Car finance from dealer.

loseyourself

Any drawbacks on this. I was planning on getting 3.5k paid off over three years. I just sold my car for 1.5K. Getting a very decent 07 Vectra with 50k miles for 5k. It works out at 100 a month.
Anyone else go down this route route or is their any drawbacks?

discombobulate

loseyourself wrote: »

Any drawbacks on this. I was planning on getting 3.5k paid off over three years. I just sold my car for 1.5K. Getting a very decent 07 Vectra with 50k miles for 5k. It works out at 100 a month.
Anyone else go down this route route or is their any drawbacks?

Only drawback is that you'd be paying back over 3.5k because of interest. Check the APR on the finance and see if it would be less if you got a loan from the bank or credit union.

discombobulate

And make sure you have the Vectra looked at by a mechanic before buying

coylemj

loseyourself wrote: »

Any drawbacks on this. I was planning on getting 3.5k paid off over three years. I just sold my car for 1.5K. Getting a very decent 07 Vectra with 50k miles for 5k. It works out at 100 a month.
Anyone else go down this route route or is their any drawbacks?

Based purely on the financials, that is virtually an interest-free loan because you're borrowing 3,500 and only paying back 3,600. The extra €100 is probably listed as an 'administrative' fee.

In a car sale which involves finance arranged by the dealer, the dealer will get a kickback from the finance house which means that his commission and the finance house's profit are built into the asking price of the car which in turn means you're paying too much for the car.

Borrow somewhere else and buy as a cash buyer, that asking price and finance deal is clearly aimed at punters who don't have the cash to buy and can't get a loan from the banks or their credit union, otherwise known as sub-prime lending.

If it was a new car and you were buying from a main dealer, there's no need to be suspicious of finance deals because the major manufacturers effectively have their own banking subsidiaries (Volkswagen's is called Leaseplan) which finance purchases of new cars so you will get a finance deal that in many cases is cheaper than a bank loan but for a relatively cheap secondhand motor, I'd avoid any financial package offered by a dealer.

loseyourself

discombobulate wrote: »

And make sure you have the Vectra looked at by a mechanic before buying

Why would you think that? Have me nervous now ha

coylemj wrote: »

Based purely on the financials, that is virtually an interest-free loan because you're borrowing 3,500 and only paying back 3,600. The extra €100 is probably listed as an 'administrative' fee.

In a car sale which involves finance arranged by the dealer, the dealer will get a kickback from the finance house which means that his commission and the finance house's profit are built into the asking price of the car which in turn means you're paying too much for the car.

Borrow somewhere else and buy as a cash buyer, that asking price and finance deal is clearly aimed at punters who don't have the cash to buy and can't get a loan from the banks or their credit union, otherwise known as sub-prime lending.

If it was a new car and you were buying from a main dealer, there's no need to be suspicious of finance deals because the major manufacturers effectively have their own banking subsidiaries (Volkswagen's is called Leaseplan) which finance purchases of new cars so you will get a finance deal that in many cases is cheaper than a bank loan but for a relatively cheap secondhand motor, I'd avoid any financial package offered by a dealer.

I'll look into the credit union.

bazz26

loseyourself wrote: »

Why would you think that? Have me nervous now ha

Because your buying an almost 7 year old used car that you don't know anything about it's current condition or previous history.

discombobulate

loseyourself wrote: »

Why would you think that? Have me nervous now ha
.

Because their going to tell you its a great car etc. etc. It might be a great car but you don't know that unless you get a mechanic to look over it for you. Even if they offer a warranty they may not stand over it as a lot of threads here will show you.

Always better safe than sorry. What garage are you buying from by the way? People might have experience with them good or bad which may help.

Edit: Not meaning to scare you its just that it pays to be careful.

Moanin

[QUOTE
If it was a new car and you were buying from a main dealer, there's no need to be suspicious of finance deals because the major manufacturers effectively have their own banking subsidiaries (Volkswagen's is called Leaseplan) .[/QUOTE]

Not true re Volkswagens finance house. They have their own Bank - Volkswagen Bank

MuppetCheck

loseyourself wrote: »

Any drawbacks on this. I was planning on getting 3.5k paid off over three years. I just sold my car for 1.5K. Getting a very decent 07 Vectra with 50k miles for 5k. It works out at 100 a month.
Anyone else go down this route route or is their any drawbacks?

Having 3.5k in the bank for for 3 years would earn you more interest than the loan costs. In a situation like this it makes senses to finance.

Honey-ec

coylemj wrote: »

Borrow somewhere else and buy as a cash buyer, that asking price and finance deal is clearly aimed at punters who don't have the cash to buy and can't get a loan from the banks or their credit union, otherwise known as sub-prime lending.

Not necessarily. Sub-prime lending tends to carry exceptionally high interest rates. Car finance often has APR lower than an equivalent personal loan from a bank or credit union.

coylemj wrote: »

If it was a new car and you were buying from a main dealer, there's no need to be suspicious of finance deals because the major manufacturers effectively have their own banking subsidiaries (Volkswagen's is called Leaseplan).

What in God's name are you talking about? Leaseplan are a fleet company. Volkswagen financing is underwritten by Volkswagen Financial Services, otherwise known as Volkswagen Bank, who are a wholly-owned subsidiary of Volkswagen AG.

coylemj

Honey-ec wrote: »

Not necessarily. Sub-prime lending tends to carry exceptionally high interest rates. Car finance often has APR lower than an equivalent personal loan from a bank or credit union.

As I stated above, that only applies to finance for new cars. Loans from finance houses for secondhand cars in the price bracket the OP is talking about (€3,500) typically carry very high interest rates, significantly higher than what you will pay a bank or credit union. They also tend to stuff you with spurious add-ons like 'setup' fees which get added on at the last minute, further inflating the APR.

Honey-ec wrote: »

What in God's name are you talking about? Leaseplan are a fleet company. Volkswagen financing is underwritten by Volkswagen Financial Services, otherwise known as Volkswagen Bank, who are a wholly-owned subsidiary of Volkswagen AG.

Leaseplan is 50% owned by Volkswagen AG. Who owns who hardly matters, the point I was making is that when you buy a new car, you can get cheap finance thanks to the manufacturer's finance subsidiary having access to cheap money to finance the deal. In a secondhand deal you're on your own and anything offered by the dealer tends to be at the other end of the spectrum i.e. sub-prime at high rates.

Yakuza

Be careful when taking out a car loan, these days most loads will be of the Hire Purchase variety (you won't own the car until the last payment is made) - for a small enough amount like in the OP you might get a personal (unsecured) loan, but make sure you know what you're getting into.