Can I overfinance a new car with trade in?

Red, for wanting to pay even more for a depreciating asset!

nyseGUY said:   Red, for wanting to pay even more for a depreciating asset!

Red for you for not adding anything constructive to the conversation.

You're looking at two separate transactions.

Transaction 1: Dealer pays you 20k for your current car.
Transaction 2: You pay dealer 10k down for your new car.

They are independent transactions and not really common, but do happen with some regularity.

beltme said:   tlvx said:   If you have a car worth 20K to a dealer, Why not just put it on the market for a couple/three thousand more?

Because sales tax is charged on the net. Dealer is giving more than I could get when you factor in the sales tax.

You should get more than the difference in sales tax selling private party vs trade in.

I did this. I bought a new car with a 0% x 60 months offer. Instead of trading in my car, I asked the dealer to buy it outright. I used the cash to pay off a high interest credit card.

As has already been stated, sales tax is paid on the net amount of the sale, so in PA, this cost me 6% of my trade in value,which was way lower than the annual rate on the credit card. Be aware also that if you also lose this sales tax benefit if you sell your car private party, though in some cases you may get that much more for the car.

You will have to do the math to be sure that you will come out ahead by doing this. In my case, I came out clearly ahead, and the dealer was happy to accommodate me.

Adam

soundtechie said:   So, do you actually own a $20k car outright?

Yes, I own the car outright.

The reason I want to do this is that GM is offering 0 % interest for 72 months. Sort of a 6 year AOR.

Thomasbates said:   You must look around providers, may they have a more comfortable package for you regarding car finance. Last one which you mention,"GM is offering 0 % interest for 72 months. Sort of a 6 year AOR." is sounds great!

I don't know if you're completely right or completely wrong, it's hard to tell. You won't find anybody but the manufacturer/captive financing company who will offer 0% for 72 months, you just won't. The position OP will find himself in is that he may be able to get something like $2500 or 0%. So, if you do the math, you may be better off at 66 months at 1.99% through outside financing and taking the $2500 up front. Obviously YMMV and depends if you're trying to max out your term, amount financed or both.

SUCKISSTAPLES said:   Exactly, are you sure you're not giving up a cash rebate by taking the 0 percent deal?

It's usually much better to take the cash rebate then pay 1.49 or 1.99 for financing such as at penfed

How I would do it is take regular rate dealer financing, the cash rebate, and the trade (so your purchase price and tax is lowest) then immediately refi the dealer loan with 1.99 at penfed for 100% of the blue book value of the new car

I didn't want to mention the car because there is such hate for the Chevy Volt and I don't want the thread to go OT. There is no rebate available on the Volt, only the 0 for 72 option. I can afford to pay cash for the whole thing, but I would prefer the liquidity that keeping the cash on hand.

I guess the bast think to do is to talk to the F&I guy and see if it can be done.

mwa423 said:   You're looking at two separate transactions.

Transaction 1: Dealer pays you 20k for your current car.
Transaction 2: You pay dealer 10k down for your new car.

They are independent transactions and not really common, but do happen with some regularity.

It definitely happens, occasionally even at a lender's request if the buyer doesn't have cash down.

snork615 said:   Some credit unions will finance or refinance for more than 100% of purchased car's value, ask around some or read this forum. Trade-in irrelevant.

I hope not. That is a violation of NCUA regulations and could get the CU officers fired and the CU fined. They can extend you a line of credit and it will be cross collateralized with the auto loan. Different interest rate though. I won't say it won't happen because I have seen many things in banking that should not have happened.

nsdp said:   snork615 said:   Some credit unions will finance or refinance for more than 100% of purchased car's value, ask around some or read this forum. Trade-in irrelevant.

I hope not. That is a violation of NCUA regulations and could get the CU officers fired and the CU fined. They can extend you a line of credit and it will be cross collateralized with the auto loan. Different interest rate though. I won't say it won't happen because I have seen many things in banking that should not have happened.

I know of no credit unions who only finance up to the sale price of the car. Every single one at least includes tt&like, destination fees, etc. Any credit union with an indirect lending program has to offer back end product and costs as well (gap, warranty, etc.). Usually they will go between 120—135% ltv.