Car dealers demand more cash for down payments
10-16-08, 07:38 PM
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Car dealers demand more cash for down payments
Car dealers demand more cash for down payments
By Chris Woodyard, USA TODAY
LOS ANGELES — Buying a new car?
Bring some extra cash.
Tighter credit standards are forcing many car buyers to put down more cash up front to get a loan.
The average down payment last month was $3,108, up 42% from $2,194 in the same month two years ago, Edmunds.com reports. That's the highest average down payment since the car-buying research site began tracking the number in 2002.
Lenders are pulling back on how much of the transaction price they'll finance, cutting their risk and requiring buyers to fork over more cash.
"Banks are a lot more stringent," says Jesse Toprak, a senior analyst for Edmunds. He advises buyers to get a loan approval before heading into showrooms so they won't be in a weakened position in price negotiations.
The average loan in August accounted for 88% of the car's value, down from 95% in July, says RDQ Economics.
The latest credit clampdown came this week from GMAC Financial Services, co-owned by General Motors and Cerberus Capital Management, which owns Chrysler.
GMAC is pulling back from financing extras besides vehicle purchase price, such as accessories, sales taxes, extended warranties or remaining debt on a trade-in vehicle. It also required that borrowers have credit ratings of 700 or higher.
Toyota Financial Services has taken a similar approach to extras, says spokeswoman Kerry Rivera, and retreated from deals in which it was lending up to 110% of a new vehicle's price.
Chase Auto Finance started cutting back high-loan-to-value deals last year. "The concern on some of these deals is making sure it's affordable for the consumer," says Chase spokeswoman Mary Kay Bean.
Tighter lending and forcing customers to have more cash is hampering automakers' attempts to revive battered sales.
To fight back, GM today begins a new ad campaign themed "Financing that Fits," aimed at luring customers who might be deterred by the financing issue.
Besides connecting buyers with a wider array of lenders, GM has revised incentives to help buyers with down payments, says spokesman John McDonald. As a result, "bonus cash" on a Saturn Aura sedan — a rebate that can be used as a down payment — is $2,000 starting this month, up from $1,250.
http://www.usatoday.com/money/autos/...t_N.htm?csp=34
Just a sign of the times. Hmmm, $3,100 average down payment and average auto value financed 88% which is down from 95%. Obviously going to always, always be underwater on your car loan.
Oh well, guess the party's over for more than just Wall Street.
By Chris Woodyard, USA TODAY
LOS ANGELES — Buying a new car?
Bring some extra cash.
Tighter credit standards are forcing many car buyers to put down more cash up front to get a loan.
The average down payment last month was $3,108, up 42% from $2,194 in the same month two years ago, Edmunds.com reports. That's the highest average down payment since the car-buying research site began tracking the number in 2002.
Lenders are pulling back on how much of the transaction price they'll finance, cutting their risk and requiring buyers to fork over more cash.
"Banks are a lot more stringent," says Jesse Toprak, a senior analyst for Edmunds. He advises buyers to get a loan approval before heading into showrooms so they won't be in a weakened position in price negotiations.
The average loan in August accounted for 88% of the car's value, down from 95% in July, says RDQ Economics.
The latest credit clampdown came this week from GMAC Financial Services, co-owned by General Motors and Cerberus Capital Management, which owns Chrysler.
GMAC is pulling back from financing extras besides vehicle purchase price, such as accessories, sales taxes, extended warranties or remaining debt on a trade-in vehicle. It also required that borrowers have credit ratings of 700 or higher.
Toyota Financial Services has taken a similar approach to extras, says spokeswoman Kerry Rivera, and retreated from deals in which it was lending up to 110% of a new vehicle's price.
Chase Auto Finance started cutting back high-loan-to-value deals last year. "The concern on some of these deals is making sure it's affordable for the consumer," says Chase spokeswoman Mary Kay Bean.
Tighter lending and forcing customers to have more cash is hampering automakers' attempts to revive battered sales.
To fight back, GM today begins a new ad campaign themed "Financing that Fits," aimed at luring customers who might be deterred by the financing issue.
Besides connecting buyers with a wider array of lenders, GM has revised incentives to help buyers with down payments, says spokesman John McDonald. As a result, "bonus cash" on a Saturn Aura sedan — a rebate that can be used as a down payment — is $2,000 starting this month, up from $1,250.
http://www.usatoday.com/money/autos/...t_N.htm?csp=34
Just a sign of the times. Hmmm, $3,100 average down payment and average auto value financed 88% which is down from 95%. Obviously going to always, always be underwater on your car loan.
Oh well, guess the party's over for more than just Wall Street.
10-17-08, 10:28 AM
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I don't get why people wouldn't get financed before they go over there. They know chances are the place is going to **** them over. I know the pricing of the car along with other details. Dealerships hate me because I don't fall for the "it has rims" or a "system".
The irony is that they're getting ****ed because they were trying to **** people.
The irony is that they're getting ****ed because they were trying to **** people.
And of course the wonderful part about any auto loan is that the interest is non deductible on your taxes. Obviously, a very large percentage of the home equity lines that were granted wound up being used to buy cars and far less useful junk at the mall. The interest on the equity line has limits and is only supposed to be deductible to the extent it was used to purchase or improve the property but I don't believe the IRS has gone after anybody yet for using the equity line for non property expenses.
Wonder how long it will take for people to get the message that you shouldn't be buying what you can't afford? Of course, mfrs will have to get the message that if people don't go into debt up to their eyeballs to buy their shiny new Mercedi E5 SM wunderpanzer, their sales volume will fall. And the pols need to figure out that stimulating the economy by encouraging going further into debt only works in DC.
10-17-08, 02:49 PM
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10-17-08, 03:11 PM
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Not everyone has that much money in the bank.
Also, especially around here, people trade every 3 years or so. In that type of situation, paying cash for the car is a losing proposition, so they lease, either a one-pay or monthly payments.
Also, especially around here, people trade every 3 years or so. In that type of situation, paying cash for the car is a losing proposition, so they lease, either a one-pay or monthly payments.
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10-17-08, 04:33 PM
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But if you are on the new car every 3 year cycle, whether bought or leased, you are going to spend a whole lot of money on cars and interest in your life. And I would agree that you probably never will have enough money in the bank to buy a car.
I have a seven year old GS that I bought for cash, new in 2k1. I haven't really been very impressed with much of anything I have seen to replace it even though I started looking this summer. I will wait till the new 7 is out (and out for a while) and the serious competition for it are the Panamera, A8, and maybe the S class but I doubt the S. Probably going to keep the GS for another couple of years (not brave enough to get a new model bimmer the first year out) and then go for one of those. And I will pay cash for it too.
And I probably will find that whatever the new one is, it isn't that much of an improvement over what will then be a nine year old Lexus. Different strokes for different folks but regardless of income, it is definitely possible to buy cars, either new or used, in cash and not finance. If you get on the finance or lease something every three year merry go round, it can be tough to get off.
10-17-08, 04:44 PM
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As a genuine old fart, I haven't financed a car in decades. 100% down and no payments for the rest of my life. And there is absolutely no way anyone could argue with the fact that if you finance at the dealer without a subsidized lease or special program (think Toyota's 0% or BMW leases), you will get screwed. The reason why people do go to dealers and use their financing, especially IMO for the American cars, is because the financing is and has been subsidized to move the cars and/or they can't get financing anywhere else.
And of course the wonderful part about any auto loan is that the interest is non deductible on your taxes. Obviously, a very large percentage of the home equity lines that were granted wound up being used to buy cars and far less useful junk at the mall. The interest on the equity line has limits and is only supposed to be deductible to the extent it was used to purchase or improve the property but I don't believe the IRS has gone after anybody yet for using the equity line for non property expenses.
Wonder how long it will take for people to get the message that you shouldn't be buying what you can't afford? Of course, mfrs will have to get the message that if people don't go into debt up to their eyeballs to buy their shiny new Mercedi E5 SM wunderpanzer, their sales volume will fall. And the pols need to figure out that stimulating the economy by encouraging going further into debt only works in DC.
And of course the wonderful part about any auto loan is that the interest is non deductible on your taxes. Obviously, a very large percentage of the home equity lines that were granted wound up being used to buy cars and far less useful junk at the mall. The interest on the equity line has limits and is only supposed to be deductible to the extent it was used to purchase or improve the property but I don't believe the IRS has gone after anybody yet for using the equity line for non property expenses.
Wonder how long it will take for people to get the message that you shouldn't be buying what you can't afford? Of course, mfrs will have to get the message that if people don't go into debt up to their eyeballs to buy their shiny new Mercedi E5 SM wunderpanzer, their sales volume will fall. And the pols need to figure out that stimulating the economy by encouraging going further into debt only works in DC.
10-17-08, 08:39 PM
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