Subprime Auto Finance

[dado potato]

Spoiler Alert:
1. Design your life so that ownership of a private vehicle is not what you want or need.
2. Failing that, when you need to buy or replace a vehicle pay cash.
3. Failing that,
a. Realistically decide what you intend to pay for the vehicle you want. Do not allow a car dealership entice you to choose a "much better package" at a higher selling price, made affordable by extending the term of the loan to 4, 5, or 6 years. (Consumers should beware of being "under water" on their auto loan from the moment they drive the car off the dealer's lot.)
b. While credit arranged by the car dealer may seem incredibly convenient to get, the Auto Finance Company is likely to charge a relatively high rate of interest AND to securitize your loan … into an Auto Asset-Backed Security. Somebody on Wall Street will probably buy your paper.
c. Your local credit union makes auto loans at a competitive interest rate, AND the CU keeps your loan on their own books.

I got these nuggets of insight from
http://knowledge.wharton.upenn.edu/article/auto-loan-subprime-crisis

[lmerullo]

Strongly agree, except when there is a special financing offer - we usually try to make our purchase including trade value in cash, but when offered 1.9%, we financed.

[razz]

I bought my Prius V after several visits to the dealer. The first time I had a half cash + trade-in quote and the interest rate. A couple of months later, I got a quote without the trade-in and the interest rate was 0%. It was a good deal with no regrets.

[Gardnr]

We haven't financed a vehicle since 2001 (cash for 2 since then). We will finance only if the interest rate is significantly lower than our return on our investment account set aside for major purchase needs.