Question about Car Financing

[cchen]

I'm planning on buying a VW Jetta... on their site it says they have 0.9 % APR financing?
Would financing through them be better than outside source, such as lendingtree or peoplefirst? peoplefirst has a 5.89% APR

 

[cchen]

Another question...
on carbuyingtips, it says to offer 5% over the dealer cost
that price is before taxes right?

 

[microAmp]

Are you sure you can get approved for .9%? Try to see if you can get the .9% if not see what lendingtree can give you.....

 

[Skinner2]

Usually they offer a low financing rate for a shorter term loan (eg. 3 years) then increase the rate as you increase the term. So you should look into that to see if you can afford the payments. If you can then it would be good to finance through VW and take the better rate. And to answer your question, there is absolutely no problems with financing an automobile through the automobile manufacturer's lending institution, it is just as reputable as any other lending institution out there....and like you have pointed out, you usually get better rates.

To answer your next question, in my experience you always make the deal before you take taxes into account. Taxes are the last thing that gets added on and you are nearly always responsible for them (unless there is some sort of a sale). Of course you should always take taxes into account when you are budgeting for a car and deciding what you can afford since it's money that you have to pay... unfortunately.

Hope that helps.

 

[Sluggo]

More than anything it depends on how much money the dealer has to cough up (nicely named dealer contribution) to the VW distributor for the 0.9% financing.

To get their customers the below market rate finance rate, the distributors of the cars ask the dealers to contribute a chunk of money to offset the cost of the low financing. Something along the lines of $1000 or more. Now while the low rate may seem attractive, you are actually paying more for the car because if you think for a minute that the dealer is going to eat this cost you are fooling yourself.

Just compare what they would sell you the car for a cash deal and your bank financing, as compared to what they would sell the car for with their below market rate financing. It could still be a better deal because they might still sell the car for a little less, because they still hope to make money on the "back end" of the deal.

The "back end" money is money they get through selling you a finance package, extended warranties etc. Selling me a finance package you ask? The dealership gets a kick back from lending institutions, because basically the dealership is doing all their selling for them. The higher rate, more options (credit life and the like) the more money they get. The "back end" money is generally more profitable than the "front end" money.

The "front end" money on a car deal is the actual amount they make on the car itself after paying the distibutor what they owe for the car.