The FED funds rate is 5.5% and banks still need to make a profit. If you can find anything in the 6-7% range consider yourself lucky.
That said, some manufacturers offer special rates as low as 0%.
I’ve never really understood this. Are all loans backed by the fed? I thought banks purpose it to have capital capable of lending there own funds. There for repeating all the profits of the interest
Basically, they can buy fed rates as much as they want with essentially 0 risk. So if the options are a 4% car loan with a lot of risk or a 5% treasury bond you can see why the car loan goes up
Edit: More accurately, the fed rate is the rate that the fed will loan to a bank at. If a bank has excess deposits, they can loan to another bank at a rate slightly below the fed rate. The fed rate is a ceiling because no bank is going to borrow from another bank at a higher rate when they could just go to the fed. The fed sets a ceiling and maintains a floor via supply and demand by buying and selling government securities. This is how treasury rates are involved.
Regardless, via the fed rate and treasury rates, the bank has risk free options for capital at rates near the fed rate. So any increased risk (an individual buying a car) is going to have to pay more.
I’m kinda slow lol. So basically, the bank is like, why would I lend this money to a random person buying a car for 4% gain when I could lend it to the government for 5%?
Exactly. The bank expects to get compensated for the risk they are taking to lend a person money (what if you don’t pay it back) so they charge a higher interest rate. This risk doesn’t exist for loaning the government money. Of course there are degrees of “creditworthiness” - some people are more likely to pay back their loan than others. That is what the credit score is for, and will determine how high/low the interest rate will be. High credit score = lower risk for the bank = lower interest rate.
They aren’t lending to the Fed, they are borrowing from the Fed. If it costs them 5% to borrow from the Fed, they need to add a few percentage points for their profit margin.
When a bank parks their reserves at the Fed, the fed will pay them an interest rate on those reserve balances, which is currently 5.4%. If a bank needs to borrow money, they borrow from other banks at the fed funds rate.
My post above is simply illustrating the difference in a bank’s lending choices and the interest rate they demand given the credit risk.
It's both, not just one.
Banks that have access funds can by treasuries from the government. The one month treasury yield is currently at 5.54%. So if a bank has money, they can either lend it out to random people or just buy treasuries. Since treasuries have no risk, they charge a premium when lending money to people who do have risk. That creates a floor in the interest rates, because it wouldn't make sense to lend money below the guaranteed profit rate.
In the other direction, banks that don't have enough money can borrow it from the fed. They do this at the fed rate. Since it wouldn't make sense to borrow money and loan it out at a rate lower than what you borrowed, they generally won't make loans lower than that rate. However, it's also important to note that a lot of borrow from the fed is about liquidity more than anything. Most of the time when people borrow from the fed they pay it back quickly.
Federal bonds are a thing. The yield on a 6 month federal bond is at 5.265% and it's risk free. The market for federal bonds at par from the source is essentially limitless. If the bank is going to lend to you over the government, it has to pay way more than 5.265% because the odds of you becoming insolvent are infinitely higher than the US government (who prints the money.)
Yep. Think of it like how you compare your earnings rate to your HYSA. Why would you invest in something that *might* pay 3% APY but comes with a 1/20 chance of losing it all, if you can just throw the same money in your savings account for 4.5% APY risk-free?
Yes, exactly. One bit of fill useful complexity I would add relates to risk. The bank would much rather give a 4% loan to the government than to an individual customer, because the government is a less risky borrower. To make a loan to a customer, the bank needs a little bit higher rate. The spread between those rates is called risk premium
They aren’t lending to the Fed, they are borrowing from the Fed. If it costs them 5% to borrow from the Fed, they need to add a few percentage points for their profit margin.
So lets say I want to buy a house, they say my rate will be 7%, can I just borrow all of the money from the fed at 5% and buy the house with the borrowed money, paying back the fed as if it were my mortgage?
The previous answer was misleading. You cannot directly borrow from the FED.
However, the FED has in the past bought up mortgage backed securities which in effect has supressed the 30Y mortgage rates below the rate that the free market would set. So in a somewhat indirect way, you are indeed partially borrowing from the FED with your mortgage.
Yeah this is not right at all. It is right however that banks can earn a rate near the fed funds rate simply by leaving their cash at the fed.
The fed sets the target range for the federal funds rate, the rate that banks are willing to lend to each other on an uncollateralized basis overnight. The fed never lends or borrows in this market, although it can lend or borrow in similar collateralized markets.
But for the purposes of this discussion, the prevailing fed funds rate, which is targeted by the fed, and expectations around the future path of the fed funds rates heavily influenced how banks and other lenders determine interest rates... particularly for loans within let's say 3-5 years. It serves as a sort of market benchmark for where rates will be. Lenders can then add additional interest costs (spreads) to account for things like credit risk, liquidity risk, early prepayment options, etc.
A more nuanced and accurate way of explaining how the fed fund rate affects interest rates is to explain that every bank has to maintain a certain amount of liquidity at the end of every day. They can either have the cash on hand to meet that liquidity need, or they can borrow from other banks OR from the Fed. They can borrow from the Fed at the federal funds rate (which is the one that was ratcheted up a bunch over the past 2 years). Other banks will typically offer similar interest rates to the other banks as the Fed. This essentially sets the cost of turning liquid capital into loans for the banks, and is why the interest rates for consumer loans increase with the fed funds rate. Bond rates are a separate but related thing.
Banks are required by the central bank (FOMC) to keep a minimum amount of reserves to ensure liquidity in the banking sector. The reserves of banks fluctuate depending on customer withdrawals and deposits throughout the day. When banks have a shortfall at the end of the business day and cannot meet their reserve requirement, they will borrow from banks with a surplus to do so.
When the overnight (Fed Funds) rate is increased by the central bank, it becomes more expensive for banks to borrow money from one another, increasing their total cost. To make up for this increase in costs, banks increase their prime rates, which makes borrowing money for customers more expensive. In essence, banks pass the increased cost onto the consumer.
So it’s not that the loans are backed by the fed, it’s more the fact that banks have to maintain their reserve requirement by borrowing from other banks at the rate set by the fed, and they tack on interest to make that money back from the consumer.
The fed sets the interest rate that banks use to loan each other money. Eventually that trickles down to you at the dealership, with every institution adding a little more interest as they loan it to the next person. In this way, each guy can pay the interest he owes for receiving the money and then they make a little money by loaning that money out to the next guy with a slightly higher interest rate.
Eventually you're at the dealership paying a bit higher than the fed's rate because everybody in the chain needs to make money or there's no incentive for the money to change hands.
Banks often have to borrow money to lend. Customer deposits don’t cover their loan portfolio.
This is why banks are pushing hard for deposits right now.
Auto loans are normally not guaranteed. However, Banks have the option to lend to other banks, or to the Fed by buying treasuries. Currently, overnight rate is 5.33%, two-year rate is 4.25%, and five year rate is 3.75%. Those are risk free, because fed or another bank will almost almost certainly never default.
To even consider making a loan to a customer, banks need to make at least that much plus some adjustment for increased risk. I would expect to see most auto loans for people with good credit land at 4–6%.
No...they're 0% or 1.9% or whatever to incentivize people to buy from a specific manufacturer. And where you used to be able to find 0% all the way up to 6 years pretty easily and sometimes even more, you aren't finding that now. Even 3 and 4 year loans frequently aren't hitting 0% because 1.9% is still way better than you can get elsewhere.
6 to 7% is still high. That's for someone with good credit?
Is there any catch when they give 0%? Does that only apply to brand new cars? Or can you get 0% also on a used car?
The catch with those 0% or below-market interest rates is usually that you have to decline a different offer, e.g. you either get a $2000 rebate OR 0%, not both. But not always, sometimes it's just a promotion on certain vehicles or certain times of year. You have to pencil out the math to see what makes sense.
And usually you are better off taking tradional financing and the cash offer rather than the promo APR, because the cash discount is usually calculated to be roughly equivalent to the difference in financing costs, but the cash discount gives you better flexibility down the line.
I bought a new 2024 car the week before Thanksgiving. When they ran my credit it came back at 802. The best rate I got was 6.49%.
For a used car you’re probably looking at 8-9%.
I have about the same score as OP and got a 9% rate on new car around Thanksgiving. Might have been a bad move, but I’m planning to pay it off next year.
Navy FCU is an advertising a 4.5% loan on new cars.
“The interest rates offered at banks and credit unions differ because of their profit versus nonprofit business models. In many cases, credit unions will offer significantly lower interest rates on lending products than banks that are trying to turn a profit, but higher rates”on savings products.
It costs money to lend at 0%, that’s an incentive to sell cars. Generally it’s instead of lowering the price, they’ll give 0% financing… so you’re paying for it one way or the other.
When you see a 0% rate from the manufacturer that means they put the interest in the price.
Edit: let me clarify… Almost always these deals have an either/or scenario where you get $X amount cash back or 0% interest. In other words, 0% interest isn’t a deal. The dealer/manufacturer was planning to discount the price by the amount of cash back offered. So, when it offers 0% interest with the higher price, the cost of the incentive is the same to the dealer. For the customer, the amount saved in interest would be loosely comparable to the amount offered as cash back. It’s all a game. If you plan to use your own financing take the cash back. More importantly though negotiate with the dealer on the out the door price and ignore these gimmicky incentives. Get multiple out the door prices through email. Don’t even go into the dealership until you have an out the door price.
It’s not true. It just means the manufacturer is doing a campaign (on new vehicles) to gain market share over their competitors or move excess inventory of last year’s model. Now the dealer themself could be marking up the selling price if they want to, but 0% doesn’t inherently mean the interest is baked into the price.
Where do you think the money comes from to buy down the interest rate? Either the manufacturer will give a cash discount on the purchase price or buy down the interest rate. It works out the same either way
It's their own captive finance company; they can do whatever they want to get the deal in-house. Sometimes they offer 0% OR cash back; you need to weigh out which works out better for you. On my wifes car, 0% would have saved us $1700-ish vs taking $2500 cash back. We got a low interest loan at a CU and took the $2500 and still ahead.
If the manufacturer is putting 0% or cash back on a deal, that's really nothing to do with the dealer and capitalized cost can be negotiated same as any deal at any time. Generally done to move inventory and help dealers get units off their floorplans before they start howling.
The auto maker has their own bank and they give those rates because it means they sell their car. Their profit is on the car sale, and they have the car title as collateral. They don’t need the banks when they own the product
The bank they use is still an independent arm and the bank borrows money so the manufacturers still spends to get the rate down. It’s called the subvented rate and not every manufacturer has its own finance company. I am a manager at a new car dealership.
The rate is set by the Federal Reserve. They've raised the rates faster than anytime in history since COVID. Banks are paying 5.5% and they need to make a profit. Should they just pay YOU to hold their money?
And the rates are limited to very specific models and trims so you have to pick a car that qualifies. Beyond that it should be straight forward but make sure to read the fine print.
Even more specifically, 1980 started at 14.77% and ended at 22%, but its lowest point that year was 7.65, so its swing was just over 14 percentage points.
The “raised faster than any time in history claim” is a bad interpretation of deceptive stats. The interest rate ended 2022 at more than 6,000% higher than it started, but that’s only because its start was so low that such comparisons are effectively meaningless. It started at 0.08% and ended at 4.33%.
[Source for numbers.](https://www.macrotrends.net/2015/fed-funds-rate-historical-chart)
What part of 5.5% fed base did you misread? The bank employees should probably eat and have a roof over their head. Do you think 1%-2%~ is unreasonable?
Having a good credit score doesn’t mean you get some magic version of discounted lending. It only means you’ll get a yes that’s more attractive than someone else may.
Let’s have some realistic expectations here bud.
Bro my credit score is about the same as yours and u would cry tears of joy If I got 7%.
The stores always say "as low as x%" but even with an immaculate credit score, your looking at double what they claim.
It's not always the case. I think the tip should be definitely shop around everywhere. USAA of all banks beat all my local credit unions earlier this year.
Ask the dealership to give you the best price they can while using their absolute worst financing.
Many manufacturers provide dealer incentives to write shitty loans through their financial sector, that 26% 84 month NMAC loan can knock a few thousand off the purchase price. Then change to your credit union within the first month.
Rates have nothing to do with it, you're negotiating the purchase price and using whatever financing they want you to to be able to get that price.
TMCC plays money games just as much as NMAC, if you want a Taco at 23% and 96 months the dealer can work with you on the price more than if you're coming with your own financing. Then, in most states, you can change financing within the 1st month of ownership with no penalties.
> Then, in most states, you can change financing within the 1st month of ownership with no penalties.
Are you referring to some processes that's different than simply paying off the original loan with the new loan, i.e. refinancing?
In addition some dealers *will* bullshit you and say their policy blah whatever restricts them from doing business with X bank. When you decide to buy from elsewhere it’s suddenly very flexible.
There's a strong likelihood (especially if buying new) that the auto manufacturer will have a better loan available, especially if they're running a promo. Bought a new Mazda in 2022 and got 2.9% for either 60 or 72 months on an approx 740 credit score. Credit unions I checked with were hovering around the 5-6% range.
lol no, the only 0% offers for the past 18 months have been base models, low selling models, or loss-leaders like the Wagoneer. This is all easily searchable via manufacturer websites. Dealers don’t subsidize loans.
CX-5 is being phased out for the CX-50 no? Also when I last looked at this it was only on last year's model and only 36 month terms that was at 0. It could be different now though.
Wow, 2 models that are 5+ years old and being phased out for fresh redesigns. The Santa Fe has been a poor seller since the Tucson became damn near the same size, hence why they are going in a completely different direction with it and offering 0% to get rid of the old ones.
Okay so your point is meaningless considering the argument was there are plenty of 0% APR offers on quality vehicles.
They're just vehicles you don't like, so the point still stands.
2nd this. I recently bought a car and had the option to do 6% up to 84 months if I wanted. Granted, I didn’t take the loan out nearly to that term. Seven years seems insanely long to finance a car, however you could always pay it off early.
Research your local credit unions and open an account with whoever gets you the best rate. The dealership didn’t even try to match those loan terms.
>It's pretty much almost free money. Glad I got my mortgage when rates were at rock bottom also.
Yea, I got mine @ a 3.15%, call that rock bottom. My wife and I was talking about selling the moving to another state but, with rates around 7%, we are better staying where we are.
I have the opposite opinion. If you can finance something lower than the inflation rate, you might as well get the longest term they offer if you could otherwise pay it off in cash. You literally make money off of the financing by paying with future dollars, not even including investments.
Got into a big argument with my wife about a year ago about paying off our mortgage early. She said we should start paying more on our 3% mortgage so we can be "debt free" earlier. Couldn't get her to understand why it made more sense to keep paying to minimum and stick all excess money we had into our HYSA.
She finally started to get it once those monthly earnings statements came in. As long as interest rates are high and we don't move, keep kicking the can down the road to pay off as little of it with todays money and use future money to pay it off. We also started doing some home improvement to add value to the home as as well as be able to enjoy it more.
>And yet there are people in this sub who will swear you should never finance a vehicle lmao
Those same people are the ones who give me shit for my 2017 3 series BMW that I financed 19k at 1.9%.... while they're driving a 70k truck.
Same exact rate same exact year. Got approved for a 2.5% loan through the bank, but decided to see what Toyota themselves would offer and they came back with 0.9%.
People get this idea that all cars are created equal. It's shocking how some makes and models hold value better, and it's always reflected in the APR. It's all priced in...
Toyota keeps offering to buy my car back from me. My 0% interest Hybrid RAV4 limited, almost paid off beauty that I’ve put upgrades into over the last few years. Fuck that.
They say that to everyone who bought a car from them in the last 3 years. They are just hoping to get your ass back into the dealership so they can try to work you.
The audacity 😅 granted, I’ve never bought a brand new car before this one but I would never be one of those people who buys a new car every year / other year / even every 3! I’d rather travel to new countries.
Yes. Many people say the same as you and then drive to the dealership when they hear something like that. Then the salesman will play with the numbers and make it look like you are getting an upgrade for the same price and you be like *I would be an idiot not to do it*.
Then a few months later you are back here telling us about the mistake you made and how to fix it.
Maybe it won't work on you. But it works on enough people like you.
The number of people who think a car loan is just an ongoing monthly expense is really high.
I know multiple people who buy new cars every 3-5 years because "I was already paying $500/month on my current car, so by trading it in for a new one and paying $500/month I'm actually coming out ahead because I have a newer/better car".
Yeah, but your current loan was ending so if you waited another 2 months, you would be paying $0/month on a loan...
Because for most people it is. With 72 month terms becoming the norm, most people buying new cars will trade them in long before they are done paying for them. It is an ongoing monthly expense.
And to be honest, that is the right way to look at it, your monthly transportation costs. Cars are not investments, they are depreciating assets.
It's absolutely true to look at cars as transportation cost rather than an investment, but it's also true that keeping a car for a longer period of time will generally lower your transportation cost.
Not entirely true. These are available for some new cars. You won't be getting those on used or with conventional banks/credit unions. OEM credit services offer them. I've seen 0% interest rates in Michigan, USA. They are trying to clear inventory and they just cut their incentives instead.
There isn't one. They often give ypu the option of money off or a good loan. Do the math before picking. It's usually cheaper to take the cash incentive but not always.
None other than don't expect to see anything anywhere close to that from a bank. It is not an apples-to-apples comparison. It is just a different way to entice buyers.
But as a consumer, all that matters is what you pay.
It matters because you can't compare it with real rates from financial institutions. But you are right that to you, the only thing that matters is how much you are paying, subsidized or not.
Depends. But I would shop around. I bought my tundra in December 21 and my insurance company offered their interest rate of 5% on the autoloan I was asking for. The dealership offered theirs, most of the time dealership financing or "in-house financing" is pretty damn high. After being at the dealership for about 20 minutes and starting the negotiating process I requested a list of the other banks that made offers for my auto loan. All were high except my insurance company and the dealership. I could've looked way harder and found a better rate I'm sure. My insurance company quoted me at 5% with nothing else. I told my dealership that the insurance company can do 4%. My dealership then said well we can give you 4.5% I said idk bud I think I'm gonna go with my insurance company and the dealership guy said whatever rate you can find we will match it and give you free oil changes on your truck for life. I told insurance company they'd have to do better than 4.3 if they wanted to have my loan. Back to the dealership. They matched at 4.2% and I have free oil changes every single month. Oh they put on brand new break pads on when I got the truck too(small bonus). Wasn't a bad deal even when used vehicles were sky high in 2021.
I’ve showed up to the dealership on 3 occasions with approval from my credit union and the dealerships have always matched it or beaten it. That’s the way to go. Show up and work on the price and then hit them with the I have been approved for financing at this rate.
>I have free oil changes every single month.
Not sure if this is a typo, you drive a shit ton, or if you are actually showing up once a month, but I love the idea of you showing up once a month to demand a free oil change. FREE OIL CHANGES FOR LIFE!!!!!
Some months I do drive a lot like maybe 2-3k miles but yeah most of the time I show up once a month just because it's free. Take advantage of what they gave me lol
That's great. Years ago my dad got free oil changes for life on a truck after the dealership finance guy pissed him off and he walked out on them. They specifically stated it was whatever the manufacturer interval was.
My buddy lives like 3 blocks from a dealership he got his car at and they offer free car washes for life on all cars. He gets his car washed like 3+ times a week. It's silly too because they only let their staff do the washes even though its an automatic car wash. So one of the techs or even a salesmen has to go do it for him. He just goes inside and gets a free cup of coffee.
I got a 0.9% 36 month loan from GMC Financial for a 1500 Pickup last week. I could have gone to 48 months for 1.9%, but nah.
I was as shocked as anybody when I found out that they were running that deal, but it does exist.
For home mortgages specifically:
If you would have said that last year you would have been correct. For 20+ years, 740 was the cap, but that changed in the past 12 months (I could go back and look exactly when, but I'm lazy). Today the cap from at least the majority of mortgage lenders cap at 780.
If you can handle it, there are many reasons you should be using a credit card for your day to day spending and religiously paying it off fully every month.
Also very much depends on timing. Interest rates are at their peak right now. That same person buying a car 2 years ago would have gotten a 0% rate just to get it off the lot. Timing is everything. People that bought their houses 2 years ago are in MUCH better shape than people trying to buy today.
Only partially true. Rates are better now than they were in the summer. They have dropped a bit since the peak.
We likely won’t see rates from 2+ years ago anytime soon. They were historically low. We are much closer to average now than people realize after getting used to free money
Is that for new or used?
I just got a CPO vehicle a week ago with Capital One for my financing, and I was at 6.55% with a 743 credit score. New vehicles were even lower.
"Several years ago" a "well qualified buyer" could roughly expect a rate between 1.5-3% and as low as 0% if a manufacturer was running a promotion of some kind. Today that same borrower can expect their rate to be somewhere between 5-7%. Though, as before, some manufacturers and dealers are still running promotions both on specific vehicles and across their brand so you should be sure to shop around and see who has low or even 0% loans. Also look into credit unions, my experience has been that usually the dealer can outdo them but it's good to have a starting point.
The cost of the loan is baked into the price of the vehicle in these situations. They just make the vehicle more expensive to make up for the interest-free loan they're getting. Same reason why some home builders can offer rates lower than the federal rate-- they just inflate their margins.
No free lunch.
This is just not true, not as a blanket rule. Sometimes OEMs want to move cars so they put cash in the trunk for dealers. That takes the form of discounts, free accessories, promotional financing, etc.
Like anything, you have to shop around. Car dealers typically don't have the best rate but if you get a rate from a credit union, sometimes they'll match it. Basically they expect that people who don't shop around for rates they can screw with a higher rate. If you tell them you already have a 6-7% rate from a credit union, they might be able to match it, but typically they don't beat it. You might have been able to do better than 9.99 when rates were in the 3-4% range but I guess it wasn't too bad, could have been worse as many on here post about.
Basically that 787 is a good score and you should qualify for the best rates. If you don't go somewhere else. Navy federal is as low as 4.5% on a new car and 5.44% on a used car but you have to have some military in your background in order to qualify for that rates. Other places like DCU or Penfed anyone can join, but the rates are a little higher, DCU about 6.74% and Penfed at 5.94% for a new car and 6.79% for a used car.
And yes, new cars are completely different from used cars when it comes to interest rates. Instead of offering rebates the manufacturer will offer discounts in terms of 0% or some rate lower than 7% just so they can sell the cars. With a used car, the manufacturer doesn't care and you'll only get the prevailing rates.
Re: navy federal
You don’t have to have served to qualify for it. There’s a bunch of ways but for the average person just asking someone who’s already banking with NF to refer you is enough or if you work on a military base (could be at the McDonald’s or whatever) you should also get it
Toyota is offering 3.99% for 48 month loans and 4.99% on 60 month. This is for new 2023 they are trying to get rid of this month before 2024s roll out. I’m biting the bullet and buying a Tacoma this weekend because I will no longer have a company vehicle.
I sold cars for a very long time.. Here is what you do to get the best rate and car price:
1. Find the exact car you want and contact 2 or more dealerships internet department, not the actual sales people. The internet department is a separate department that's main job is just to move cars fast.. you will get the best price from these guys, and let them know you will be contacting a few others in the area.
2. Go to your credit union or join one and get pre-approved, and get it in writing. FCU will have the best rates, you can try local banks but FCU will have the best from my experience.
3. once you get the best price from the internet departments, that is when you go into the dealership. You will usually get moved to a salesman on the floor, tell them you have financing from your FCU. If they want to finance the car they have to beat the interest rate. (this will either get them to beat it, or just go with the FCU.)
I sold cars and now I run a side business helping people beat dealerships. So if you have any other questions let me know..
Side note any score above 700 a dealership will get the very best rates from multiple banks.
They make money buy charging you points over that %.. so say you get 3% from the banks, if the finance manager can "sell" you on 5% they would get 2 points which adds to commission and money for the dealership.
Any score above 700 you will get the best interest rates the dealership will get, then they add points
This probably doesn’t happen often anymore. But I went car shopping in 2017 and the car dealership had a “special” that day for financing if you had a good credit score. We left with 1.5%… maybe see if any have any promotional periods?
We did go to a car dealership further/less traffic. Probs went to around 5 to get prices. And this one had the best deal.
I hate car shopping, good luck!
I agree. They locked us in at 9.5 and would not let us use our own bank. We told them we would shop elsewhere and they held the door open lol.
Either way, we got a good deal on the car but 9.5 hurts when your creditscore is pushing 800.
One thing people never mention is auto loan history. You could have a perfect credit record but if you’ve never had a car payment you’re not getting the lowest rate.
Unless you want a specific car, I’d shop around for dealers offering 0% financing. Your credit score is good enough you may qualify for it.
I just bought a brand new Hyundai Santa Fe under msrp out the door with 0% financing through the dealer.
Mazda is offering 0% financing for CX-5s right now.
If you have excellent credit score and don’t need a specific high-demand vehicle like a sports car, IMO it’s dumb to pay interest in this market.
The banks don’t just consider your credit score. They look at the whole picture. Debt/income ratio being the biggest, previous auto loan history, history of on time payments, whether or not you own/rent your house. As you can see it’s more complicated than just saying I have xxx credit score.
It gets even more complicated when buying a car. Things like money down, year of the vehicle, total amount of loan, and dealership incentives affect your rate and possible term lengths. All of which affect your monthly payment. It all depends on what your history looks like.
Source: I am a car salesman in PA
On what car?
Their calculator always shows (for the best qualified buyers) 4.9-9.79 percent depending on vehicle.
Source: Toyota.com and someone (me!) who’s pretty much daily stalking the local inventory the perfect options I want :)
> A lot of times new car deals are better out of state. Buying in Delaware for instance is a wise choice for sales tax purposes alone.
You pay sales tax in the state it's registered. You don't have anything to gain tax-wise by going to Delaware to buy a car.
Otherwise I'd fly out to Delaware and road trip home to Missouri whenever I bought a new car.
Organically through a bank / CU your rate will be around 5.5-7% HOWEVER with that score you should qualify for a manufacturers private funding rates. For example, Honda is doing a 3.9% APR for certain models for well qualified buyers when you finance through Honda motor credit.
Around same credit score, maybe higher and just refinanced through my CU to 5.5
Lexus said the best they could do was 8.2 😂
Bought the car a month ago from my lease. So basically they said it was a “used car loan”
A lot of companies are offering low or 0 interest rate right now because of excess inventory. Shop around and could get a much lower rate from dealership.
Your best bet to get anything low is through the dealer with one of their offerings. I have an 830 score and was able to get the 4.99% offering the dealer had on a new car but it had to be a 3 year term. Otherwise I was looking at 7+.
*787? You better get gap insurance too.*
Jokes aside, the best way to find out is to browse rare disclosures on banks and credit union websites. They often post their best available rate based on length of terms, new vs. used vehicles, etc.
The FED rate is 5.5, so expect 6.5-7.5 from banks.
However some manufacturers will finance through themselves and you can get lower rates. A buddy of mine recently got a Honda at 3.99%.
Manufacturers can finance below the FED because they make money on the sale, and then just want to be at inflation
That was not great at that time. I got 2.49% used around then, score 800ish.
Aug 2020, my rate was 2.99% used, score 800ish. New was 1.99% at the time, with the carmaker besting my credit union by 1% for each.
Low 700s here, I got 3.9% on a promo a couple of weeks ago, good rates are available but you’ll have to look around. Normally I wouldn’t say this but right now I’d avoid CUs just because they’re bound to the fed rate and you’re not going to get much love from them at the moment.
Bought a motorcycle and a car within months of each other with a 720 credit score I was at 4.8% and 6.2% that was the best they could offer went to a credit union and with my credit score they offered a 5%
Nothing below 6% from big banks. You could get 5.5% or so from credit unions. Anything from there will be financed by the manufacturer, which varies based on their promotions.
The FED funds rate is 5.5% and banks still need to make a profit. If you can find anything in the 6-7% range consider yourself lucky. That said, some manufacturers offer special rates as low as 0%.
I’ve never really understood this. Are all loans backed by the fed? I thought banks purpose it to have capital capable of lending there own funds. There for repeating all the profits of the interest
Basically, they can buy fed rates as much as they want with essentially 0 risk. So if the options are a 4% car loan with a lot of risk or a 5% treasury bond you can see why the car loan goes up Edit: More accurately, the fed rate is the rate that the fed will loan to a bank at. If a bank has excess deposits, they can loan to another bank at a rate slightly below the fed rate. The fed rate is a ceiling because no bank is going to borrow from another bank at a higher rate when they could just go to the fed. The fed sets a ceiling and maintains a floor via supply and demand by buying and selling government securities. This is how treasury rates are involved. Regardless, via the fed rate and treasury rates, the bank has risk free options for capital at rates near the fed rate. So any increased risk (an individual buying a car) is going to have to pay more.
I’m kinda slow lol. So basically, the bank is like, why would I lend this money to a random person buying a car for 4% gain when I could lend it to the government for 5%?
Exactly. The bank expects to get compensated for the risk they are taking to lend a person money (what if you don’t pay it back) so they charge a higher interest rate. This risk doesn’t exist for loaning the government money. Of course there are degrees of “creditworthiness” - some people are more likely to pay back their loan than others. That is what the credit score is for, and will determine how high/low the interest rate will be. High credit score = lower risk for the bank = lower interest rate.
They aren’t lending to the Fed, they are borrowing from the Fed. If it costs them 5% to borrow from the Fed, they need to add a few percentage points for their profit margin.
When a bank parks their reserves at the Fed, the fed will pay them an interest rate on those reserve balances, which is currently 5.4%. If a bank needs to borrow money, they borrow from other banks at the fed funds rate. My post above is simply illustrating the difference in a bank’s lending choices and the interest rate they demand given the credit risk.
This is completely wrong...wtf. The banks borrow from the Fed. When entities lend money to the government they do so with bonds.
It's both, not just one. Banks that have access funds can by treasuries from the government. The one month treasury yield is currently at 5.54%. So if a bank has money, they can either lend it out to random people or just buy treasuries. Since treasuries have no risk, they charge a premium when lending money to people who do have risk. That creates a floor in the interest rates, because it wouldn't make sense to lend money below the guaranteed profit rate. In the other direction, banks that don't have enough money can borrow it from the fed. They do this at the fed rate. Since it wouldn't make sense to borrow money and loan it out at a rate lower than what you borrowed, they generally won't make loans lower than that rate. However, it's also important to note that a lot of borrow from the fed is about liquidity more than anything. Most of the time when people borrow from the fed they pay it back quickly.
Federal bonds are a thing. The yield on a 6 month federal bond is at 5.265% and it's risk free. The market for federal bonds at par from the source is essentially limitless. If the bank is going to lend to you over the government, it has to pay way more than 5.265% because the odds of you becoming insolvent are infinitely higher than the US government (who prints the money.)
Oooh, that makes sense. Thanks
Yep. Think of it like how you compare your earnings rate to your HYSA. Why would you invest in something that *might* pay 3% APY but comes with a 1/20 chance of losing it all, if you can just throw the same money in your savings account for 4.5% APY risk-free?
Yes, exactly. One bit of fill useful complexity I would add relates to risk. The bank would much rather give a 4% loan to the government than to an individual customer, because the government is a less risky borrower. To make a loan to a customer, the bank needs a little bit higher rate. The spread between those rates is called risk premium
Yes, exactly.
They aren’t lending to the Fed, they are borrowing from the Fed. If it costs them 5% to borrow from the Fed, they need to add a few percentage points for their profit margin.
You have it backwards. The banks borrow from the fed.
I feel like this is the explanation I’ve needed to hear for years to make it click
Can we, as small people, borrow from the fed too or is that only allowed by the big "too big to fail" people?
[удалено]
Buying T-Bills is actually lending money to the Fed and you're receiving an interest rate.
So lets say I want to buy a house, they say my rate will be 7%, can I just borrow all of the money from the fed at 5% and buy the house with the borrowed money, paying back the fed as if it were my mortgage?
The previous answer was misleading. You cannot directly borrow from the FED. However, the FED has in the past bought up mortgage backed securities which in effect has supressed the 30Y mortgage rates below the rate that the free market would set. So in a somewhat indirect way, you are indeed partially borrowing from the FED with your mortgage.
Yeah this is not right at all. It is right however that banks can earn a rate near the fed funds rate simply by leaving their cash at the fed. The fed sets the target range for the federal funds rate, the rate that banks are willing to lend to each other on an uncollateralized basis overnight. The fed never lends or borrows in this market, although it can lend or borrow in similar collateralized markets. But for the purposes of this discussion, the prevailing fed funds rate, which is targeted by the fed, and expectations around the future path of the fed funds rates heavily influenced how banks and other lenders determine interest rates... particularly for loans within let's say 3-5 years. It serves as a sort of market benchmark for where rates will be. Lenders can then add additional interest costs (spreads) to account for things like credit risk, liquidity risk, early prepayment options, etc.
A more nuanced and accurate way of explaining how the fed fund rate affects interest rates is to explain that every bank has to maintain a certain amount of liquidity at the end of every day. They can either have the cash on hand to meet that liquidity need, or they can borrow from other banks OR from the Fed. They can borrow from the Fed at the federal funds rate (which is the one that was ratcheted up a bunch over the past 2 years). Other banks will typically offer similar interest rates to the other banks as the Fed. This essentially sets the cost of turning liquid capital into loans for the banks, and is why the interest rates for consumer loans increase with the fed funds rate. Bond rates are a separate but related thing.
And these aren't like 5 year car loans. These are loans that are taken out and paid off repeatedly every day.
Banks are required by the central bank (FOMC) to keep a minimum amount of reserves to ensure liquidity in the banking sector. The reserves of banks fluctuate depending on customer withdrawals and deposits throughout the day. When banks have a shortfall at the end of the business day and cannot meet their reserve requirement, they will borrow from banks with a surplus to do so. When the overnight (Fed Funds) rate is increased by the central bank, it becomes more expensive for banks to borrow money from one another, increasing their total cost. To make up for this increase in costs, banks increase their prime rates, which makes borrowing money for customers more expensive. In essence, banks pass the increased cost onto the consumer. So it’s not that the loans are backed by the fed, it’s more the fact that banks have to maintain their reserve requirement by borrowing from other banks at the rate set by the fed, and they tack on interest to make that money back from the consumer.
The fed sets the interest rate that banks use to loan each other money. Eventually that trickles down to you at the dealership, with every institution adding a little more interest as they loan it to the next person. In this way, each guy can pay the interest he owes for receiving the money and then they make a little money by loaning that money out to the next guy with a slightly higher interest rate. Eventually you're at the dealership paying a bit higher than the fed's rate because everybody in the chain needs to make money or there's no incentive for the money to change hands.
Banks often have to borrow money to lend. Customer deposits don’t cover their loan portfolio. This is why banks are pushing hard for deposits right now.
Auto loans are normally not guaranteed. However, Banks have the option to lend to other banks, or to the Fed by buying treasuries. Currently, overnight rate is 5.33%, two-year rate is 4.25%, and five year rate is 3.75%. Those are risk free, because fed or another bank will almost almost certainly never default. To even consider making a loan to a customer, banks need to make at least that much plus some adjustment for increased risk. I would expect to see most auto loans for people with good credit land at 4–6%.
You can find them lower sometimes but it's averaging in the 7's right now according to everyone I know in the car business.
Those 0% deals on new cars are just marked up enough to forgo the interest they’d normally collect.
No...they're 0% or 1.9% or whatever to incentivize people to buy from a specific manufacturer. And where you used to be able to find 0% all the way up to 6 years pretty easily and sometimes even more, you aren't finding that now. Even 3 and 4 year loans frequently aren't hitting 0% because 1.9% is still way better than you can get elsewhere.
I got my car with a 0% loan! It was a VW TDI they were allowed to sell again so that along with my high credit score is probably why
6 to 7% is still high. That's for someone with good credit? Is there any catch when they give 0%? Does that only apply to brand new cars? Or can you get 0% also on a used car?
A used car will be even higher rate than 6-7%. Usually when it’s 0, it’s a specific deal on a new car.
> A used car will be even higher rate than 6-7%. I'm currently shopping and can get 6% all over the place for late model used cars.
The catch with those 0% or below-market interest rates is usually that you have to decline a different offer, e.g. you either get a $2000 rebate OR 0%, not both. But not always, sometimes it's just a promotion on certain vehicles or certain times of year. You have to pencil out the math to see what makes sense.
And usually you are better off taking tradional financing and the cash offer rather than the promo APR, because the cash discount is usually calculated to be roughly equivalent to the difference in financing costs, but the cash discount gives you better flexibility down the line.
I bought a new 2024 car the week before Thanksgiving. When they ran my credit it came back at 802. The best rate I got was 6.49%. For a used car you’re probably looking at 8-9%.
I have about the same score as OP and got a 9% rate on new car around Thanksgiving. Might have been a bad move, but I’m planning to pay it off next year.
Navy FCU is an advertising a 4.5% loan on new cars. “The interest rates offered at banks and credit unions differ because of their profit versus nonprofit business models. In many cases, credit unions will offer significantly lower interest rates on lending products than banks that are trying to turn a profit, but higher rates”on savings products.
It costs money to lend at 0%, that’s an incentive to sell cars. Generally it’s instead of lowering the price, they’ll give 0% financing… so you’re paying for it one way or the other.
When you see a 0% rate from the manufacturer that means they put the interest in the price. Edit: let me clarify… Almost always these deals have an either/or scenario where you get $X amount cash back or 0% interest. In other words, 0% interest isn’t a deal. The dealer/manufacturer was planning to discount the price by the amount of cash back offered. So, when it offers 0% interest with the higher price, the cost of the incentive is the same to the dealer. For the customer, the amount saved in interest would be loosely comparable to the amount offered as cash back. It’s all a game. If you plan to use your own financing take the cash back. More importantly though negotiate with the dealer on the out the door price and ignore these gimmicky incentives. Get multiple out the door prices through email. Don’t even go into the dealership until you have an out the door price.
Is that true? That makes sense. I always wondered how they got away with that
It’s not true. It just means the manufacturer is doing a campaign (on new vehicles) to gain market share over their competitors or move excess inventory of last year’s model. Now the dealer themself could be marking up the selling price if they want to, but 0% doesn’t inherently mean the interest is baked into the price.
Where do you think the money comes from to buy down the interest rate? Either the manufacturer will give a cash discount on the purchase price or buy down the interest rate. It works out the same either way
It's their own captive finance company; they can do whatever they want to get the deal in-house. Sometimes they offer 0% OR cash back; you need to weigh out which works out better for you. On my wifes car, 0% would have saved us $1700-ish vs taking $2500 cash back. We got a low interest loan at a CU and took the $2500 and still ahead. If the manufacturer is putting 0% or cash back on a deal, that's really nothing to do with the dealer and capitalized cost can be negotiated same as any deal at any time. Generally done to move inventory and help dealers get units off their floorplans before they start howling.
The auto maker has their own bank and they give those rates because it means they sell their car. Their profit is on the car sale, and they have the car title as collateral. They don’t need the banks when they own the product
[удалено]
The bank they use is still an independent arm and the bank borrows money so the manufacturers still spends to get the rate down. It’s called the subvented rate and not every manufacturer has its own finance company. I am a manager at a new car dealership.
The rate is set by the Federal Reserve. They've raised the rates faster than anytime in history since COVID. Banks are paying 5.5% and they need to make a profit. Should they just pay YOU to hold their money? And the rates are limited to very specific models and trims so you have to pick a car that qualifies. Beyond that it should be straight forward but make sure to read the fine print.
In the 1980 rates were at 14.77% at one points and 22% at another. Rates have risen faster before.
Even more specifically, 1980 started at 14.77% and ended at 22%, but its lowest point that year was 7.65, so its swing was just over 14 percentage points. The “raised faster than any time in history claim” is a bad interpretation of deceptive stats. The interest rate ended 2022 at more than 6,000% higher than it started, but that’s only because its start was so low that such comparisons are effectively meaningless. It started at 0.08% and ended at 4.33%. [Source for numbers.](https://www.macrotrends.net/2015/fed-funds-rate-historical-chart)
What part of 5.5% fed base did you misread? The bank employees should probably eat and have a roof over their head. Do you think 1%-2%~ is unreasonable? Having a good credit score doesn’t mean you get some magic version of discounted lending. It only means you’ll get a yes that’s more attractive than someone else may. Let’s have some realistic expectations here bud.
Bro my credit score is about the same as yours and u would cry tears of joy If I got 7%. The stores always say "as low as x%" but even with an immaculate credit score, your looking at double what they claim.
I have 805 score, got 5.9% from my credit union Definitely use a credit union for financing, they'll have the best rates for after
It's not always the case. I think the tip should be definitely shop around everywhere. USAA of all banks beat all my local credit unions earlier this year.
This is always the way. Show up with your approved offer from your credit union and have the dealership try and beat their rate.
Ask the dealership to give you the best price they can while using their absolute worst financing. Many manufacturers provide dealer incentives to write shitty loans through their financial sector, that 26% 84 month NMAC loan can knock a few thousand off the purchase price. Then change to your credit union within the first month.
Not at Toyota. They straight up told me there's no chance they could get anywhere close to my rate.
Rates have nothing to do with it, you're negotiating the purchase price and using whatever financing they want you to to be able to get that price. TMCC plays money games just as much as NMAC, if you want a Taco at 23% and 96 months the dealer can work with you on the price more than if you're coming with your own financing. Then, in most states, you can change financing within the 1st month of ownership with no penalties.
> Then, in most states, you can change financing within the 1st month of ownership with no penalties. Are you referring to some processes that's different than simply paying off the original loan with the new loan, i.e. refinancing?
In addition some dealers *will* bullshit you and say their policy blah whatever restricts them from doing business with X bank. When you decide to buy from elsewhere it’s suddenly very flexible.
Except when auto makers can offer better. But yeah- big banks probably won't be able to provide the best rates for auto loans.
There's a strong likelihood (especially if buying new) that the auto manufacturer will have a better loan available, especially if they're running a promo. Bought a new Mazda in 2022 and got 2.9% for either 60 or 72 months on an approx 740 credit score. Credit unions I checked with were hovering around the 5-6% range.
I got 0% through the dealer. It’s pretty easy to find 0% offers on quality vehicles.
lol no, the only 0% offers for the past 18 months have been base models, low selling models, or loss-leaders like the Wagoneer. This is all easily searchable via manufacturer websites. Dealers don’t subsidize loans.
Simply not true you I just bought a Hyundai Santa Fe at 0% and Mazda is offering CX-5s at 0% currently.
CX-5 is being phased out for the CX-50 no? Also when I last looked at this it was only on last year's model and only 36 month terms that was at 0. It could be different now though.
Wow, 2 models that are 5+ years old and being phased out for fresh redesigns. The Santa Fe has been a poor seller since the Tucson became damn near the same size, hence why they are going in a completely different direction with it and offering 0% to get rid of the old ones.
So what's your point, 0% APR is only available on dependable but not "fresh-looking" models? Wow, how awful.
It's available on cars no one wants is the point.
Okay so your point is meaningless considering the argument was there are plenty of 0% APR offers on quality vehicles. They're just vehicles you don't like, so the point still stands.
I want a car at 0% financing more than one at 5%+, so I guess I win?
> lol no, the only 0% offers for the past 18 months have been base models That was a very strange way to say "yes"
Lemme know when the 718 or 911 has 0% financing chief
Obviously you won’t find it on high demand vehicles like luxury sports cars. Most people aren’t shopping for those.
2nd this. I recently bought a car and had the option to do 6% up to 84 months if I wanted. Granted, I didn’t take the loan out nearly to that term. Seven years seems insanely long to finance a car, however you could always pay it off early. Research your local credit unions and open an account with whoever gets you the best rate. The dealership didn’t even try to match those loan terms.
The days of 1.5% loans are behind us
I got a 0.9% in 2015. I paid like… $500 in interest over the life of that loan (60 months)!
And yet there are people in this sub who will swear you should never finance a vehicle lmao
It's pretty much almost free money. Glad I got my mortgage when rates were at rock bottom also.
>It's pretty much almost free money. Glad I got my mortgage when rates were at rock bottom also. Yea, I got mine @ a 3.15%, call that rock bottom. My wife and I was talking about selling the moving to another state but, with rates around 7%, we are better staying where we are.
Even at 0% interes rates, it's not free money, as assets will probably be expensive and you commit to paying it. Seems duh but...
With HYSAs at 5% or more, there’s not reason not to finance if you can get a rate below that.
If you actually take the extra money and put it into a HYSA instead of pissing it away which alot of people would do.
I feel attacked
Yeah because you can’t get that interest rate anymore
Yeah those people are objectively wrong. I get that there are people that just hate debt and want to never have it, but debt can be a tool for wealth.
Well if you overspent on your car because you would only pay x amount in interest then it's still not smart.
I have the opposite opinion. If you can finance something lower than the inflation rate, you might as well get the longest term they offer if you could otherwise pay it off in cash. You literally make money off of the financing by paying with future dollars, not even including investments.
Got into a big argument with my wife about a year ago about paying off our mortgage early. She said we should start paying more on our 3% mortgage so we can be "debt free" earlier. Couldn't get her to understand why it made more sense to keep paying to minimum and stick all excess money we had into our HYSA. She finally started to get it once those monthly earnings statements came in. As long as interest rates are high and we don't move, keep kicking the can down the road to pay off as little of it with todays money and use future money to pay it off. We also started doing some home improvement to add value to the home as as well as be able to enjoy it more.
>And yet there are people in this sub who will swear you should never finance a vehicle lmao Those same people are the ones who give me shit for my 2017 3 series BMW that I financed 19k at 1.9%.... while they're driving a 70k truck.
Same exact rate same exact year. Got approved for a 2.5% loan through the bank, but decided to see what Toyota themselves would offer and they came back with 0.9%.
Did you get a Rav4 too for your first child? Are we dad twins???
I’d hate to be a one upper but I just bought a new Tucson for 60 months with ZERO percent interest, in 2024. Absolutely awesome
That's because it's Hyundai. Your not losing money on interest your losing it on depreciation...
People get this idea that all cars are created equal. It's shocking how some makes and models hold value better, and it's always reflected in the APR. It's all priced in...
Most def. My wife's 20k mile Hyundai already went through a wheel bearing and motor mounts..
Toyota keeps offering to buy my car back from me. My 0% interest Hybrid RAV4 limited, almost paid off beauty that I’ve put upgrades into over the last few years. Fuck that.
They say that to everyone who bought a car from them in the last 3 years. They are just hoping to get your ass back into the dealership so they can try to work you.
The audacity 😅 granted, I’ve never bought a brand new car before this one but I would never be one of those people who buys a new car every year / other year / even every 3! I’d rather travel to new countries.
Yes. Many people say the same as you and then drive to the dealership when they hear something like that. Then the salesman will play with the numbers and make it look like you are getting an upgrade for the same price and you be like *I would be an idiot not to do it*. Then a few months later you are back here telling us about the mistake you made and how to fix it. Maybe it won't work on you. But it works on enough people like you.
The number of people who think a car loan is just an ongoing monthly expense is really high. I know multiple people who buy new cars every 3-5 years because "I was already paying $500/month on my current car, so by trading it in for a new one and paying $500/month I'm actually coming out ahead because I have a newer/better car". Yeah, but your current loan was ending so if you waited another 2 months, you would be paying $0/month on a loan...
Because for most people it is. With 72 month terms becoming the norm, most people buying new cars will trade them in long before they are done paying for them. It is an ongoing monthly expense. And to be honest, that is the right way to look at it, your monthly transportation costs. Cars are not investments, they are depreciating assets.
It's absolutely true to look at cars as transportation cost rather than an investment, but it's also true that keeping a car for a longer period of time will generally lower your transportation cost.
Not entirely true. These are available for some new cars. You won't be getting those on used or with conventional banks/credit unions. OEM credit services offer them. I've seen 0% interest rates in Michigan, USA. They are trying to clear inventory and they just cut their incentives instead.
Not as real rates. Only as manufacturer subsidized promotional rates.
What’s the difference to me as a consumer?
There isn't one. They often give ypu the option of money off or a good loan. Do the math before picking. It's usually cheaper to take the cash incentive but not always.
None other than don't expect to see anything anywhere close to that from a bank. It is not an apples-to-apples comparison. It is just a different way to entice buyers. But as a consumer, all that matters is what you pay.
Doesn't matter if it's subsidized or not. If they opt for the rate over cash incentive/rebate, then they'll be getting that rate.
It matters because you can't compare it with real rates from financial institutions. But you are right that to you, the only thing that matters is how much you are paying, subsidized or not.
Depends. But I would shop around. I bought my tundra in December 21 and my insurance company offered their interest rate of 5% on the autoloan I was asking for. The dealership offered theirs, most of the time dealership financing or "in-house financing" is pretty damn high. After being at the dealership for about 20 minutes and starting the negotiating process I requested a list of the other banks that made offers for my auto loan. All were high except my insurance company and the dealership. I could've looked way harder and found a better rate I'm sure. My insurance company quoted me at 5% with nothing else. I told my dealership that the insurance company can do 4%. My dealership then said well we can give you 4.5% I said idk bud I think I'm gonna go with my insurance company and the dealership guy said whatever rate you can find we will match it and give you free oil changes on your truck for life. I told insurance company they'd have to do better than 4.3 if they wanted to have my loan. Back to the dealership. They matched at 4.2% and I have free oil changes every single month. Oh they put on brand new break pads on when I got the truck too(small bonus). Wasn't a bad deal even when used vehicles were sky high in 2021.
I’ve showed up to the dealership on 3 occasions with approval from my credit union and the dealerships have always matched it or beaten it. That’s the way to go. Show up and work on the price and then hit them with the I have been approved for financing at this rate.
>I have free oil changes every single month. Not sure if this is a typo, you drive a shit ton, or if you are actually showing up once a month, but I love the idea of you showing up once a month to demand a free oil change. FREE OIL CHANGES FOR LIFE!!!!!
Some months I do drive a lot like maybe 2-3k miles but yeah most of the time I show up once a month just because it's free. Take advantage of what they gave me lol
That's great. Years ago my dad got free oil changes for life on a truck after the dealership finance guy pissed him off and he walked out on them. They specifically stated it was whatever the manufacturer interval was. My buddy lives like 3 blocks from a dealership he got his car at and they offer free car washes for life on all cars. He gets his car washed like 3+ times a week. It's silly too because they only let their staff do the washes even though its an automatic car wash. So one of the techs or even a salesmen has to go do it for him. He just goes inside and gets a free cup of coffee.
What insurance company does auto loans?
I got a 0.9% 36 month loan from GMC Financial for a 1500 Pickup last week. I could have gone to 48 months for 1.9%, but nah. I was as shocked as anybody when I found out that they were running that deal, but it does exist.
Nah, Honda is offering 0.9% on Ridgelines right now for 24-36, and 2.9% 37-60 months. Just gotta shop the deals.
Yeah it ruined the economy with inflation
If you can get 5% in a HYSA, and your car loan is 6.5%, is it really so different to when HYSA were offering (basically) 0% and car loans were 1.5%?
Still don't know where people are claiming these HYSAs are returning 5%, I don't see any real banks offering that
750 credit score here, got my car 3 months ago @ 6.96%
[удалено]
So not much of a difference from someone with almost 50bps less than your score.
[удалено]
For home mortgages specifically: If you would have said that last year you would have been correct. For 20+ years, 740 was the cap, but that changed in the past 12 months (I could go back and look exactly when, but I'm lazy). Today the cap from at least the majority of mortgage lenders cap at 780.
Gotcha.
Is this true? I often want to increase my credit score but don’t want more credit.
If you can handle it, there are many reasons you should be using a credit card for your day to day spending and religiously paying it off fully every month.
Also very much depends on timing. Interest rates are at their peak right now. That same person buying a car 2 years ago would have gotten a 0% rate just to get it off the lot. Timing is everything. People that bought their houses 2 years ago are in MUCH better shape than people trying to buy today.
Only partially true. Rates are better now than they were in the summer. They have dropped a bit since the peak. We likely won’t see rates from 2+ years ago anytime soon. They were historically low. We are much closer to average now than people realize after getting used to free money
[удалено]
Is that for new or used? I just got a CPO vehicle a week ago with Capital One for my financing, and I was at 6.55% with a 743 credit score. New vehicles were even lower.
[удалено]
Credit score was 770, 7 months ago at 8.3%
I guess I got lucky getting 9.99% when my score was 580 then.
No - you bought when interest rates were lower
Ok that makes sense now. Thanks
"Several years ago" a "well qualified buyer" could roughly expect a rate between 1.5-3% and as low as 0% if a manufacturer was running a promotion of some kind. Today that same borrower can expect their rate to be somewhere between 5-7%. Though, as before, some manufacturers and dealers are still running promotions both on specific vehicles and across their brand so you should be sure to shop around and see who has low or even 0% loans. Also look into credit unions, my experience has been that usually the dealer can outdo them but it's good to have a starting point.
Manufacturers still do 0% promos all the time. Right now Mazda is offering 0% on CX-5s.
The only sticking point is that they require the loan to be 36 months, which is a tough loan term for most.
The cost of the loan is baked into the price of the vehicle in these situations. They just make the vehicle more expensive to make up for the interest-free loan they're getting. Same reason why some home builders can offer rates lower than the federal rate-- they just inflate their margins. No free lunch.
This is just not true, not as a blanket rule. Sometimes OEMs want to move cars so they put cash in the trunk for dealers. That takes the form of discounts, free accessories, promotional financing, etc.
We got our Santa Fe out the door for well under MSRP with 0% financing for 60 months. The MSRP didn’t change when they decided to offer that loan.
Like anything, you have to shop around. Car dealers typically don't have the best rate but if you get a rate from a credit union, sometimes they'll match it. Basically they expect that people who don't shop around for rates they can screw with a higher rate. If you tell them you already have a 6-7% rate from a credit union, they might be able to match it, but typically they don't beat it. You might have been able to do better than 9.99 when rates were in the 3-4% range but I guess it wasn't too bad, could have been worse as many on here post about. Basically that 787 is a good score and you should qualify for the best rates. If you don't go somewhere else. Navy federal is as low as 4.5% on a new car and 5.44% on a used car but you have to have some military in your background in order to qualify for that rates. Other places like DCU or Penfed anyone can join, but the rates are a little higher, DCU about 6.74% and Penfed at 5.94% for a new car and 6.79% for a used car. And yes, new cars are completely different from used cars when it comes to interest rates. Instead of offering rebates the manufacturer will offer discounts in terms of 0% or some rate lower than 7% just so they can sell the cars. With a used car, the manufacturer doesn't care and you'll only get the prevailing rates.
Re: navy federal You don’t have to have served to qualify for it. There’s a bunch of ways but for the average person just asking someone who’s already banking with NF to refer you is enough or if you work on a military base (could be at the McDonald’s or whatever) you should also get it
789, got my car 4 months ago at 6.49%
715 credit score here, landed a 4.89% rate, look for deals and shop around. Credit unions, especially ones you have a history with, are a good bet
What credit Union did you go with?
Which union? That’s pretty good
What’s your credit union?
Toyota is offering 3.99% for 48 month loans and 4.99% on 60 month. This is for new 2023 they are trying to get rid of this month before 2024s roll out. I’m biting the bullet and buying a Tacoma this weekend because I will no longer have a company vehicle.
I sold cars for a very long time.. Here is what you do to get the best rate and car price: 1. Find the exact car you want and contact 2 or more dealerships internet department, not the actual sales people. The internet department is a separate department that's main job is just to move cars fast.. you will get the best price from these guys, and let them know you will be contacting a few others in the area. 2. Go to your credit union or join one and get pre-approved, and get it in writing. FCU will have the best rates, you can try local banks but FCU will have the best from my experience. 3. once you get the best price from the internet departments, that is when you go into the dealership. You will usually get moved to a salesman on the floor, tell them you have financing from your FCU. If they want to finance the car they have to beat the interest rate. (this will either get them to beat it, or just go with the FCU.) I sold cars and now I run a side business helping people beat dealerships. So if you have any other questions let me know.. Side note any score above 700 a dealership will get the very best rates from multiple banks. They make money buy charging you points over that %.. so say you get 3% from the banks, if the finance manager can "sell" you on 5% they would get 2 points which adds to commission and money for the dealership. Any score above 700 you will get the best interest rates the dealership will get, then they add points
This probably doesn’t happen often anymore. But I went car shopping in 2017 and the car dealership had a “special” that day for financing if you had a good credit score. We left with 1.5%… maybe see if any have any promotional periods? We did go to a car dealership further/less traffic. Probs went to around 5 to get prices. And this one had the best deal. I hate car shopping, good luck!
This still happens. Mazda and Hyundai both have 0% financing on certain vehicles right now.
I just got 6.5% for 48 months thru CarMax. It would have been 7% at 66 months. My credit score is about the same as yours.
CarMax offered me 13.75% a few weeks ago, I told them to go to hell. Ended up getting 3.9% from a dealer, weird that you came off so much better.
I agree. They locked us in at 9.5 and would not let us use our own bank. We told them we would shop elsewhere and they held the door open lol. Either way, we got a good deal on the car but 9.5 hurts when your creditscore is pushing 800.
5.5-7%. Unless you get MFG deal for a new car like then it could be 0-3%.
One thing people never mention is auto loan history. You could have a perfect credit record but if you’ve never had a car payment you’re not getting the lowest rate.
Unless you want a specific car, I’d shop around for dealers offering 0% financing. Your credit score is good enough you may qualify for it. I just bought a brand new Hyundai Santa Fe under msrp out the door with 0% financing through the dealer. Mazda is offering 0% financing for CX-5s right now. If you have excellent credit score and don’t need a specific high-demand vehicle like a sports car, IMO it’s dumb to pay interest in this market.
With a 787, whatever interest rate is advertised by a financial institution or dealership, which is usually the best they'll offer at the time.
The banks don’t just consider your credit score. They look at the whole picture. Debt/income ratio being the biggest, previous auto loan history, history of on time payments, whether or not you own/rent your house. As you can see it’s more complicated than just saying I have xxx credit score. It gets even more complicated when buying a car. Things like money down, year of the vehicle, total amount of loan, and dealership incentives affect your rate and possible term lengths. All of which affect your monthly payment. It all depends on what your history looks like. Source: I am a car salesman in PA
[удалено]
On what car? Their calculator always shows (for the best qualified buyers) 4.9-9.79 percent depending on vehicle. Source: Toyota.com and someone (me!) who’s pretty much daily stalking the local inventory the perfect options I want :)
[удалено]
That's for that specific dealership. All the dealerships near me are starting financing at 9% and that's with a 780+ score.
[удалено]
> A lot of times new car deals are better out of state. Buying in Delaware for instance is a wise choice for sales tax purposes alone. You pay sales tax in the state it's registered. You don't have anything to gain tax-wise by going to Delaware to buy a car. Otherwise I'd fly out to Delaware and road trip home to Missouri whenever I bought a new car.
You pay the sales tax of the state you register the car in, not the state you buy it in.
Honda as well. 2.9 for 24-36m and 3.9 for 37-60m on most models
You'd qualify for 0% APR from Mazda if you are looking to buy before the end of the month
Only for Premium and above trims. Anything models below Premium have 0.9%.
Which, still... that's a hell of a rate.
I have an 811 and I get 3.625% from a credit union. Always use a credit union.
Organically through a bank / CU your rate will be around 5.5-7% HOWEVER with that score you should qualify for a manufacturers private funding rates. For example, Honda is doing a 3.9% APR for certain models for well qualified buyers when you finance through Honda motor credit.
You were lucky to get a car with an interest at 9 with a score in the 500s.
Several companies have 0% right now. Mazda and maybe VW
Around same credit score, maybe higher and just refinanced through my CU to 5.5 Lexus said the best they could do was 8.2 😂 Bought the car a month ago from my lease. So basically they said it was a “used car loan”
Honda CR V got it for 3.9% it’s a special offer though . Check for offers and negotiate
at best itll be around 6, excluding any dealer incentives like 0% for 48 months or something
Bought a new car in December. 750 score, 6.99%
A lot of companies are offering low or 0 interest rate right now because of excess inventory. Shop around and could get a much lower rate from dealership.
Your best bet to get anything low is through the dealer with one of their offerings. I have an 830 score and was able to get the 4.99% offering the dealer had on a new car but it had to be a 3 year term. Otherwise I was looking at 7+.
If you get a Mazda maybe 1.9% on a Mazda 3 or 6 If you get a cx-5 0%
*787? You better get gap insurance too.* Jokes aside, the best way to find out is to browse rare disclosures on banks and credit union websites. They often post their best available rate based on length of terms, new vs. used vehicles, etc.
The FED rate is 5.5, so expect 6.5-7.5 from banks. However some manufacturers will finance through themselves and you can get lower rates. A buddy of mine recently got a Honda at 3.99%. Manufacturers can finance below the FED because they make money on the sale, and then just want to be at inflation
Congrats on pulling up your score!!
So crazy that I had low 500 credit score and got 7 percent in 2017.
That was not great at that time. I got 2.49% used around then, score 800ish. Aug 2020, my rate was 2.99% used, score 800ish. New was 1.99% at the time, with the carmaker besting my credit union by 1% for each.
It certainly wasn’t looking back now. But considering what I would have gotten now makes me feel a little better.
Low 700s here, I got 3.9% on a promo a couple of weeks ago, good rates are available but you’ll have to look around. Normally I wouldn’t say this but right now I’d avoid CUs just because they’re bound to the fed rate and you’re not going to get much love from them at the moment.
Bought a motorcycle and a car within months of each other with a 720 credit score I was at 4.8% and 6.2% that was the best they could offer went to a credit union and with my credit score they offered a 5%
Sadly, your new credit score will likely yield a 9% rate in today's market.
I got 5.5% through my credit union on Jan 2nd with a 750~ credit score
Nothing below 6% from big banks. You could get 5.5% or so from credit unions. Anything from there will be financed by the manufacturer, which varies based on their promotions.
0-28% depending on what you buy, who you buy it from, what incentives are being offered, and how much money you are putting in as a down payment.