No big deal - the dealer wanted me to get a loan when I bought a new car six years ago. I figured they must get some incentive from originating a loan. There's no prepayment penalty so just pay it off. However my rate was so low that I had no reason to accelerate the payoff.
But auto loans (like most loans) usually have origination fees and other amounts lumped into the loan. So by taking a loan and paying it off you are immediately paying a premium on the cash value of the loan.
My most recent auto loan had no origination or other fees. If you finance through the manufacturer's captive lender then they often don't charge any such fees.
Just because it's not a line item doesn't mean it's not there.
It's just baked into the negotiated price.
Of course despite the past jokes about "hands are tied" re the sale price of new cars, the manufacturers actually do have relatively rigid controls today on dealers lowering allowable sales price. (But not raising, which has turned into an interesting situation.)
In reality, it just means you need to be trading in something to negotiate against any of that baked in finance cost, since trade-in amount is the one thing manufacturers can't really influence.
Which isn't to say that captive/manufacturer financing isn't often cheaper. It's just that the actual cost of financing isn't as transparent as claiming "no fees".
(You see this in gimmicks like having "no/low cost" financing, but at the expense of foregoing "cash back", which even in today's market is often upwards of $3k-5k.)
Nope. I negotiated the purchase price and trade-in value before discussing financing. Nothing was baked in. And there was no manufacturer "cash back" offer on the vehicle I bought.
There's an entirely separate system of dealer approved discounts that customers never see.
Regardless, you aren't getting a few lunch. It just means your negotiated price had the margins to absorb whatever financing they ended up offering.
And the manufacturers are directly and indirectly controlling those margins based on complying with their approved discounts, whether advertised or unpublished.
They even have a discount type for sales to immediate family, that applies to any car that doesn't keep dealer plates and dealer insurance.
At least where I live in the United States, the base out-the-door price is generally negotiated _before_ you indicate if you will be paying in cash or via financing. I've never seen an origination fee on an auto loan here.
(Assuming you're not paying cash) Unless you've also negotiated your APR with your sales price, thats where it usually shows up. The rate is just recalculated to make the fee included. For "no penalty" payoffs, it generally has fine print saying you can't sell before some minimum period of ownership.
Which is why it's a good idea to have backup financing pre-arranged and approved with a credit union. That gives you leverage to negotiate financing even with a settled cash price.
Either that, or their margin on the vehicle at your negotiated price is big enough that it doesn't make much difference to them.
I have multiple years of experience in auto sales and I’m not familiar at all with lender fees ‘baked in’ to the price.
Moreover, state laws required all costs to be broken out in the contract, there was no legal way to attempt to hide additional costs.
I’ve personally watched many customers do exactly what you were contesting - take a loan, then pay it off early without penalty. Most lender had a 3-6 month wait on that, so they needed to make a few payments before paying it off in a lump sum.
>not familiar at all with lender fees ‘baked in’ to the price.
Not cars, but a family member sells high end mowers. They offer 0% financing, knowing that they directly pay the lender $400 per loan to be able to offer that (varies with loan amount, but not much). They just price everything $400 higher when running that deal (their internal minimum recoup sale price, not necessarily the sticker or displayed discount price).
>there was no legal way to attempt to hide additional costs.
It's not hiding an "additional" cost, it just means the sale price or financing rate takes into account the dealers/ lenders cost to finance. It also has to do with whether the rate offered is APY or APR, and how those are used somewhat interchangeably to hide fees as included in the offered APR (so it's truthful, but basically based on a best-case payback scenario, and effectively higher if you prepay, even if there are no "penalties").
>Most lender had a 3-6 month wait on that, so they needed to make a few payments before paying it off in a lump sum.
Yes, this is almost universal now, including provisions that restrict the title transfer for some minimum period (was 6 months in our last car, but they said some are for 12 or even 24 months). Basically they don't have to remove the lien until then, even if you pay off the note.
So if you pay early, you are effectively penalized the annuitized cost between the payback date and when you are actually free to sell the vehicle to recoup that payoff amount.
I never sold lawn mowers, I sold automobiles at a ounce shed dealership for a major automobile brand.
There was never, at any point, with more than a dozen lenders, any type of fee associated with taking a loan. We did not offer lower prices for customers paying cash, it was the opposite in fact. We never paid a bank for giving a loan either.
None of the things you keep proposing have any semblance to my professional experience.
>In reality, it just means you need to be trading in something to negotiate against any of that baked in finance cost, since trade-in amount is the one thing manufacturers can't really influence
Trade-in amount is completely arbitrary and fictional, like every other line item. It may be the government's fiction, the dealer's fiction, or someone else's, but it's fiction.
The minute someone tells you they can't do this about that item, because blah blah blah, you should say "that's fine, I don't care about that item, only about the total".
The more ways you can say that, while being polite and sincere about wanting to make a deal, the closer you are to a good price.
>Trade-in amount is completely arbitrary and fictional
Which is exactly why it gives dealers a huge degree of freedom to work with for "bottom line" discounts, that manufacturers can't (yet) control/ influence.
Dealers now make very little margin on new sales, and rely on income from monthly/quarterly/yearly kickbacks from the manufacturers, which are based on targets that include sticking to manufacturer approved discounts.
Without a trade-in, they don't have a place on the reciept to pass some of that kickback on to you. If they discount the sale price, they lose the margin they had to give you the discount in the first place.
Technically, you're right, in that they can sell for whatever they want, with no trade-in. They're just not likely to do that if it costs them more on the backend.
All of the shop talk about how the dealer supposedly makes a profit or doesn't, I think should be treated as small talk that has no bearing on actually making a deal.
As a customer it's important to listen and say how I respect them and that they need to make a living, because salespeople think customers are all lying scumbags. It has to be as clear as day that I intend to make a deal as soon as possible.
But whether this car is being sold at a profit or why is irrelevant. I'm not their accountant.
Check the paperwork, this is very uncommon in the US. Not sure on the legal limits, but the math is very simple. Car for 45k - 10k cash = 35k loan over 6 years at X% APR = $Y per month payment. You can replicate on a calculator and see no hidden fees.
Read your Retail Installment Contract - it will call out all the fees and things. Most dealers pay the origination fees, but often make up the difference in something call 'participation', where they charge you a higher APR and share the extra interest charges with the lender
And most dealers, especially nicer manufacturers, are completely open and willing to negotiate all these percentages. Especially now with loan rates well below inflation, you can really save a lot of money by negotiating things other than purchase price, even if you end up with a higher purchase price at the end.
With dealer stocks being low and demand being high, there’s little room for negotiation on any material term right now. That’s the whole point of this article.
You're completely right, my mistake. I haven't bought a car since 2019 but my partner got one about 6 months ago and it was as you say, basically "this is the price, take it or leave it."
The loans may also be genuine interest free - but with a few caveats such as settling by a certain date to avoid penalty fees and such. There will be enough people falling into this trap to make it profitable for the loan company.
Quite often the same loan company is also financing the dealer's stock so there are also hidden incentives for him to push loans - such as preferential rates for himself.
Could it be that your rate is so low because you overpaid fro car? I heard stories like you go do car dealer and negotiate discount when you pay whole price on spot (EU)
In the US, you can often get a lower price by taking a loan with the dealer/manufacturer's finance partner. They can lower the price because they make money on the loan in addition to the car markup. The rates are often lower than traditional banks or credit unions.
Everything is relative to inflation and other investment opportunities.
The rate on our loan is something like 1.6% (shortly after it was literally 0%). If I can find an investment for more than 1.6%, I'm technically coming out better. Loan fees make the math fuzzier, but I'm simply demonstrating for this conversation.
For example, if I can make 4% on an investment and a loan is 1.6%, that means I can still make 2.4% net interest if take the loan and use the cash to invest.
The math gets even more favorable when you consider inflation. $1 in 5 years is actually cheaper to me than $1 right now.
I'd argue that inflation is further reducing the cost.
Inflation means that $1 is fundamentally less valuable in the future than it is right now. If we're making a deal for me to pay $1 in the future, I'd prefer to make that $1 payment as far out as possible.
Yes, it was 0.9 percent APR. I lost less than $300. I took the liquidity over the $300–having the principal in the bank was worth more to me than $300.
An auto loan is a financial product: something that you effectively buy. The dealer not only sells cars, but financial products. They make more money if they sell you a car and one or more financial products, than if they just sell you a car.
Also, auto loans give them steady income averaged over time, which smooths out their cash flow. If they only sold cars for cash, they would have more pronounced boom and bust cycles in their revenue.
If the rate of their loans is low, it's because the car is overpriced to make up for it. Do the reverse math. Call your bank and ask them what the interest would be for a line of credit equivalent to the loan amount for that car, over the same period. Use the bank's interest part of their loan to deduce what the cash value of the car must be. E.g. say the bank offers you $30,000 over five years at 3%. You're going to pay about $2300 in interest which is 7.6% of the principal amount. OK, so if the car dealer were to offer you close to 0% interest for five years, it means they inflated the car's price by 7.6% (if not more) so that they make at least the same money on the loan as the bank would. You should therefore pay 7.6% less for the car in cash, than what they are asking for under the too-good-to-be-true loan.
Dealerships typically get points on the loan - the approving bank will give an approval for x amount, not to exceed y after taxes/fees/warranties. The amount paid to the dealer will vary, but typically = y * points on the loan
I would have 1000% agreed with you except I had a very different experience last year. I was out seeking loans for a car and shopping around for low interest. One of the lower ones was from a company branded LightStream but on the back end is really SunTrust/Truist. They had a great rate, no origination fees, and weirdly, asked specifically not to set the loan up so that the car was collateral. Maybe it was a credit rating thing (mine is quite good) and they would incur more costs setting it up that way.
> an unsecured line of credit is going to have a higher interest rate than loan backed by the collateral of the car.
That depends on who you are and what you have, from the bank's POV. If they are actively bugging you to take out this kind of loan, then they probably don't have an issue regarding collateral.
A car is not particularly good collateral; it depreciates rapidly, subject to being damaged and stolen.
That’s a bit incorrect from the POV of the dealer, the loan company pays them the cash for the car (and commissions) and takes the cash flow.
A 0% loan doesn’t necessarily mean you’re paying more, there are often factory incentives and other issues. Basically modern manufacturing is highly capital intensive with low cost of reproduction. By selling more vehicles they amortize the cost the factory across more vehicles. Also many of the cars have already been produced and the factory and dealer are looking at selling that car new vs selling a year old car with no mileage.
Even if the 0% loans are there to incentivize people to get into car ownership who can't put up the cash, thereby moving more cars, that makes no difference.
That incentivizing costs money, and the car is more expensive because of it.
The buyer who is not incentivized by "0% financing for X period", because they are paying with cash, shouldn't have to pay the cost of those incentivies, and thus expects to pay less.
Dealers will usually reduce the purchase price if you finance through them since they are getting kickbacks on originating loans. As long as there aren't any fees associated with financing, you can get a better deal than if you were paying cash and can just pay it off right away.
Dealers tend to assume people are going to finance. Just don't say you're not and then when you get in to the finance guy's office say... ya know what, I think I'm just gonna pay cash. After you already have a price for the car in writing. I have a close friend that doesn't believe in credit and he has done this several times for a better deal.
I've had a car's price agreed to in writing (which was the full advertised price they had online) and after presenting cash, they refused to honor it. They said if I was paying cash they required me to spend another $3k minimum on a service package. I told the manager, who was forcing this to happen, to fuck off and walked out. Wasted a lot of my time and it was really dishonest. The salesperson later texted me at my personal number to apologize for the manager and said there was a lot of turmoil at the dealership because of those practices.
This was a fairly large Toyota dealership outside of Houston TX
I experienced the same tactic at Jenkins Acura in Ocala, Florida. Very shady. Funny enough, the sales guy was also apologetic for his manager. I walked out, but what a waste of everyone's time.
Did you make sure there was no huge fee for getting the loan in the first place? That was my plan also, but...a huge $1k fee for the loan made it into my closing paper work somehow (I didn't read it close enough).
Actually, I tried buying one by charge card as it was within the limit (rather than cash). Whole lotta points. Dealer just said no. Took a certified check as I didn’t want to use a Brinks truck.
Also wanted to see if it extended the warranty by a year. And the buyer protection plan.
It's not a bank issue. The retail F&I staff at most mainstream dealerships aren't accustomed to dealing with wire transfers and literally don't know what buttons to push. You can probably get it done eventually but it will involve some delays and complaints.
You can readily wire money with any bank in the US. It exists but people don’t really use it. It just never caught on much as a consumer product because of alternatives like ACH and debit cards that achieve the same thing.
That's mostly because it's slow and most banks charge a fee ($35 or so). The only time I've used it is wiring money to the escrow company when buying a house.
A coworker of mine bought his car on his Amex and the dealer was more than happy. I paid for my new truck with a debit card back in 2019 (well $15k of it rest on loan).
The reason dealers don't want to do this is because of chargeback abuse. Now, to counter that argument dealers have gotten "smart" but greedy to the point now where they sneak arbitration agreements into a purchase... so while you may dispute a charge if the dealership lies about price or something, good luck using their chosen arbitration service.
You are also paying like a 2.9% fee to your payment processor (vs $0 for a check). On a 50,000 car, that is $1,450. Not chump change at all, maybe a big chunk of your margin.
You are lucky. My parents went to buy a new car some years ago - with cash (they downsized their house and had the money leftover).
Some dealers refused outright, no matter the payment method. Even if they waited to have the car until the dealer knew the money was there and stuff. No loan = no car. Obviously, they went somewhere else.
Most dealers will not accept large cash payments because of the legal reporting requirements of such payments, not because they'd rather loan you the money. Few dealerships will accept cash in amounts that trigger IRS reporting, for example, because it's a red flag for money laundering and the drug business.
I know that requirement exists, but I'm not convinced that is the reason. They'd be dealing with a bank, after all, who knows the restrictions but more importantly, I'm guessing the cost of the cars is as much and they likely aren't taking a loan for the cars.
There are lots full of cars under that limit that only sold with financing, and the dealers just simply said that they don't take cash. (the limit used to be 10k, and had not been raised to keep up with inflation, but I don't know if it ever became raised)
Additionally: The reporting requirements weren't so bad. Another couple of dealers didn't have an issue with it. Obviously, they bought the car from one of those folks.
Another reason cash isn't accepted is usually the money can come from non auto based loans (student loans, home loans, etc.). Loan service companies can't repo a vehicle in these circumstances because it was never collateral in the first place and if the person taking out the loan signs over the car then it can't be part of assets that can be sold to recoup losses. So dealerships have a good reason to refuse cash when loan service companies are the ones that give them kickbacks.
I'm sorry, but none of that makes sense. No one can repo a vehicle unless he has title and anyone with title can repo a vehicle regardless of where the money came from. No student lender has title to a financed vehicle, even if the student used his loaned cash as part of the downpayment. Title to financed vehicles is held by the lender until the loan is satisfied in full. No buyer can "sign over a car" to someone without that title, for it is the title document itself which must be "signed over" in order to transfer ownership.
And no dealerships receive "kickbacks" of any kind. There are plenty of hidden and confusing ways that car dealers make money, but kickbacks from lenders or anyone else are not part of it.
Most dealers will not accept large credit card payments because of the fees they must pay to use the credit card network, as with any transaction. Not because they'd rather loan you the money.
A dealer recently told me that leasing, not buying, was the future, at least for his dealership. He said 80% of the business was leasing. With prices today, I can see why. So they also want to "loan" you a vehicle.
I'm not even sure this is the future - the new hotness is car subscriptions. (though some of these are cool in that you can swap out a sedan for an SUV or convertible).
My wife and I have found the tickle down of this is extremely nice. Most of these lease vehicles are 2 year, low-mile leases that are basically brand-new still. Many of them even extend warranties to the point you're basically getting a new car.
My daughter just turned 16, and we had saved up to buy her a car for her birthday. One dealership we talked to tried to add a $2000 charge as a "penalty" for paying cash instead of taking a loan.
There is risk in cash, it is called inflation, if you bought a car last year you lost 7% + depreciation of the car since you bought it. The SP500 is up 11% since last year.
This means you would have lost 7% to inflation, 11% to potential upside plus depreciation of your car. Assuming your car did not depreciate because of current car production shortages you lost 18% of your money buying cash vs 3%-4% interest on the loan.
Yes. If I had 1M in the bank and went to buy a 500k house, and was offered like a 3% APR loan, would I take it? Yes. Reasons being:
1) I can make 5-6% return with my money. So I can pay the interest and still come out ahead.
2) That mortgage interest is tax deductible, so it costs a little bit less than 3%, maybe only 2.5% to me
3) Real estate market crashes and house is worth 200k? Especially in a no-recourse state, you can leave the keys and walk. The bank takes on the downside risk of your house, not you.
Argument #1 is a "should", not a "will", so there's definitely risk there. Considering the average stock market gain is something like 10% and we're sitting at way over that, it would stand to reason that if that average holds at some point we're going to get below average performance. It's a gamble.
Regarding #3 - doesn't that do a number on your credit? And how many states are non Recourse? As I understand it here in Canada those agencies that backed your loan (the bank or the CMHC) will attempt to recoup their losses by taking you to court if they have to.
3)
> Home mortgages—though generally recourse—are non-recourse in 12 states: Alaska, Arizona, California, Connecticut, Idaho, Minnesota, North Carolina, North Dakota, Oregon, Texas, Utah and Washington. If a homeowner defaults in one of these states, the lender can foreclose on the collateralized home but cannot go after the borrower’s other assets.
Generally taking a credit hit for a few 100k is a fine trade off. You can even buy a new house right before you walk away from your old house..
YES. Hell yes. That's better-than-free money, adjusting for inflation. If you haven't maxed out your I-bond purchases yet, you can get 7.12% basically risk-free.
It's only high if the dealership isn't offering incentives in some way. That 0.9% APR is because BMW (or the dealership) is subsidizing it in kickbacks. Not every dealership/brand does that.
> If you haven't maxed out your I-bond purchases yet, you can get 7.12% basically risk-free
Those are being issued at 0% real. The initial rate is 7.12%, but that figure fluctuates with CPI-U. Betting that American inflation will keep raging at 2.5%+ isn’t a terrific bet.
That said, your broader point is valid. Money at 2.5% should not be paid back. There are good bonds yielding more, to saying nothing of dividend-paying stocks.
How many people actually do that? No one I know of talks about taking a loan for something they would have paid cash for, then turning around and putting the cash into their Robinhood/Fidelity/Schwab/etc. account. In fact, I haven't even read stories of people doing that, despite all this "advice".
Depends on the interest rate. When rates are low, borrowing money and having liquid assets can be a better choice (ie. putting the money into an index fund)
All of these people saying "take a loan and you'll make money in the stock market" are wrong. You can't "make money" in stocks, from the perspective of choosing whether to take a loan, you can only "expect to make money". That's a huge difference.
And a number of experts say you shouldn't invest in stocks if you need the money in the next 5 years, so that's another strike against this advise.
I think the last few years have given people false confidence about the market. Sure the trend generally goes up, but if your loan came due in March 2020 that money wouldn't have been there.
I used to do this at department stores with store card signups. Except I’d make a payment at the till right after purchase and call and cancel the card as I’m walking out.
That’s really not great to do long-term, as it would impact your credit rating. Stores cards are seen as one of the worst types of credit, so that will lower it. Also the hard pull on the report as part of the signup process, and the act of cancellation all will lower your score. It’s like a 3x bad strategy.
Credit score only matters if you want to borrow money. If you already have a mortgage, your credit score is basically invincible unless you stop paying or declare bankruptcy. Fluctuations for hard pulls and closing accounts are temporary.
Get them to agree to a price in writing before you discuss financing options. Once they give you the financing options "decide" that you'll just pay in cash.
Having worked at a car dealership this is just the left hook if you will. You got them to go down on the price and when it comes time for them to get you to sign on the dotted line they add "fees" to add back what you took off. Many of the sales people I knew just shrugged it off, you can't buy the car for almost the cost and not expect us to get money back somewhere.
So, in reality the car dealership (most dealerships sell various makes if they are successful) makes money on financing/fees and not the actual car itself. However, car sales people make money on the price the vehicle sells for (the price without financing/fees). The parties who care about the price of the "car" is the buyer and sales person but the parties that care about the total cost are the dealership and the buyer.
When I went to get my first car (around 1996), I had some cash from a settlement that happened when I was a kid. I remember my mom saying that I'd get a better deal because I had cash, but it turned out to be quite the opposite, they wanted me to have a loan. So whenever this changed (couldn't read the article), I'd imagine it was prior to the 90s.
The dealers are using 3rd-party partners to finance the loans. The only risk the dealers take is if you're rejected and can't buy the car. Besides that, the loan is the same as cash for them, except they also get kickbacks for the financing lead.
As soon as I started paying for cars with cash, I noticed a palpable cold, if not subtly hostile, attitude from dealership salesmen. I learned from that to only buy from online wholesalers (I've used cartelligent 3 times, all good).
Most dealership profits come from interest on those loans.
Years ago, I worked in auto sales and then became a finance manager. The two halves of the sales process: selling the car and financing it, are calculated and managed separately on each transaction. Normally, the sales side doesn't know or care what finance does, and vice versa.
The sales side of the business makes its money on "top line price," the first number on the contract, less their true cost of the car -- which isn't shown anywhere to the public. It includes many discounts, incentives, and also fees the dealer pays which are not included in the public pricing transaction. However, finance isn't part of this.
Finance makes its money on the difference between the "buy" and "sell" rates for financing. It makes no difference to the dealership if you wait 3 years to pay off the car, or if you pay it off the next day. The dealer is paid immediately (often the next day) for the total difference in the buy and sell rate.
How does this work in practice? The finance managers job is to sell the cheapest contract that you qualify for. In reality, banks and other auto finance institutions (many are not banks) offer far lower rates than they tell you about -- they just don't offer them to you directly, only at wholesale to a dealer. In fact, there is great competition to get dealers to sell financing to these various companies, which update and publish new rates and programs daily.
By carefully understanding the loan packages offered by various lenders and matching them to the correct customer credit profile and vehicle (and these requirements can be quite complex), the finance side of the business, known as the "back of the house," profits from selling you a sales contract as expensively as you are willing to pay and then buying the money to fulfill that contract from a bank as cheaply as they can. If the finance guy can sell you on a 3.5% finance contract when he knows he can "get you bought" at 3%, he makes a 0.5% profit in full and immediately, regardless of what happens after your car "rolls over the line" off of dealership property. It is in that moment that the dealer's sales obligation to you is concluded and the sales contract can be bought or funded by a lender.
A good finance manager makes money for his or her store by taking advantage of this customer ignorance. It is always possible for customers to obtain financing outside the store and to do before they go shopping. In fact, you are doing the same thing as the finance manager when you use this approach. By "pre-qualifying" at a finance institution (credit unions are the cheapest), you are making the same kind of arrangement as the finance guy makes with his lenders: an agreement to purchase a sales contract on a specific car type (year range and cost) for a specific buyer (you!). That contract is only fulfilled when and if you drive off the line with a car.
On a day-to-day basis, finance managers make a small amount of money from everyday customers who probably don't know what kind of real rates they qualify for. With better financially educated customers and those with greater assets and credit scores, the finance department has little wiggle room and sometimes must sell a contract at cost -- which they despise. If you find your finance manager's attitude has suddenly changed from friendly and chatty to "let's get you out of my office," its because he has determined that he will have to offer you his buy rate.
Finance managers make the most money with "special finance" customers, those who have credit disabilities and poor credit scores. Only a few institutions will finance those customers and at high rates with onerous restrictions. Within a dealership, there will be a single person who handles this department, if there is one at all, although they can be highly profitable as customers who have damaged their credit have few choices. It's notable that this does not apply to customers with
- Don't buy new, on avg the first 2-3 years you take the biggest depreciation risk
- Don't finance with the dealership, go to a credit union like DCU
- Negotiate, even in times like this you can negotiate
- If you can't get outside financing and you have to get dealer financing for whatever reason, they make money from the financing, negotiate even further down because of this
- Depending on your state some fees are illegal, check your laws, negotiate the fees off
I have never bought a used car. I have this unnatural fear of what people might have done on the seats. Also a new car warranty is great and maintenance is negligible. Also buy the full thing in cash.
The hardest part of buying used is that it's so hard to find people who have taken care of their cars. If someone has gone 20-30% over the recommended oil change interval, you'll end up paying for that a lot on the tail end. This isn't to mention the many, many people I know who barely put any miles on their car, but change the oil based on mileage (instead of time), putting a ton of hard miles of short trips on the car. If they sell them, it looks like a great low-mileage car!
Some people have all the documentation of correct interval service for the car, but it's becoming rarer these days as cars just tend to work until they fail catastrophically, instead of years ago when they would sputter and fault in a gradual way before dying by the side of the road.
It depends on what kind of car you buy, an Audi that’s gone 30% over service interval is much different than a Toyota 30% over.
Also, this is why you should buy high end cars (from a reliable brand) from affluent areas, they are devalued because no one wants them there, and they are well maintained because rich people tend to just take it to the dealer, who will religiously follow the service interval.
Is the claim on this that the Audi can't go 30% over, but the Toyota can? or the other way around.
The nicest car I've ever owned is an Acura. Others include Ford, Hyundai, and Honda, and I've been pretty bad at routine maintenance, but I've never had any mechanical issues as a result.
Are premium car brands really so fragile? If so why would you recommend buying them if they're less durable? Seems like a rip off to me.
yes and no. german cars tend to have tighter tolerances than your typical economy sedan. they can be very reliable if maintained properly, but they can't take as much neglect as a Corolla. the tradeoff is that, subjectively, they are often more pleasant to drive.
bmw would be an exception, being notorious for using plastic parts designed to last only the duration of the first lease.
> Is the claim on this that the Audi can't go 30% over, but the Toyota can? or the other way around.
Yes, but that is kind of an irrelevant claim.
There's wildly different engineering and service recommendation ethos between Europe and Japan and it shows.
He could have just as easily said Volvo and Nissan and been just as correct but that's not a batting practice pitch over home plate for HN's biases the way <luxury German brand> and <toyota/honda> is.
Can you point me to a luxury German brand that is as reliable as a Toyota/Lexus or Honda/Acura? Here's some facts to dispell the myth that Toyota/Lexus reliability is HN bias.
"Ze Germans" aren't "reliable" by western metrics because that's not something their engineering culture strives for.
You're comparing apples to oranges using a scale derived for grapefruit and acting like it's some big accomplishment that the orange wins.
If Toyota was trying to build better driving machines than Audi, build to the bottom dollar like Chrysler or cram in new tech gimmicks like Kia they would score similarly in those qualities and in reliability because the tradeoffs are necessarily similiar.
All engineers have the same technology and supply chains at their disposal and the same laws of physics to constrain them. The reason Toyota's vehicles are reliable is because they make cars for people who want to pay top dollar for reliable. The reason Audi makes cars that drive great is because they make cars for people who want to pay top dollar for great driving.
At the end of the day it's just going to boil down to you a value judgement about which qualities are important.
The context of the discussion was reliable used cars.
If you buy a used Audi you are going to have a lot of problems. That’s what my comment addresses. The driving experience is not that good when the shocks are blown to shit, bearings are spun, or the timing chain inevitably fails and the pistons drive the valves through the head.
Also, my 4Runner will smoke most Audis, it has 385,000 kms on it, and I change the oil once or twice a year.
I bet most Audis the age and mileage of my 4Runner would start spinning bearings during a spirited drive, and my G35 just runs circles around them.
If you’re an idiot buy an Audi, if you’re looking for reliability buy a Toyota if you want a great sports car buy a Corvette. The only reason to buy an Audi is if you’re nostalgic for the Quattro days of rally.
I guess if you want to drive an iPhone they aren’t bad.
Audis are basically fat, slow and unreliable. (Yes they make some decent cars if you want to pay Z06 prices for Mustang performance with 6.0 powerstroke reliability.
Btw I’m German, I have a bit of an idea what the engineering culture is like. It’s basically an engineering circle jerk, anyone can make a big unreliable engine that produces less power in more space than a $300 pushrod LS.
Yes, they are very fragile, especially if you use them as the "ultimate driving machine" or are expecting "Being Ahead through Technology", if you drive your kids to soccer and follow the maintenance religiously they should last until your lease is up, or you exceed the mileage limit on your lease.
BMW should just rebrand to the Ultimate Leasing Machine, as they are very cost effective due to for some reason people wanting used BMW's out of warranty.
This idea that going 20% over the recommended oil change interval will cause you to "pay a lot on the tail end" seems dubious. Could you quantify what you think this will cost a person? What exactly is the "tail end", anyways?
There are plenty of people who take care of their cars. Their old cars are in the CPO section of used car lots and priced accordingly.
Short of actually being able to look at a vehicle and assess its condition directly there is no free lunch. Any "signal" you can use will also be used by everyone else and the dealers will price it in.
This is just not true. Cars are waaay more durable than your assumption.
I've never had an issue buying used (2-4 years old) cars from dealers. They've always been essentially like new. On top of that I have failed to do routine maintenance as scheduled. I usually do oil changes about every 10k because you really don't need to do it as often as they say.
That said... I've now had 3 cars that I bought around 30,000 miles and put over 100k miles on without any major maintenance. Just tires, brakes filters, and fluids. Maybe some weird one off thing, for example a little plastic gear in my steering system on my 2010 Hyundai recently broke and cost $500 to replace (@ 140,000 miles on the odo).
> Cars are waaay more durable than your assumption.
Truth. I bought a 2003 Ford Excursion in 2020. Parts are easy to find and are very compatible with F250s etc... It's all about resourcefulness. Not to mention I get to save a boat load of money in a used vehicle, I don't have to worry about damaging it too much. Scratch it a little with a tree branch, no problem, I don't care.
> Don't finance with the dealership, go to a credit union like DCU
Not always true. DCU has to make a profit, so the floor of their auto loan is going to be like 1.5-2%. A car dealer is also making money from the sale of the car, I have gotten APRs like 0.9% from the likes of Honda, which is going to beat DCU.
Basically, shop around and take the better deal.
> Negotiate, even in times like this you can negotiate
Well, some cars you can't. Tesla has a fixed price, take it or walk. It's quite refreshing.
My most recent car I bought at about a year old with 15k miles. It turns out it had previously been in a massive front end collision and the dealership described it as a "fender bender". The bumper and plastic under the engine starting falling off, parts started falling off that were clearly just glued on with gorilla glue, closer inspection in the engine bay showed a ton of bent metal structure, the paint color on the front of the car started to clearly not match the rest of the car after it had been exposed to sun for a year, the alternator died after a year and after removal it was clearly a really cheap non-OEM replacement. This was all from a reputable Toyota dealership in a major city.
Not sure I want to go through this process again and may just buy new in the future.
I offered to take a loan when I bought my car knowing there was a kick back but ultimately they wouldn’t offer me any incentive to do it so I didn’t. It really depends on how the compensation model works for the dealer salesman. If he gets no extra money he won’t bother to push it
The large Toyota dealership I was last at offered a simple interest loan. I thought this must have been an unfortunate misuse of the word “simple” in a loan context, but I pressed him further and he definitely meant “simple interest” as in the one high school maths teachers warn you against.
Of course I agreed and payed it off the same week, but these loans must be targeted toward the uneducated or poor.
Most loans are simple interest, or "compounded" monthly with a payment greater than the interest so there is no compounding. This is generally good for the consumer, you don't want interest compounding against you. Is it possible you meant interest only loan?
I bought a new car late last year as well. The experience with Honda and Toyota dealers was extremely unpleasant, so I kept putting off the purchase.
I ended up going to the Audi dealership in town on a Saturday evening because I saw them post a used car on their website that was overpriced but such a unicorn I had to see it in person. I was too late for that car, but TL;DR - I bought a new car in their inventory for cash and it was a great experience. There was a Costco discount that put it below MSRP, they didn't care at all about cash vs finance, they kept the dealership open a few minutes past closing to finish off the state paperwork so I drove away with the permanent license plates, etc.
They didn't even deposit the check until a week later, LOL.
Happily I haven't had to buy a car since 2020, but I had good luck using cargurus to spot cars that had sat on smaller dealer lots for awhile. I understand that some dealers take out loans of their own to cover the vehicle while it's on the lot (a "floor loan") so as the vehicle sits, their incentive to unload it increases.
Obviously that's not relevant in the current low-supply environment, but it worked once and it will hopefully work again once supply returns.
One very important component to this: having the car inspected by an independent third party. In all (non-local) cases I was able to locate an independent repair place that would look at the car and send me a report. Levels of detail varied, some shops were set up for this and sent me a novel, others were lighter on fine details. I usually paid $50-200 for the service and I wouldn't buy a car without such an inspection.
Wife bought a new sprinter van two months ago, it was like pulling teeth to get the dealer to let us deal with our credit union vs originating the loan themselves. Luckily we were up against the end of the year, so they were willing to deal with us in order to have the deal done to count for 2021 sales vs 2022
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[ 4.1 ms ] story [ 218 ms ] threadIt's just baked into the negotiated price.
Of course despite the past jokes about "hands are tied" re the sale price of new cars, the manufacturers actually do have relatively rigid controls today on dealers lowering allowable sales price. (But not raising, which has turned into an interesting situation.)
In reality, it just means you need to be trading in something to negotiate against any of that baked in finance cost, since trade-in amount is the one thing manufacturers can't really influence.
Which isn't to say that captive/manufacturer financing isn't often cheaper. It's just that the actual cost of financing isn't as transparent as claiming "no fees".
(You see this in gimmicks like having "no/low cost" financing, but at the expense of foregoing "cash back", which even in today's market is often upwards of $3k-5k.)
Regardless, you aren't getting a few lunch. It just means your negotiated price had the margins to absorb whatever financing they ended up offering.
And the manufacturers are directly and indirectly controlling those margins based on complying with their approved discounts, whether advertised or unpublished.
They even have a discount type for sales to immediate family, that applies to any car that doesn't keep dealer plates and dealer insurance.
Which is why it's a good idea to have backup financing pre-arranged and approved with a credit union. That gives you leverage to negotiate financing even with a settled cash price.
Either that, or their margin on the vehicle at your negotiated price is big enough that it doesn't make much difference to them.
Moreover, state laws required all costs to be broken out in the contract, there was no legal way to attempt to hide additional costs.
I’ve personally watched many customers do exactly what you were contesting - take a loan, then pay it off early without penalty. Most lender had a 3-6 month wait on that, so they needed to make a few payments before paying it off in a lump sum.
Not cars, but a family member sells high end mowers. They offer 0% financing, knowing that they directly pay the lender $400 per loan to be able to offer that (varies with loan amount, but not much). They just price everything $400 higher when running that deal (their internal minimum recoup sale price, not necessarily the sticker or displayed discount price).
>there was no legal way to attempt to hide additional costs.
It's not hiding an "additional" cost, it just means the sale price or financing rate takes into account the dealers/ lenders cost to finance. It also has to do with whether the rate offered is APY or APR, and how those are used somewhat interchangeably to hide fees as included in the offered APR (so it's truthful, but basically based on a best-case payback scenario, and effectively higher if you prepay, even if there are no "penalties").
>Most lender had a 3-6 month wait on that, so they needed to make a few payments before paying it off in a lump sum.
Yes, this is almost universal now, including provisions that restrict the title transfer for some minimum period (was 6 months in our last car, but they said some are for 12 or even 24 months). Basically they don't have to remove the lien until then, even if you pay off the note.
So if you pay early, you are effectively penalized the annuitized cost between the payback date and when you are actually free to sell the vehicle to recoup that payoff amount.
There was never, at any point, with more than a dozen lenders, any type of fee associated with taking a loan. We did not offer lower prices for customers paying cash, it was the opposite in fact. We never paid a bank for giving a loan either.
None of the things you keep proposing have any semblance to my professional experience.
Trade-in amount is completely arbitrary and fictional, like every other line item. It may be the government's fiction, the dealer's fiction, or someone else's, but it's fiction.
The minute someone tells you they can't do this about that item, because blah blah blah, you should say "that's fine, I don't care about that item, only about the total".
The more ways you can say that, while being polite and sincere about wanting to make a deal, the closer you are to a good price.
Which is exactly why it gives dealers a huge degree of freedom to work with for "bottom line" discounts, that manufacturers can't (yet) control/ influence.
Dealers now make very little margin on new sales, and rely on income from monthly/quarterly/yearly kickbacks from the manufacturers, which are based on targets that include sticking to manufacturer approved discounts.
Without a trade-in, they don't have a place on the reciept to pass some of that kickback on to you. If they discount the sale price, they lose the margin they had to give you the discount in the first place.
Technically, you're right, in that they can sell for whatever they want, with no trade-in. They're just not likely to do that if it costs them more on the backend.
As a customer it's important to listen and say how I respect them and that they need to make a living, because salespeople think customers are all lying scumbags. It has to be as clear as day that I intend to make a deal as soon as possible.
But whether this car is being sold at a profit or why is irrelevant. I'm not their accountant.
Quite often the same loan company is also financing the dealer's stock so there are also hidden incentives for him to push loans - such as preferential rates for himself.
If the interest rate is below market, which it usually is, that can be converted to a lump sum discount. The math has to be done.
What was the rate though? If it was > 0, you lost money not accelerating the payoff.
Not if they could put that money somewhere else with higher expected returns than the interest rate.
The rate on our loan is something like 1.6% (shortly after it was literally 0%). If I can find an investment for more than 1.6%, I'm technically coming out better. Loan fees make the math fuzzier, but I'm simply demonstrating for this conversation.
For example, if I can make 4% on an investment and a loan is 1.6%, that means I can still make 2.4% net interest if take the loan and use the cash to invest.
The math gets even more favorable when you consider inflation. $1 in 5 years is actually cheaper to me than $1 right now.
-You have an investment that you can reliably withdraw the funds from.
-There isn't risk to losing principal with the investment.
-The investment outpaces inflation + interest. If inflation is 3% in your example you just lost .6%.
99% of the time these things aren't true for the 5-7 years of a loan.
Willing to be wrong on that, just having a hard time understanding.
Inflation means that $1 is fundamentally less valuable in the future than it is right now. If we're making a deal for me to pay $1 in the future, I'd prefer to make that $1 payment as far out as possible.
Also, auto loans give them steady income averaged over time, which smooths out their cash flow. If they only sold cars for cash, they would have more pronounced boom and bust cycles in their revenue.
If the rate of their loans is low, it's because the car is overpriced to make up for it. Do the reverse math. Call your bank and ask them what the interest would be for a line of credit equivalent to the loan amount for that car, over the same period. Use the bank's interest part of their loan to deduce what the cash value of the car must be. E.g. say the bank offers you $30,000 over five years at 3%. You're going to pay about $2300 in interest which is 7.6% of the principal amount. OK, so if the car dealer were to offer you close to 0% interest for five years, it means they inflated the car's price by 7.6% (if not more) so that they make at least the same money on the loan as the bank would. You should therefore pay 7.6% less for the car in cash, than what they are asking for under the too-good-to-be-true loan.
Say take out a 35k loan, paperwork clears, dealer gets a check for $35,500.. the $500 being a "bonus" for originating the loan from the lender.
an unsecured line of credit is going to have a higher interest rate than loan backed by the collateral of the car.
also, people tend not to default on their primary vehicle (they need it to get around) so its a less risky loan, hence the lower interest rate
That depends on who you are and what you have, from the bank's POV. If they are actively bugging you to take out this kind of loan, then they probably don't have an issue regarding collateral.
A car is not particularly good collateral; it depreciates rapidly, subject to being damaged and stolen.
A 0% loan doesn’t necessarily mean you’re paying more, there are often factory incentives and other issues. Basically modern manufacturing is highly capital intensive with low cost of reproduction. By selling more vehicles they amortize the cost the factory across more vehicles. Also many of the cars have already been produced and the factory and dealer are looking at selling that car new vs selling a year old car with no mileage.
That incentivizing costs money, and the car is more expensive because of it.
The buyer who is not incentivized by "0% financing for X period", because they are paying with cash, shouldn't have to pay the cost of those incentivies, and thus expects to pay less.
This was a fairly large Toyota dealership outside of Houston TX
Sounds like they're going to keep doing this.
In no case was the dealership forced to accept a deal they didn’t agree with, so I wouldn’t put any stock in the “in writing” part.
Also wanted to see if it extended the warranty by a year. And the buyer protection plan.
Some dealers refused outright, no matter the payment method. Even if they waited to have the car until the dealer knew the money was there and stuff. No loan = no car. Obviously, they went somewhere else.
There are lots full of cars under that limit that only sold with financing, and the dealers just simply said that they don't take cash. (the limit used to be 10k, and had not been raised to keep up with inflation, but I don't know if it ever became raised)
Additionally: The reporting requirements weren't so bad. Another couple of dealers didn't have an issue with it. Obviously, they bought the car from one of those folks.
And no dealerships receive "kickbacks" of any kind. There are plenty of hidden and confusing ways that car dealers make money, but kickbacks from lenders or anyone else are not part of it.
The loan partner invited my boss to CES in Las Vegas, from Europe.
You can figure out how much of a hefty fee they get from each loan they originate.
The % of 100k cars leased is very high. The % of 20k basic Toyota / Hondas leased is very low.
2. Pay it off the next day
This means you would have lost 7% to inflation, 11% to potential upside plus depreciation of your car. Assuming your car did not depreciate because of current car production shortages you lost 18% of your money buying cash vs 3%-4% interest on the loan.
Cash is not risk free
1) I can make 5-6% return with my money. So I can pay the interest and still come out ahead.
2) That mortgage interest is tax deductible, so it costs a little bit less than 3%, maybe only 2.5% to me
3) Real estate market crashes and house is worth 200k? Especially in a no-recourse state, you can leave the keys and walk. The bank takes on the downside risk of your house, not you.
Regarding #3 - doesn't that do a number on your credit? And how many states are non Recourse? As I understand it here in Canada those agencies that backed your loan (the bank or the CMHC) will attempt to recoup their losses by taking you to court if they have to.
3) > Home mortgages—though generally recourse—are non-recourse in 12 states: Alaska, Arizona, California, Connecticut, Idaho, Minnesota, North Carolina, North Dakota, Oregon, Texas, Utah and Washington. If a homeowner defaults in one of these states, the lender can foreclose on the collateralized home but cannot go after the borrower’s other assets.
Generally taking a credit hit for a few 100k is a fine trade off. You can even buy a new house right before you walk away from your old house..
YES. Hell yes. That's better-than-free money, adjusting for inflation. If you haven't maxed out your I-bond purchases yet, you can get 7.12% basically risk-free.
[1] https://www.bankrate.com/loans/auto-loans/rates/
Those are being issued at 0% real. The initial rate is 7.12%, but that figure fluctuates with CPI-U. Betting that American inflation will keep raging at 2.5%+ isn’t a terrific bet.
That said, your broader point is valid. Money at 2.5% should not be paid back. There are good bonds yielding more, to saying nothing of dividend-paying stocks.
And a number of experts say you shouldn't invest in stocks if you need the money in the next 5 years, so that's another strike against this advise.
So, in reality the car dealership (most dealerships sell various makes if they are successful) makes money on financing/fees and not the actual car itself. However, car sales people make money on the price the vehicle sells for (the price without financing/fees). The parties who care about the price of the "car" is the buyer and sales person but the parties that care about the total cost are the dealership and the buyer.
Most dealership profits come from interest on those loans.
The sales side of the business makes its money on "top line price," the first number on the contract, less their true cost of the car -- which isn't shown anywhere to the public. It includes many discounts, incentives, and also fees the dealer pays which are not included in the public pricing transaction. However, finance isn't part of this.
Finance makes its money on the difference between the "buy" and "sell" rates for financing. It makes no difference to the dealership if you wait 3 years to pay off the car, or if you pay it off the next day. The dealer is paid immediately (often the next day) for the total difference in the buy and sell rate.
How does this work in practice? The finance managers job is to sell the cheapest contract that you qualify for. In reality, banks and other auto finance institutions (many are not banks) offer far lower rates than they tell you about -- they just don't offer them to you directly, only at wholesale to a dealer. In fact, there is great competition to get dealers to sell financing to these various companies, which update and publish new rates and programs daily.
By carefully understanding the loan packages offered by various lenders and matching them to the correct customer credit profile and vehicle (and these requirements can be quite complex), the finance side of the business, known as the "back of the house," profits from selling you a sales contract as expensively as you are willing to pay and then buying the money to fulfill that contract from a bank as cheaply as they can. If the finance guy can sell you on a 3.5% finance contract when he knows he can "get you bought" at 3%, he makes a 0.5% profit in full and immediately, regardless of what happens after your car "rolls over the line" off of dealership property. It is in that moment that the dealer's sales obligation to you is concluded and the sales contract can be bought or funded by a lender.
A good finance manager makes money for his or her store by taking advantage of this customer ignorance. It is always possible for customers to obtain financing outside the store and to do before they go shopping. In fact, you are doing the same thing as the finance manager when you use this approach. By "pre-qualifying" at a finance institution (credit unions are the cheapest), you are making the same kind of arrangement as the finance guy makes with his lenders: an agreement to purchase a sales contract on a specific car type (year range and cost) for a specific buyer (you!). That contract is only fulfilled when and if you drive off the line with a car.
On a day-to-day basis, finance managers make a small amount of money from everyday customers who probably don't know what kind of real rates they qualify for. With better financially educated customers and those with greater assets and credit scores, the finance department has little wiggle room and sometimes must sell a contract at cost -- which they despise. If you find your finance manager's attitude has suddenly changed from friendly and chatty to "let's get you out of my office," its because he has determined that he will have to offer you his buy rate.
Finance managers make the most money with "special finance" customers, those who have credit disabilities and poor credit scores. Only a few institutions will finance those customers and at high rates with onerous restrictions. Within a dealership, there will be a single person who handles this department, if there is one at all, although they can be highly profitable as customers who have damaged their credit have few choices. It's notable that this does not apply to customers with
- Don't buy new, on avg the first 2-3 years you take the biggest depreciation risk
- Don't finance with the dealership, go to a credit union like DCU
- Negotiate, even in times like this you can negotiate
- If you can't get outside financing and you have to get dealer financing for whatever reason, they make money from the financing, negotiate even further down because of this
- Depending on your state some fees are illegal, check your laws, negotiate the fees off
Do you have this same fear of hotel room beds and avoid them for it?
Some people have all the documentation of correct interval service for the car, but it's becoming rarer these days as cars just tend to work until they fail catastrophically, instead of years ago when they would sputter and fault in a gradual way before dying by the side of the road.
Also, this is why you should buy high end cars (from a reliable brand) from affluent areas, they are devalued because no one wants them there, and they are well maintained because rich people tend to just take it to the dealer, who will religiously follow the service interval.
The nicest car I've ever owned is an Acura. Others include Ford, Hyundai, and Honda, and I've been pretty bad at routine maintenance, but I've never had any mechanical issues as a result.
Are premium car brands really so fragile? If so why would you recommend buying them if they're less durable? Seems like a rip off to me.
yes and no. german cars tend to have tighter tolerances than your typical economy sedan. they can be very reliable if maintained properly, but they can't take as much neglect as a Corolla. the tradeoff is that, subjectively, they are often more pleasant to drive.
bmw would be an exception, being notorious for using plastic parts designed to last only the duration of the first lease.
Yes, but that is kind of an irrelevant claim.
There's wildly different engineering and service recommendation ethos between Europe and Japan and it shows.
He could have just as easily said Volvo and Nissan and been just as correct but that's not a batting practice pitch over home plate for HN's biases the way <luxury German brand> and <toyota/honda> is.
https://www.kbb.com/car-news/consumer-reports-lexus-makes-th...
You're comparing apples to oranges using a scale derived for grapefruit and acting like it's some big accomplishment that the orange wins.
If Toyota was trying to build better driving machines than Audi, build to the bottom dollar like Chrysler or cram in new tech gimmicks like Kia they would score similarly in those qualities and in reliability because the tradeoffs are necessarily similiar.
All engineers have the same technology and supply chains at their disposal and the same laws of physics to constrain them. The reason Toyota's vehicles are reliable is because they make cars for people who want to pay top dollar for reliable. The reason Audi makes cars that drive great is because they make cars for people who want to pay top dollar for great driving.
At the end of the day it's just going to boil down to you a value judgement about which qualities are important.
If you buy a used Audi you are going to have a lot of problems. That’s what my comment addresses. The driving experience is not that good when the shocks are blown to shit, bearings are spun, or the timing chain inevitably fails and the pistons drive the valves through the head.
Also, my 4Runner will smoke most Audis, it has 385,000 kms on it, and I change the oil once or twice a year.
I bet most Audis the age and mileage of my 4Runner would start spinning bearings during a spirited drive, and my G35 just runs circles around them.
If you’re an idiot buy an Audi, if you’re looking for reliability buy a Toyota if you want a great sports car buy a Corvette. The only reason to buy an Audi is if you’re nostalgic for the Quattro days of rally.
I guess if you want to drive an iPhone they aren’t bad.
Audis are basically fat, slow and unreliable. (Yes they make some decent cars if you want to pay Z06 prices for Mustang performance with 6.0 powerstroke reliability.
Btw I’m German, I have a bit of an idea what the engineering culture is like. It’s basically an engineering circle jerk, anyone can make a big unreliable engine that produces less power in more space than a $300 pushrod LS.
Yes, they are very fragile, especially if you use them as the "ultimate driving machine" or are expecting "Being Ahead through Technology", if you drive your kids to soccer and follow the maintenance religiously they should last until your lease is up, or you exceed the mileage limit on your lease.
https://www.kbb.com/car-news/consumer-reports-lexus-makes-th...
BMW should just rebrand to the Ultimate Leasing Machine, as they are very cost effective due to for some reason people wanting used BMW's out of warranty.
Short of actually being able to look at a vehicle and assess its condition directly there is no free lunch. Any "signal" you can use will also be used by everyone else and the dealers will price it in.
I've never had an issue buying used (2-4 years old) cars from dealers. They've always been essentially like new. On top of that I have failed to do routine maintenance as scheduled. I usually do oil changes about every 10k because you really don't need to do it as often as they say.
That said... I've now had 3 cars that I bought around 30,000 miles and put over 100k miles on without any major maintenance. Just tires, brakes filters, and fluids. Maybe some weird one off thing, for example a little plastic gear in my steering system on my 2010 Hyundai recently broke and cost $500 to replace (@ 140,000 miles on the odo).
Truth. I bought a 2003 Ford Excursion in 2020. Parts are easy to find and are very compatible with F250s etc... It's all about resourcefulness. Not to mention I get to save a boat load of money in a used vehicle, I don't have to worry about damaging it too much. Scratch it a little with a tree branch, no problem, I don't care.
Not always true. DCU has to make a profit, so the floor of their auto loan is going to be like 1.5-2%. A car dealer is also making money from the sale of the car, I have gotten APRs like 0.9% from the likes of Honda, which is going to beat DCU.
Basically, shop around and take the better deal.
> Negotiate, even in times like this you can negotiate
Well, some cars you can't. Tesla has a fixed price, take it or walk. It's quite refreshing.
https://en.wikipedia.org/wiki/Tesla_US_dealership_disputes
Not sure I want to go through this process again and may just buy new in the future.
Of course I agreed and payed it off the same week, but these loans must be targeted toward the uneducated or poor.
I ended up going to the Audi dealership in town on a Saturday evening because I saw them post a used car on their website that was overpriced but such a unicorn I had to see it in person. I was too late for that car, but TL;DR - I bought a new car in their inventory for cash and it was a great experience. There was a Costco discount that put it below MSRP, they didn't care at all about cash vs finance, they kept the dealership open a few minutes past closing to finish off the state paperwork so I drove away with the permanent license plates, etc.
They didn't even deposit the check until a week later, LOL.
Obviously that's not relevant in the current low-supply environment, but it worked once and it will hopefully work again once supply returns.
One very important component to this: having the car inspected by an independent third party. In all (non-local) cases I was able to locate an independent repair place that would look at the car and send me a report. Levels of detail varied, some shops were set up for this and sent me a novel, others were lighter on fine details. I usually paid $50-200 for the service and I wouldn't buy a car without such an inspection.