Best place to get a loan for a car

[Lakeshore]

Hello! Anyone have suggestions for best place to get a car loan…my fresh out of college son is preparing to make a purchase. Thanks so much!

 

[dioxide45]

Go to your local bank or credit union and attempt to get pre approved. Some banks have products like 'check ready', meaning they will provide you with a blank check valid for up to the approved amount. Then you can walk in as if you are paying cash.

 

[Talent312]

If he's going to buy a new car, the manufacturer may offer special financing for certain makes. Otherwise, credit unions and banks may have special rate sales at local used car dealers advertised on their websites. It pays to shop around.

 

[geist1223]

When we recently purchased Patti's new BMW we checked Interest Rates with USAA, our Bank, our Credit Union, and BMW. BMW had the best rates. The Rates he is offered will greatly depend on his Credit History and his employment.

 

[DrQ]

That is so open ended. There can be many factors:

• Does your son have a real (career) job in his field of study?
• Does your son have student debt?
• Does your son have an existing FICO score?
  • If Yes, What is it?
  • Is it Bad?
• New or Used car?
• What type of car?
• Trade in?
• Down payment?

A fresh graduate with a hefty student loan is probably not going to get the best interest rate. Some new car companies used to offer special programs for new graduates with jobs in their field of study, but that was a long time ago.

I would be VERY wary of Santander. (Not just no, but **** NO!)

 

[Passepartout]

Some 'in house' financers offer 'first time buyer's incentive rates. Sure, get pre approved by your (his) bank/credit union, but don't forget to ask at the seller if they have 'specials'.

Jim

 

[dioxide45]

When we recently purchased Patti's new BMW we checked Interest Rates with USAA, our Bank, our Credit Union, and BMW. BMW had the best rates. The Rates he is offered will greatly depend on his Credit History and his employment.

You have to be careful with manufacturer or similar financing. Often that low rate is supported through a buy-down. So you may be paying more upfront to get that lower rate.

 

[Lakeshore]

That is so open ended. There can be many factors:

• Does your son have a real (career) job in his field of study?
• Does your son have student debt?
• Does your son have an existing FICO score?
  • If Yes, What is it?
  • Is it Bad?
• New or Used car?
• What type of car?
• Trade in?
• Down payment?

A fresh graduate with a hefty student loan is probably not going to get the best interest rate. Some new car companies used to offer special programs for new graduates with jobs in their field of study, but that was a long time ago.

I would be VERY wary of Santander. (Not just no, but **** NO!)

Thanks to everyone for all of your good advice!
To answer your questions…he has a masters degree and a job in his field of study. No student debt. I would think his FICO score would be good, as he had internships three different summers and always paid his rent and bills on time. He wants to purchase a used minivan. I doubt he has much for a down payment, as I know they would like to purchase a house in the future, so they need to save for that, too.

Why would you be weary of Santander?

 

[Shiba]

Shop around and see who has the best interest on car loans. I start with my credit unions and see who has the best rate and terms.If he has minimal credit history you might have to cosign.

Does he know what kind of car he wants? I’ve seen special financing terms on certain brands, but financing for limited time. Does he have his first big boy job yet? Because the banks will want pay stubs.

He needs to see what his credit score is first, see what the current interests rates are, get preapproved with whoever has the best terms (interest rate/ length of loan), then go shopping for the car.

If a dealer has rebates on the car they typically cannot be combined with the special interest rates the dealer offers. This is why you come pre approved.

If its a new car look online, some have really good advertised deals. We had to buy a car during covid and our local dealer was raising the car prices so much higher than MSRP, we drove out of town for a much better deal that was advertised online. Not sure how many people are buying new cars today, but always try to haggle.

 

[dioxide45]

Thanks to everyone for all of your good advice!
To answer your questions…he has a masters degree and a job in his field of study. No student debt. I would think his FICO score would be good, as he had internships three different summers and always paid his rent and bills on time. He wants to purchase a used minivan. I doubt he has much for a down payment, as I know they would like to purchase a house in the future, so they need to save for that, too.

Why would you be weary of Santander?

The problem is that rent and utilities aren't reported to credit agencies unless one goes to collections. Does he have any other debt or credit cards that would have helped him build credit. If he has a large enough down payment, credit score probably won't matter.

 

[heathpack]

The interest rate for my first car loan in 1993 was 10%. I had just graduated veterinary school, had summer employment history, manageable student loan debt, a low paying job, nothing bad in my payment history on anything (mostly because I had no money so never spent much). I had no down payment, the family car that I had received as a graduation gift a few months prior unexpectedly died.

I remember being shocked- I was a professional and didn't have bad credit.

I was told that's what you get when you have no real credit history. Of course it could be different for him and many years have elapsed. But my understanding is that short credit history = higher interest rates.

 

[jorcus]

Used car loans are a different animal. As others have said get pre approved at local bank or credit union to get a rate before walking into a dealer. Don't say anything until you talk to the finance person. They will almost always quote a higher rate. Then discuss what the bank offered. Most of the time they will match or beat that.

 

[DrQ]

Why would you be weary of Santander?

Executives From a Bank Charged With “Predatory Lending” Moved to a New Lender. Regulators Did Little to Stop Them.

A dozen states that pursued Santander Consumer USA for its high-interest loans have failed to address scores of complaints alleging nearly identical behavior at Exeter Finance. The same team of executives ran both companies, ProPublica has learned.

www.propublica.org

Santander down: Banking app not working as customers unable to make transactions

Santander’s services have gone down in a major outage. Customers reported being unable to get onto online banking, make transactions and other issues. It comes after a run of outages across the high street, which have taken apps of many major banks briefly offline.

www.aol.com

Santander Released from Fed Enforcement Action - Banking Exchange

Santander says “significant strides” have been taken in addressing a range of issues Santander has had its 2017 enforcement action terminated by the Federal Reserve, bringing its last remaining regulatory matter with the bank to a close. Issued in March 2017, the action was the last of three...

www.bankingexchange.com

In short: Santander is the EU's version of Wells Fargo.

 

[emeryjre]

When a person gets into the Finance and Insurance (F&I) office of a car dealership the world of interest rates can become a different animal
The F&I person is paid a healthy bonus to get the buyer to pay a couple of points over the going rate
What you will consider good points will be downplayed
You will be told these are not important considerations by lenders
This is why it is important to have a pre-approved loan
Then you are negotiating for the F&I person to earn your business with a better rate than your pre-approved rate
I am not sure of the interest rate landscape these days
But the role of the F&I person has not changed an iota over the years
There job is to upsell you and get the maximum amount they can for the dealership
The big yachts in the Atlantis Marina owned by car dealers are paid for by believing car dealers are on your side

 

[DrQ]

To answer your questions…he has a masters degree and a job in his field of study. No student debt. I would think his FICO score would be good, as he had internships three different summers and always paid his rent and bills on time. He wants to purchase a used minivan. I doubt he has much for a down payment, as I know they would like to purchase a house in the future, so they need to save for that, too.

If he has a good or great Fair Isaacs (FICO), then he may want to look at manufacturer subvented interest rates.

Hyundai in our area currently has 0% for up to 60 months on a 2025 Palisade. You need to balance that against any discount you could negotiate with outside financing and then calculate the interest paid over the life of the loan.

At the time interest rates were rising in 2022, I was able to get a manufacturer interest rate of 2.99% for 72 months from Genesis Financing at the time when my Credit Union rate was about 5.25% for the same term. I was also able to pay list for the car when other dealers were charging a "market adjustment" [RIPOFF] on this popular make (GV70).

I could have dipped into investments to pay cash for the car, but at that rate, my investments made more money where they were.

I would wait on a house as prices are falling. New car prices are rising next year due to tariffs, but currently are tamped down due to inventory on hand.

 

[geist1223]

You have to be careful with manufacturer or similar financing. Often that low rate is supported through a buy-down. So you may be paying more upfront to get that lower rate.

That is why you negotiate Price first and separately. Then check out the financing options.

 

[Patri]

When a person gets into the Finance and Insurance (F&I) office of a car dealership the world of interest rates can become a different animal
The F&I person is paid a healthy bonus to get the buyer to pay a couple of points over the going rate
What you will consider good points will be downplayed
You will be told these are not important considerations by lenders
This is why it is important to have a pre-approved loan
Then you are negotiating for the F&I person to earn your business with a better rate than your pre-approved rate
I am not sure of the interest rate landscape these days
But the role of the F&I person has not changed an iota over the years
There job is to upsell you and get the maximum amount they can for the dealership
The big yachts in the Atlantis Marina owned by car dealers are paid for by believing car dealers are on your side

My nephew’s wife makes big bucks doing this.

 

[RX8]

Always good to shop for rates before visiting the dealership. A dealership may match a rate, in some cases may even get the captive finance company (i.e BMW Financial, Ford Credit, VW credit) to do a rate concession in order to keep the financing with the dealership.

While credit unions typically offer the lowest rates it isn’t uncommon for them to cross collateralize. What that means is if you default on their car loan, personal loan or credit card, the credit union can take your saving and checking balances to cover the losses. No one goes into a loan thinking they will come into hard times and for many the low rate will still be most important but this is something that people should at least be aware of.

 

[Bucky]

Having worked in the auto business for many years the first thing I would do is pay for a credit report that shows his FICO. That score means everything when qualifying for an auto loan. How it’s arrived at is irrelevant. In most cases the F&I guy will shotgun his app to 2 or 3 lenders at one time. They tell us it’s to get the best rate but actually it’s a combination of that and which one pays them the most to give them the paper. Don’t be surprised if they tell you the loan must be kept for at least 90 days +. That again has nothing to do with helping us. In most cases lenders will charge back any profit the dealer may have made from financing or extended warranties, etc if not kept for a certain period.

Know what he will qualify for before starting to shop. Check your credit union if you have one. Can he qualify for an account separately? Check manufacturer rebates that may be available if buying new. Many have a college grad rebate AND provide special rates. Check all the pros and cons. For example I recently purchased a new BMW X3 and the dealer offered me 2.99% and a $500 military cash rebate. Well, due to my advance research I found out if I didn’t take their financing I would get a $3000 cash rebate. Since I was paying cash this was a no brainer. Do a simple google search for “manufacturers that offer college grad rebates”. Whenever I need to finance a vehicle I first turn to my credit union since I get the same new car rate even on a 2 yr old used vehicle. Over the years USAA has had favorable rates. My daughter was eligible for membership based on my service and used them for her first car out of college.

I could go on and on but the most important thing to do is be prepared. Know what you are dealing with from your child and any manufacturer. That is always the best way to prepare before one begins to shop.

 

[Brett]

That is why you negotiate Price first and separately. Then check out the financing options.

yep

I'll vote for the local credit union after negotiating the price

 

[Janann]

While credit unions typically offer the lowest rates it isn’t uncommon for them to cross collateralize. What that means is if you default on their car loan, personal loan or credit card, the credit union can take your saving and checking balances to cover the losses.

It isn't usually cross-collateralization, because that would mean there is an ongoing hold on the account. Many lenders have a statement in their loan documents that says there is a "right of offset." This means that the lender can take whatever deposits are held with them at the time of loan default.

 

[Lakeshore]

Thanks for all of this info everyone. I really appreciate it. His FICO score is in the “very good” range (740-799).

 

[Bucky]

Thanks for all of this info everyone. I really appreciate it. His FICO score is in the “very good”

Sounds like he’s good to go then. I cannot overemphasize how important it is to research rates and what’s a good price to pay for any vehicle before even walking into a dealership. Being totally prepared puts the advantage in the consumers hands and puts the dealer at a disadvantage. Time of the month plays a big part in negotiations for new vehicles. Dealers don’t want to miss any deal that’s possible to make during the last week of any month. Check out truecar.com to see how much any new vehicle is selling for in his area. Last but certainly not least is it’s always good to know what kind of lease deals are out there, even if he is not interested in leasing. Lots of good info can be gleamed from this website. https://forum.leasehackr.com/

 

[Big Matt]

Tell him to find the cheapest car he can find and pay cash.

 

[Ken555]

I helped my nephew with this process last year, and it’s never fun. He opted for a used car from a dealer and financed with them without difficulty. However, after we agreed on a price the dealer came back with the monthly payment and it seemed high to me. Turns out the dealer included a $4000 warranty into the monthly payments but didn't disclose that on the itemized purchase page. We all know they make profit on those warranties, but as soon as we identified this they were quick to offer to remove it…though the sales person was confused for about ten minutes and kept saying my numbers were wrong.

So be sure to have a car payment calculator on your phone and run the numbers yourself, not using the dealers payment sheet. Verify the monthly rate matches to the penny.

New cars are usually easier to deal, since they don't try as many of these deceptive practices, though it can happen.

Have fun!