'm also guessing they will jack up the rates the less you are putting down. The down payment should be applied BEFORE the loan is established as unless I am missing something it won't bring your monthly payment down later on, simply reduce the number of payments you have to make. Unless you have the cash to buy the whole loan out afterwards you will be stuck with a larger monthly payment for the duration of the loan. Possibly this ends up being cheaper than putting down and then paying it off for the full say 60 month loan, but I doubt it and I'd rather have the lower monthly payment to start.
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