The Art of Buying a New Car - Protection Plans etc

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brucecohen
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Post by brucecohen »

How does 0% financing work? Is it really 0% or do they capitalize the interest not paid? Let's say you get 0% for one year. At the anniversary, can you pay off the full loan without penalty?
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Post by adrian2 »

brucecohen wrote:How does 0% financing work? Is it really 0% or do they capitalize the interest not paid? Let's say you get 0% for one year. At the anniversary, can you pay off the full loan without penalty?
The offers I've seen were for more than one year (3, 4 or 5) at 0% (or 0.9%, 1.9%) with the loan amortized over the term, so there is nothing left to pay at the end. Usually but not always, by taking the low / no interest offer you forgo discounts from the MSRP.
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worthy
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Post by worthy »

I've got three of these. No penalty. No bonus for early discharge.

Logically, they make sense.

But they are still a bit of a trap. Just because you're not paying any interest doesn't mean that the payments are suddenly dirt cheap. Before you know it, you're paying $25-$30Gs a year in no-interest loan payments for vehicles you may not even be driving.
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Post by Bylo Selhi »

worthy wrote:you're paying $25-$30Gs a year in no-interest loan payments for vehicles you may not even be driving.
In that case the 0% is to compensate you for parking their excess inventory in your driveway rather than on their lots.
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Post by worthy »

Just doing my part for the economy spending money on things I don't need!

(Like an out-of-work stepson who just announced he's coming back to keep our guest suite occupied. ):( :(
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Post by millergd »

Bylo Selhi wrote:
worthy wrote:you're paying $25-$30Gs a year in no-interest loan payments for vehicles you may not even be driving.
In that case the 0% is to compensate you for parking their excess inventory in your driveway rather than on their lots.
The implied interest rate can be had by asking the dealer what the purchase price for cash buyers is. The "cash price" is rarely advertised these days.

Like when GM was selling the Cavalier (in the U.S.) for $11,500 in cash or $13000 with 0% APR earlier this decade. I'd sleep well knowing I didn't pay a penny of interest! :roll:
worthy wrote:But they are still a bit of a trap. Just because you're not paying any interest doesn't mean that the payments are suddenly dirt cheap. Before you know it, you're paying $25-$30Gs a year in no-interest loan payments for vehicles you may not even be driving.
...even worse, you could be paying interest on a vehicle that you may not even be driving...

~millergd~
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Post by like_to_retire »

I used Car Cost Canada when I bought my new car this year and I felt it really saved me a lot of messing around at the dealer.

CCC provides you with the the wholesale price the dealer pays for the car and all the options you specify, before adjusting for any applicable Factory Incentives. Then they list all the present applicable factory incentives that you deduct from that price. They also continuously update that car file so you can check if any new incentives are added.

It was well worth the price I paid for the membership. At the time they had a bargain price if you were a MoneySaver magazine subscriber.. so I think I paid $31.95

I went in with cash and my CCC report in hand. I refused all their money grabbing extras, and drove away with a great deal. Basically, their profit was that they cleared the car from their inventory....

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Post by brucecohen »

I know several FWFers have used CarCostCanada.

I'm in the market for a Subaru Forester and CCC has referred me to a guy who has quoted CCC's bottom 3% markup minus $500 factory dealer bucks plus $495 "registration fee".

The $495 add-on bothers me. Has anyone else faced this?
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Post by Shakespeare »

I found CCC to be very cooperative. Why don't you phone them and ask?
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Post by Bylo Selhi »

brucecohen wrote:$495 "registration fee
It's total bullshit. It (or the similar "administration fee") is supposed to reimburse the dealer for sending a gofer down to vehicle licensing office and getting you an ownership permit, plates and the like. Since most offices have an express line for dealers, dealers will waste less time than you would DIY. But $500? No way.

The dealer does deserve to make some money on the deal. Invoice price alone is misleading because the manufacturers pay various direct "incentives" to dealers, including so-called "hold-backs" that aren't in the invoice price. A markup of 2% or 3% may be reasonable, especially if you just buy the car rather than waste a salesman's time with test drives, questions, etc.

As Shakes suggests, call CCC, tell them what you were quoted and ask them what's reasonable.

BTW why aren't you buying this car in the US, especially in Subaru country (VT, NH)?
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Post by brucecohen »

Bylo Selhi wrote: BTW why aren't you buying this car in the US, especially in Subaru country (VT, NH)?
1. I checked a dealer in Rochester, NY who has done a lot of biz with Canadians. When I factored in the exchange rate, there was not enough price difference to cover the cost of Canadian modifications

2. The Forester is built in Japan so there's Canadian import duty on it.

I'm inclined to tell the guy I'll do a deal at 3% markup less $500 factory-to-dealer incentive plus $50 for having them plate the car. I haven't done a test drive with him, just 3 round-trip e-mails.
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Post by brucecohen »

Here's my dealer's explanation of his $495 add-on:
The $495 consists of $195 for the administration fee and $300 for the
Globali.com vehicle registration as a theft deterrent program. The entire
vehicle is "branded" with a specific number unique to the vehicle and is
utilized by law enforcement agencies in an attempt to track your vehicle
should a theft occur.

The warranty benefit is up to $4000. This is above and beyond whatever the
insurance company agrees to pay you.

Globali.com vehicle etching may even get you extra discount depending on
your insurance company.
I've my insurance agent if there's such a discount and, if so, how much. But I doubt it.

So far, negotiating by e-mail instead of face-to-face has been fantastic.
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Post by BRIAN5000 »

IMHO Doc fee is bull crap...unless you want the other, its just an add on to increase profit.
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Post by marty123 »

The window etching is a high-profit service which brings the kind of margin that dealers see with extended warranty and undercoating. The etching is of a random serial number so that they can tell you it's registered with Globali. It appears like a service, but it would be much more efficient for law enforcement and much more productive to etch the VIN number instead. The problem with etching the VIN number instead of a Globali registered number is that it doesn't sound as "sophisticated" and as "value added". It's also available through your neighbourood garage for less than $100 and as a DIY kit off the internet for $30.

Etching will not deter a crackhead from stealing your car, or a teenage joyrider from taking it. It only deters sophisticated theft rings that resell the cars or its parts. It may have more value on a high(er)-end car IMHO. Most car thefts are committed by joyriders and crackheads.

Some dealers will even pre-etch their entire inventory (or say they did), so that you can't opt out of the service.
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Post by brucecohen »

marty123 wrote: Some dealers will even pre-etch their entire inventory (or say they did), so that you can't opt out of the service.
When I bought my current car in 1999, the dealer claimed to have already done that and there was a little warning window sticker by the lock tab on each door. But I told the sales guy I wasn't interested and wouldn't pay for it, so he knocked off the fee. But the stickers are still there. :lol:

If my insurance agent tells me there is a discount, I'll see if the $300 registration would pay for itself. But I doubt there's a discount, at least for a somewhat humble Subaru.
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Post by Bylo Selhi »

7 ways dealers make you pay extra. See #6.

Also:
Deep within the bowels of Google's cache wrote:Source: : Consumer Reports, 07/00, page 9

Situation
- New car dealers charge up to $160 for VIN etching Vehicle identification number on windows deters theft
- Most major body panels on new cars are now already marked & deter theft

Significant Points
- Some dealers put charge on purchase orders & treat as non-negotiable
- Some dealers incorrectly imply to customers etching required by state law
- High-markup is easy money for dealers
- Do-it-yourself kits available for only $15-$30
- Consumer Reports-tested kit by Auto Etch = easy-to-use & took 10 minutes

Says
- "There are several other VIN-etching vendors on the Internet. Some municipalities occasionally sponsor free or low cost VIN etching programs as well." -- Says Consumer Reports
- "It makes no sense to pay a car dealer big bucks for VIN etching when you can do it yourself with a $15 to $30 kit." -- Says Consumer Reports

Background
- Some auto insurers pass-along discounts up to 5% for VIN etching
- Webitor's Comments: VIN etching has long been one of the favorite over-priced dealer add-ons -- along with undercoating & no-maintenance exterior & interior surface treatments
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Post by brucecohen »

So I did the deal today. No effort at all in getting the $495 etching & admin fees killed. Paid 3% over the CarCostCanada wholesale price minus a $500 factory-to-dealer incentive that I didn't know about before reading the CCC report. Subaru ads and website didn't mention it. Factoring in sales tax, I paid a bit over $2,000 less than MSRP.

What I really liked was nailing down the deal by exchanging a few e-mails. Only then did I go in to sign the contract. (Dealer said I could put a deposit of as much as $3,000 on my credit card to get points or dividend. Beyond that they charge the 2% commish they'd have to pay to Visa.)

I asked how low-rate loans work. My understanding was that they're available only if you buy the car at MSRP. Not necessarily so. Dealer said Subaru eats two-thirds of the cost of the interest rate buy-down and the dealer has to cover one-third. So he increases his markup by the amount of that one-third. For example, it would have cost me $106 to finance my Forester at 1.9% over 24 months. (A friend of mine who sells Toyotas told me Toyota prefers to move cars by offering concessionary financing than cutting prices or doing cash backs that are more obvious. Looks like Subaru -- which actually uses Toyota Financing -- has the same policy.)
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Post by twa2w »

Factoring in sales tax, I paid a bit over $2,000 less than MSRP
Bruce I am looking at a new Forester as well so very interested in your experience.

Are you saying your net price equated to MSRP - 2000 + sales tax.

So no dealer prep fee, no transportation fee. I knowy you eliminated the admin fee.


I plan on paying cash so not interested in financing but it is good to know.

Thanks
J
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Post by BRIAN5000 »

We took a Honda Civic and a Fit for a test drive today. Wife likes the Civic.

DX-G $18995 over the phone at one dealer

MRSP 21,990 - $1000-1500 = $19490 till Mar 31 where we were today.
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Post by brucecohen »

twa2w wrote: Are you saying your net price equated to MSRP - 2000 + sales tax.
No, $2000 including the sales tax I would have paid on the difference. I bought the Touring model. Dealer charged CCC wholesale price ($26,995) + 3% markup ($809.85) and then deducted the $500 factory incentive noted by CCC. So the price was $27,304.85. Freight/PDI and AC tax were the standard $1,495 + $100. Total = $28,899.85 plus PST/GST of $3756.98. Savings from MSRP = $1,790.15 + $232.72 tax = $2,022.87.

Freight/PDI is no doubt a profit centre but I don't know if it's negotiable and to what extent. The dealership I used apparently has clear business accountability separation between sales and service/parts. I tried to get him to throw in a trailer hitch but he said the best he could do would be to knock 10% of the parts cost. That put their price only 2x the rough quote I got from a local after-market guy who sells hitches and trailers. The problem is that Subaru sales, especially for the Forester, are still so strong that the dealers aren't hungry.
I plan on paying cash so not interested in financing but it is good to know.
Keep your eyes and mind open. Going through the auto section of our local paper today, I noticed a Toyota ad offering 0% financing on Rav4s. That's new, I believe. The 2/3-1/3 split my dealer told me about is Subaru's program for all dealers, at least in Ontario. Subaru's current financing deal -- 1.9% for 24 months, 2.9% for 36 etc -- ends April 1. I'm sure there will be a new one and it might include a bigger buydown. Now you know that you only have to cover the dealer's one-third share.

Another tip that, depending on how the dealer does business, might be major, minor or irrelevant. My friend the Toyota salesman explained to me that when a dealer sells a car that's not in stock, it swaps with another dealer. But it's not as simple as I trade you a white Forester for a green one. He said it gets as complicated as the trades baseball teams make, so to swap less popular white for more popular green, the dealer might have to offer the white one plus some currentéfuture consideration. There's also negotiable equivalence models; a dealer who needs an Impreza might trade an Outback and get the Impreza plus some future consideration. And in Toyota world -- I don't know about Subaru -- some dealers don't participate at all. Bottom line: your salesman's life becomes easier if the colour you want is in stock.
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Post by Shakespeare »

So the price was $27,304.85.
That's quite a bit better than the V6 RAV4 Sport I got a year ago.
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Post by brucecohen »

Shakespeare wrote:
So the price was $27,304.85.
That's quite a bit better than the V6 RAV4 Sport I got a year ago.
Maybe with Alberta's booming economy, dealers felt less pressured to shave markdown. Also, a good-sized chuck of my savings was the $500 factory-to-dealer incentive. Toyota might not have had anything like that then, especially on a RAV4 in Alberta. Also, Subaru didn't advertise this incentive, so there's nothing to prevent the dealer from just keeping it.

twa2w, another point. See if you can find someone else in the market for a Forester -- maybe someone here. While chatting, I asked my dealer how much more he'd shave the markdown to sell two at the same time. He said he'd drop the markdown to $600/car but wouldn't go lower.
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Post by Shakespeare »

dealers felt less pressured to shave markdown
A difference in model, I think. The Forester has a MSRP range of $26,995 to $37,795. The RAV4 has a MSRP of $26,050 to $32,400. I paid $33922 all-in a year ago for a V6 Sport with automatic transmission and sunroof.
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Post by worthy »

two at the same time
I did this with a real estate broker I worked for and a friend. We bought three GM cars dealing through the "fleet manager." None of the usual fandango you get buying an individual car. No meeting with his "manager" or attempted upselling.
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Post by Bylo Selhi »

Shakespeare wrote:A difference in model, I think. The Forester has a MSRP range of $26,995 to $37,795. The RAV4 has a MSRP of $26,050 to $32,400. I paid $33922 all-in a year ago for a V6 Sport with automatic transmission and sunroof.
All Subarus, including the base model Forester, are AWD. Is that true of RAV4? How much more do you have to pay to get AWD?
worthy wrote:dealing through the "fleet manager."
As it happens one of the principals of CCC used to be an independent car broker. I bought my '97 Camry through him at a substantial discount to the APA price. He too dealt with the fleet manager at the Toyota dealership. What I found amusing was that when I arrived at the dealership to make the downpayment for my new Camry the fleet manager summoned one of the salesmen off the floor and told him to process the paperwork. Then, when I arrived a few days later to pay for and pick up my car that salesman gave me a thorough introduction to the features of my new car, then insisted I take it for a test drive with him to ensure I was satisfied. A couple of blocks into the drive he asked me to pull into a gas station, then insisted on filling the tank on his dime. I've never been treated so well by a commissioned salesman. And I didn't even have to endure, let alone pay for, a sales spiel.
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