NEW AUTO LOAN RATES??? Any tips?

[Hydrino]

I placed an order with Koons back in June. My projected ship date is 9/1. Buying cash is an option but its not ideal, makes more sense to finance a vehicle vs tying up a bunch of cash in a depreciating asset. Koons supposedly hits people with ridiculous Chrysler Finance rates (6%+). Anyone have any tips on who to go through for an auto loan? Ive looked into some options but the credit unions require membership and I don’t bank at a credit union. I have top tier credit and income is good so approval isn’t an issue, I just want the most competitive rate possible so I can head down to Koons with my own financing.

Jumping to the end so don't know if anyone else said this but hands down look at Credit Unions. Of course shop around as well. Then do a comparison with what the dealer can offer as they often get kickbacks from finance companies and will make a deal to match whatever rate you can get elsewhere.

For my Jeep I found 1.99% for 48 months at Allegacy Federal Credit Union. Opening an account didn't cost me anything but I put in $100 so I don't forget about it. I may change from my current credit union which is at 6%, so not competitive. My dealer will match the deal and give me another 1% off the price for using them (apparent kickback involved). So I might end up closing the new Allegacy account, but in the end it just cost me an hour of time and a few emails.

So, 2-3% new auto loan is still realistic, depending on your location.

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[MyfirstJeepwasaCJ5]

I agree with Steve in reference to the decision of financing or not - Financing only adds cost to the Jeep, so if you have the money and your opportunity cost is not higher than the interest rate, pay cash. However, if you have the cash, consider to put $10K of this cash into a treasury bond called i Bonds, it's paying more than 9% per year and it is basically risk free as it is issued by the government. Here is the link: https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds.htm

Now, going back to the financing, I have 850 credit score and financed by Jeep three weeks ago (2022 Rubicon). I got a very high rate, 5.41% ! I should have made my homework and get the financing before going to the dealer, so credit union or not, I recommend that you go to pick your Jeep with the financing approved.

 

[Tool Guy]

If you can get a better rate with your credit union than the 5.41%, you might look at getting the loan form the credit union and payoff the one from the dealer. Even if there is a prepayment penalty, it still might be cheaper in the long run. I just did this and got 2.24% from my credit union. Fortunately mine did not have a prepayment penalty, so it was a no brainer...

 

[Joe's_Roxy]

I placed an order with Koons back in June. My projected ship date is 9/1. Buying cash is an option but its not ideal, makes more sense to finance a vehicle vs tying up a bunch of cash in a depreciating asset. Koons supposedly hits people with ridiculous Chrysler Finance rates (6%+). Anyone have any tips on who to go through for an auto loan? Ive looked into some options but the credit unions require membership and I don’t bank at a credit union. I have top tier credit and income is good so approval isn’t an issue, I just want the most competitive rate possible so I can head down to Koons with my own financing.

Have you got a 401k account? You could borrow the money from yourself and pay yourself back the interest (minus a small fee). Payout comes directly from your paycheck so you don't have to worry about paying a separate loan payment. I haven't done a vehicle this way, but I have borrowed money from my 401k accounts when needed.

 

[Jeeppaul91]

Have you got a 401k account? You could borrow the money from yourself and pay yourself back the interest (minus a small fee). Payout comes directly from your paycheck so you don't have to worry about paying a separate loan payment. I haven't done a vehicle this way, but I have borrowed money from my 401k accounts when needed.

I‘ll have to look into that. I know I can pull money out of my IRA without penalty as long as I replace it within 60 days, I’ve never borrowed from that or my 401k before. Im leaning towards a credit union, just need to figure out which one I want to go with, there are a few with great rates but first one I contacted seemed very difficult to work with, their online reviews were terrible too.

 

[Some Random Guy]

Have you got a 401k account? You could borrow the money from yourself and pay yourself back the interest (minus a small fee). Payout comes directly from your paycheck so you don't have to worry about paying a separate loan payment. I haven't done a vehicle this way, but I have borrowed money from my 401k accounts when needed.

This is a way. But the reason it is normally frowned upon is the earnings you’re giving up. Most people think it will be repaid within X years, so they think they’re only giving up minor earnings. This is only true if you’re near retirement age. If you’re in your 30’s (or 20’s), you’re actually giving up the 30th plus year of compounding interest, so the hit to your bottom line at retirement age is much higher.
Say you pull $25k and repay it in a year. Assuming 6% ROI your balance in 30 years is $8,600 below what it would have been. If you’re targeting your RMD years instead of eligibility, at 40 years your withdrawal has cost you over $15,000. Pull $50k, double those numbers. Assume 7% and you’re off by $13k and $26k respectively for that $25k.
This is generic, there are reasons (or excuses, lol) to do it anyway. Near retirement lessens the hit, if you’re drawing from a tax deferred (traditional) 401k in order to continue plowing money into roth accounts as part of your monthly budget it can still be good. But debatably you should plow the loan into the investments instead.
Sorry for all the extra thoughts.

 

[Nitehawk92]

Still good rates with Credit Unions. Eglin Federal Credit Union in Florida, as of today...

 

[Opus]

There's also the option of refi with a credit union later on. We just did that with my wife's Compass. Refinanced with a local credit union, got a better rate, lowered our monthly payments and this summer they were running a special where refinancing gave us 3 months of no payments.

 

[NYJeepGirl74]

I financed mine a few weeks ago for 1.99% through a credit union. Joining one as others has posted was simple - min. $5 in a savings account and I have to have payment taken out of a checking account automatically. When I told my dealer what they were offering he didn't even try to talk me into using them for financing.

Can I ask what credit union

 

[musicforme]

I'm not a financial advisor, but work in the industry. Please please please do not borrow from your 401k. If buying a Jeep is only possibly by borrowing from your 401k, then maybe buying a Jeep isn't the most financially responsible choice to make.

I won't go into them here but there are a ton of reasons why not to borrow from your 401k unless its a last ditch option. I made the mistake in the past to borrow from my 401k and don't plan to do so again.

 

[Nitehawk92]

You can still get good deals from Credit Unions. This is from today from Eglin Federal Credit Union in Fort Walton Beach Fl.

 

[Jeeppaul91]

I'm not a financial advisor, but work in the industry. Please please please do not borrow from your 401k. If buying a Jeep is only possibly by borrowing from your 401k, then maybe buying a Jeep isn't the most financially responsible choice to make.

I won't go into them here but there are a ton of reasons why not to borrow from your 401k unless its a last ditch option. I made the mistake in the past to borrow from my 401k and don't plan to do so again.

Dont worry I am not borrowing any money from or against my 401k.

 

[nirvanaave]

Did you choose the terms of the loan yourself or with the help of consultants? I'm a complete zero in finance, and I have never taken out loans in my life. I'm surprised my family is not recognized as bankrupt yet because none of us know how to deal with big purchases. Dad spent three months looking for a good mortgage until he gave up and went to Mortgage Broker Wigan. Recommend me some consultant who knows about cars and won't want to rip off an extra hundred dollars from me.

 

[JL ME]

If you have liquid cash to outright buy it then do it. You will be less poor in the long run.

Then you could pay your savings what your monthly Jeep payment would be. At the end of your term you will have more money in the bank than what you would have had otherwise.

Thats what i did. It took 8 months and the jeep was paid for by me back into my savings.

 

[JL ME]

Have you got a 401k account? You could borrow the money from yourself and pay yourself back the interest (minus a small fee). Payout comes directly from your paycheck so you don't have to worry about paying a separate loan payment. I haven't done a vehicle this way, but I have borrowed money from my 401k accounts when needed.

That should be a last option. Pulling from a 401k will cost you more in the long run!

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