Car Loans, Applications, Finances, Approvals, Buying

While contemplating what  to write I thought of finance. Car loans to be exact.

 I enjoy teaching finance, and car buying gets complicated.  Recently I purchased a new-to-me vehicle.  Anyone can walk in, pick out a car and say I’ll take it.

Could, but shouldn’t.

Don’t get me wrong, the dealership love it. 

Don’t Get Played

I have wasted more money on cars than I care to admit.  The car I traded, I had for three years.  That is MORE than a record.

Opposite of that would be my husband. He traded in his Honda Ridgeline last year. He had that for nearly 9 years.

It’s worth noting, that was 5 years without a car payment. Isn’t that what we all want?

Cars are a losing game. There is NO OTHER way to spin it. They decrease in value no matter what you do to them.

However, since we all need one there are a few things you can do to save yourself thousands of dollars.

Leasing ~ Not Your Best Option

You should never lease a vehicle… unless you drive clients OR drive a TON of miles annually.

There is a HUGE trend in “car buying,” leasing. Why quotes?

Leasing is not buying.

Let that simmer for a minute. You aren’t purchasing anything. In fact the lease specifies when it must go back. A lease is a fancy word for renting.

A lease finances 50% of the vehicles value at whatever interest rate the dealership choses.

Effectively, as a customer, you are renting the vehicle.

The only way to own the vehicle is to purchase it from the dealer at the end of the lease. At that time you owe the dealership the remaining 50%.

 The 50% WILL BE more than the value of the vehicle. That is where the dealership gets you. If you give it back, you owe for every little thing that is wrong. To include too much mileage.

At that point your option is to pay it or lease another vehicle. This is a hamster wheel you will never get off.

This is what the mighty consumerism machine wants.

Why are Leases Popular??

Fantastic Question

By now you are probably wondering why leases are popular?

That’s easy.

Leasing allows someone to purchase a vehicle they cannot afford.

For example, a 2017 Chevy Camaro. According to Chevy, the Camaro starts out at 61 thousand. Financing at a conservative 5% interest rate, payments would be $1,059.00 monthly.

Take a look at a lease

  1. Total Lease Amount $32,500
  2. Monthly Payment (tax included) $762
  3. Security Deposit (A security deposit is not calculated into the loan or your monthly payment) $500

Bottom Line

Immediately, you can see a lease is only $762.00 per month. It cost less if the only thing taken into account are payments.

It may get you bragging about what a hot car you have, you will have to take another lease, or buy another car.


Get pre-approved. Dealerships want to finance the loan. They get kickbacks from the bank. The bank may offer 5% interest rate, but the dealer is going to offer 7-10%. 

Effectively they increased their profit by 2-5%. AND you pay more than you should.

It may not sound like a lot, but it is.

Compare a 30 thousand dollar vehicle with each interest rate.

Option 1: 30K loan, 60 months, 5%.  Payment: $610.00

Option 2: 30K loan, 60 months, 10%. Payment: $687.00

Immediately you see the higher rate is $77 to much. Over 60 months using basic math it equates to $2,310.00.

Always get pre-approved. Good credit? Shop around.

Get the Rate You Deserve

USAA give us a rate around 3.5%, which is good.

I purchased my car from Land Rover. They advised me I was required to use their financing. I told the dealership,

beat my rate or I’m walking out.”

I meant it. There is no question about that.

They looked at me crazy.  I WILL NOT pay higher interest because they want me to use their financing. 

The finance lady offered 2.4%. It’s a deal.

Yes, the dealership is making money. However, they saved Ron and I 1%. Sounds small. I know. Indulge me for a moment.

Option 1: 30K loan, 60 months, 3.5%. Payment: $588.00

Option 2: 30K loan, 60 months, 2.4%. Payment: $572.00

The change is not significant at first glance. But it is your money and you should keep it. 

Using basic math (not a loan calculator) $16.00 over the life of the loan would save $960.00.

If I offered a thousand dollars, would you say no?

The Correct Way to Shop for a Vehicle

Online, Computers, Pre shopping, Home

Now that we have the loan under control, let’s discuss car buying.

I bought a fancy car, but one I’ve wanted for over 10 years. We are the people dealerships hate. 

When you purchase a vehicle, know what you want. Do not let a sales person talk up a vehicle and have you drive home in something you hate. 

Don’t get caught up in the moment.

Utilize Kelly Blue Book, True Car and any other one online source.

Kelly Blue Book

Kelly Blue Book estimates trade in value. Be realistic regarding the condition. The dealer will hit low and hard. Know what you are in for.

Play the game. Yours will be junk, theirs pure gold. Go with a little leverage.

There is a HUGE difference between trade in and retail. A dealer gives trade in value. They are not concerned with retail value.

True Car

True Car provides an average value of the purchase vehicle.  Simply open the app, enter the year, make and model. It gives an average purchase price.

Don’t Get Comfy With The Saleman

While sitting at the dealership waiting for my interest rate update, the salesman hit me with the trade in value.

It was low.

We knew it would be, but this was lower than expect. I pulled those apps up in front of him.  He knew exactly what I was doing.

He stated,

people do it all the time.”

I pull up the trade in value and got more.  I also pulled up True Car to check their vehicle. It was on target for Dallas and that made me happy.

USAA Car Buying Service

If you are a member of USAA, utilize the car buying service.  We utilized it when we bought my Honda.  They tried to get shifty and charge us for “extras” but we weren’t having it. 

USAA Provides a guaranteed price. I had it. I held them to it.

True to myself, I  threatened to leave if they wouldn’t honor the guarantee with USAA.

Much to their distaste, they relented and gave the price on the paper.

Which brings me to my last point, never be afraid to walk out.

Cars are mass produced. Salesman try to say you will never find another one like it. 

It just isn’t true. 

There are few exceptions. My son-in-law’s Evo. He hunted for several months.  Fine.

A Honda anything, don’t be deceived.  The salesman wants a commission. I know I sound harsh, but no one will advocate for you. You must be prepared to do it yourself.

Final Thought

Utilizing these techniques changes what you can afford.

People ask me all the time, “how can I afford an expensive car?”

I have good job, but more importantly, I have a really low interest rate. When I worked at USAA I saw 28% interest rates from other banks.

Members kept saying, I liked the car so I bought it.

If you fall in this category comment below. I will make a post about refinancing.

For now let me compare and contrast the interest for you.

Option 1: 30K loan, 60 months, 2.4%  True Cost (principal & interest): $31,865.95

Option 2: 30K loan, 60 months, 28%. True Cost (principal & interest): $56,044.48

Option 2 costs $24,178.53 more. The interest rate on a loan is everything. For a quick comparison, try a tool like Bankrate!

This is also true with home loans and credit cards.

L’hitraot (See You Soon),


P.S. Don’t forget the insurance!

Car buying tips? Please share!!

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