The Best Car Deals Low Finance Rates Vs Rebates Which Should You Choose

How To Get The Best Car Deals:

Quick tips that will help you at the car dealer:

How to understand Rebates and low financing offers:

Vehicle MSRP: Manufacturers Suggested Retail Price – This price is always negotiable – don’t ever agree to pay MSRP

Exception: Some vehicles that might be “hard to find” or “limited in production” might be sold by the dealers at MSRP or, sometimes higher. This is usually called Market Adjustment.

Manufacturers Rebates: This is your money and has nothing to do with discounts given by the dealership. This money is given to you directly from the factory. Never let the rebate be used as a negotiation tool by the dealer. Any discount or negotiation from the dealer should be separate of any rebates offered.

Low finance rates: 0.00% 1.00% 1.9% etc… These are called Sub-vented rates, they too are offered by the factory and not the dealership. Do not allow a “low” finance rate to be used as part of a negotiation by the dealer. These rates are granted over and above any discounts, rebates, etc.

Exceptions: There are several exceptions to Sub-vented finance rates, but here are two that you really should be aware of:

1. Not all people qualify for these rates. So, if you suspect that you might have some issue that will cause you not to qualify, there is nothing wrong with expressing to the dealer that the low finance rate is something you are interested in, and you would like to apply first, before going through the long, timely steps of deal negotiation. Many dealerships will view this as unusual; however, any “good” dealer will be happy to let you submit an application first if you insist. Why is this important? As we always say, knowledge and preparation are the keys to not overpaying at a dealership. What happens if your entire deal is worked, negotiated and finalized with the dealer? Then you head over to the finance office to finalize the finance terms and payments… You expected to pay 0.00% interest, then at the last second you are told: “Sorry” because you don’t qualify… NOT GOOD THE WHOLE DEAL CHANGES.

2. Rebates and “low” finance rates can not always be combined. Some factories allow it some times, however there is no rule; you must do your homework first. For instance, Chrysler offers manufacturers rebates on most their vehicles, plus they offer low finance rates on most vehicles as well. Though, you the customer must decide which offer you want, you can’t have both. Although, sometimes Chrysler will run special offers that allow you to “combine” both the financing and rebate offers at once. But be careful, dealers won’t always tell you that these offers are available, if you are unaware and you agree to pay higher finance rates, you are stuck.

Commonly Asked Question: Which is the right choice, Rebate or Low Financing?

This is an interesting question asked by many customers, the answer is simple yet many people have no idea.

Remember this rule: You should do what’s best for you, do not ever inquire with a person, dealer, or anyone else that has any other motive than what’s best for you.

What that means is this: When you ask a dealership which makes more sense, the dealer will likely tell you: “Take the rebate – not the low interest rate.”

The reasoning behind this answer is, if you take the rebate you are actually paying “less” for the vehicle than if you elected the low interest rate. So, being that the vehicle price is the most important issue, you should always take the rebate. Is this correct or incorrect?

Rule: Don’t be concerned what the dealer is making or losing, it’s not relevant to what’s best for you.

Does the dealership stand to gain more if you chose the rebate vs. the low finance rate? The answer to that question is yes, the dealership does stand to gain more. They receive a little more in “reserve money” from the lender if you chose conventional finance rates. The fact is however; that this point is completely irrelevant. Who cares what the dealership is making? Why is that important anyway? Is there some rule that says a dealership is not entitled to make profit? The only person who is doing something wrong in this scenario is you. You’re asking the wrong party for information. If the complete and honest answer might cause the dealer to make less, chances are more than likely the answers will be carefully weighed to fall on their side.

Remember: Your concern is getting the best deal for you, don’t waist time caring about what the dealership makes. Prepare yourself by considering all the facts. Do not make the common errors of all the people we constantly heart about who over pay all the time.

Fact: People who think that dealerships are losing money on them are usually the ones who pay the most!

Note: Please understand the purpose of this and every other post we write is NOT to condemn dealerships for making profit. Why should a dealer not be entitled to profit? What right do we have to ask them to lose money? Would you ever go to a restaurant and tell them that you insist they sell you dinner and lose money? It’s a stretch, but equally as ridiculous.

The purpose of this post is to assist fair people in getting the best deal for themselves. Protecting people from being “ripped off” by a deceptive dealership is our motivation. We don’t claim that all dealers are unfair or “rip off artists”, in fact we are aware that most dealers are honest and forthcoming. Although, everyone is in business to make a profit and the topics written about within these posts are for the purpose of assisting “fair” consumers achieve “fair” and honest deals. Why do we keep mentioning “fair”. Because equal to us having no concern about a cheating dealership, we also have no concern about the “unfair” consumers who want the good dealers to close down their business and lose money.

“A GOOD DEAL IS WHEN BOTH PARTIES ARE SATISFIED”

As we have mentioned so many times; price is not always the most important issue.

The following is the one and only correct answer to the Rebate vs. low rate debate:

With any issue that causes you to make a decision there are always certain facts in place, those facts make up the “pros and cons”. With any decision we make, we weight the pros and cons and ultimately are lead to a decision. Then of course, we hope that decision was the right one.

Remember this rule: There is always a point where the two lines will cross, that point is where you will find the correct answer.

This means; there are variables that create change in every deal. For example: It may be a better deal for me to take the rebate, while it is a better deal for you to take the low financing rates. Let’s explain:

You might be financing $30,000 and your finance term is 60 months. The Factory is offering a $3000 manufacturers rebate or 0.00% for the 60 month finance term. Which do you choose?

I might be financing $12,000 – The factory is offering a $3000 rebate or 0.00% for the finance term. Which one do I choose?

Obviously the answers vary; your lines of “break even” will obviously cross way sooner than my lines. The reason: different factors in the two deals will yield different answers.

Here’s how you figure out the correct answer based on your factors:

For this example we’ll assume that you are considering a $30,000 car with $3,000 rebate or a 0% interest rate, and for the sake of finding an answer, we’ll assume that you’re putting $3,000 a down payment and you qualify for all offers.

First: Draw a line down the middle of a piece of paper; on one side write Rebate on the other side write 0%

Second: on the 0% side write in the sale price of $30,000 – and on the left side (rebate) write in the sale price of $30,000 as well.

Third: On both sides add in your local tax rate. For instance: if you live in Queens NY add 8.25% as sales tax.

Fourth: on both sides add $300 – this should cover DMV – Inspection and dealer Doc Fees.

Fifth: On both sides – subtract $3,000 for you down payment

Sixth: On the rebate side subtract $3,000 for the rebate

If you did this right, so far you should have the following results:

Both sides: should show Sale Price $30,000 Tax $2,475. DMV $300. Sub Total: $32,775

Rebate Side Should show $6,000.00 Total down payment and an “unpaid balance” of $26,775.00

The 0% side should show $3,000 Total Down Payment and an “unpaid balance of $29,775.00

Assumption: If you chose not to take the 0% – the dealer offered you a 5.5% interest rate.

Compare to see where the lines cross:

Next step – find an auto loan calculator – you can go on any search engine type in “free auto loan calculator”

I am not able to attach a link to this area of the post so I will simply suggest a very user friendly, free calculator (which we have no affiliation) is chase.com just search:

“Free chase auto loan calculator”

Calculate:

REBATE SIDE

$26,775 Amount Financed

5.5% APR

60 Month Term

Answer: Payment $511.43

Total Interest: $3,910.80

Total of Payments $30,685.00

0% SIDE

$29,775.00 Amount Financed

0% APR

Answer: Payment $496.25

Total of Payments $29,775.00

Summery: On your deal, 0% came out to be $910.80 less than the REBATE, so obviously the better deal for you is 0%.

On my worksheet, using the same method, it turned out that the rebate was quite a bit more of savings, (only because I was financing much less) if I chose to finance more money perhaps the lines would cross sooner.

Final notes to remember:

1) If you choose to lower or raise you down payment and lower and raise your amount financed, the out come of “which one” is a better deal will vary. So, keep testing the different scenarios using the method provided above and you will find the best deal for you. Every time!

2) Be careful – No rebate is final, while low financing isn’t: Keep in mind this very important consideration: If you choose low financing over the rebate – essentially you just paid more for the vehicle and you can’t get that money back. However, you chose to do so in return for free financing terms. (Very smart) You did your homework, you made your decision based on solid factors and you made the overall least expensive decision. EXCELLENT WORK! Though, you must remember you made this comparison based on a 5 year repayment term. If you keep the vehicle for 5 years, and pay as expected you win, your calculations were perfect and you achieved the best deal for you. On the other hand, if something changes and for any reason you decide that you are not going to keep this vehicle beyond the second or third year… Then, you just gave back the benefit of the low financing. The variables have changed once again and the better deal swings back to the rebate. So remember, in the privacy non pressured environment of your own home; carefully consider all your options and likelihoods. For instance, if you know you don’t keep a vehicle beyond a couple of years, this must be included as a decision factors.

Long story short: Always compile all the facts first, limit the variables that can change the deal and negotiate with confidence.

The author of this article is an auto industry professional for the past 18 years. Robert has extensive knowledge in automotive finance and specialty automotive finance (bad credit). Having worked as a finance and special finance manger for dealerships in the New York metropolitan area since the early 90’s Robert has assisted thousands of clients in achieving auto mobile loans with “less than perfect” credit.

 

How to Choose a Car Finance Broker Some Useful Tips

Financing a car is a very important process and today with the availability of numerous car finance brokers it has become an easy option to get secure car loans. Today these car finance brokers are also playing a vital role in assisting car buyers. In fact, consulting and taking help of car broker can definitely be most appropriate option if you don’t have any clue about what to look at according to your budget. A finance broker is the most experienced personnel and clued-up on how to approach the financiers in a way that can persuade them to approve the loan. They usually have good relations and reputation with the lenders as being reliable, and so they know which lenders are likely to be open to a client.

In general, they act as the key source and offer services such as finding a used or brand new car model that the customer wants and within a budget range. At times, these car brokers even assist car buyers in negotiating with a used car seller. However, these days there are many car finance services and making a proper selection is turning out to be a very complicated process. You need to understand that not all car finance services are fair. Therefore, if you are looking to finance a car or choose a car financing service then here are a few important points that you should keep in mind while making a selection:

Standards

You must confirm whether your car finance consultant or broker is a member of FBAA or COSL or both of these industry associations. While Finance Brokers’ Association of Australia Ltd. (FBAA) is one of Australia’s leading membership bodies for finance broking professionals, the Credit Ombudsman Service Limited (COSL) is an independent organisation that is mainly indulged in handling complaints about finance brokers. You can easily confirm finance consultant’s membership by searching through their member list. Adding to this, WA Finance Broker License is yet another additional requirement for finance brokers serving in Western Australia. Nevertheless, if you are looking for finance broker and residing in the state of WA or other states of Australia, it is essential that the broker must hold a WA Finance Broker License. A broker holding WA Finance Broker License entails passing a comprehensive range of checks, educational requirements and operational requirements.

Accreditation

While selecting a car finance broker also ensure you know about their range of lender accreditations. The range of accreditations held by a broker governs the range of options they can offer. You must note that a broker’s accreditation can not just change the range of finance options available to you, but it may even affect the quality of those options.

Experienced Staff

You must choose car finance service that recruits and retains professional and knowledgeable staff. The broker must be an experienced professional who can demonstrate and explain about why a particular product is highly recommended or even suites your specific circumstance. If possible make sure you even ask for testimonials from previous clients that in turn may help you in the confirmation of their experience.

Services Offered

As mentioned earlier, today there are many finance services available in the market. Therefore, you must find out more about any extra service that a broker can provide. You should expect your finance consultant to supply detailed information about timeframes, and any fees or extra charges related with your finance. The key point is if a broker is being able to clarify the comparison rate of your recommended vehicle finance and the overall cost of your finance package then it is quality sign of a good finance broker.

These are some important points that can help you in choosing your car finance services easily. Today a lot of responsibility goes along with buying a car and taking financial help through car broker. Just taking care of few essential steps can help you select your car broker and further purchase a nice new or used car.

The New Rule For Buying a Home Using Owner Financing

The American Dream; what does it mean to you? People have different jobs or hobbies or passions in life, but one constant remains the same among all of us, and this common thread that unites our dreams is that of Home Ownership! Unfortunately, in this current economy, achieving the dream of home ownership is becoming more difficult than any time in recent history. Too many Americans are following the unwritten rule of home ownership that tells us to ‘Find a Realtor and Get a Bank Loan’. In past economies, with thriving job markets, lower inflation, and less credit restraint, that ‘rule’ may have made sense to follow.

But our current economic system is making it difficult for the average person to achieve the American Dream of Home Ownership. In times of unstable job markets, with double digit unemployment forcing people to become self-employed to make a living, the banks are requiring a W-2 stable job history in order to issue loans. In times of a great credit crisis, the banks are requiring stricter credit scores than most people are able to achieve. Fewer and fewer honest, hard working Americans who are used to following the ‘traditional rules’ for owning a home are having the opportunity to own their own homes.

What if you could achieve the American Dream of Home Ownership without the assistance of a bank?

The purpose of this document is to allow motivated home seekers an opportunity to write a New Rule of Home Ownership that allows you to declare your freedom from the services of a Bank in order to partake in your piece of the American Dream of Home Ownership!

In order to understand the New Rule of Home Ownership, let’s take a closer look at the existing rules of purchasing a house with Traditional Bank Financing.

The first part of the Traditional Bank Financing focuses on Qualifying for a Loan. While many different loan packages exist, the most common loan written in today’s market is an FHA Loan, and therefore, we shall use their guidelines as an example. The following are guidelines for an FHA Loan:

o FHA Loans require a minimum credit score of 620 to be eligible for a loan
o FHA will require 3.5% down on the home. This down payment MUST come from your account. You are not allowed to borrow from friends, family or anyone else. You must document where the funds for the down payment came from. Specifically, the source of the down payment must be from your personal checking, savings or retirement account and CAN NOT be borrowed!

In order to work with most Realtors, you must first get pre-approved for a bank. Many Realtors won’t even show you a house unless you can prove that you are able to afford and receive financing for the property. This painful process of pre-approval from a bank can take 2-3 days and involve the following steps:

o Proof of Creditworthiness
o You must provide 2-4 years worth of tax returns!
o You must provide your last 4 pay check stubs if you are an employee or an updated Profit and Loss statement if you are self-employed, a business owner, an independent contractor or entrepreneur. However, if you cannot show a consistent pay stub as proof of income, then you may want to skip ahead to the part of this document where ‘Owner Financing’ is discussed, as you will find it increasingly difficult to qualify for a mortgage.
o Your bank may require you pay off other debit to help improve your credit score to qualify for the loan
o And the worst part… this proof of creditworthiness is done throughout the entire home buying process! Even once you qualify and pick out the home of your dreams; underwriters at the bank will have you go through the same process to make sure you still qualify.

Now that you are pre-qualified for the home of your dreams, you may finally begin the process of working with a Realtor to find your new home.

Once you’ve found your home, the Traditional Banks will want an inspection performed on the home and may require the seller to fix EVERYTHING for the bank to finance your loan. Some people just want a small discount on the house and they will do their own repairs however, many times a traditional bank will not allow you to do this! These small fixes may add to the total price of the house.

Also, expect to pay Realtor fees, bank fees, filling fees, “point buy down” fees, loan origination fees, closing costs, title fees, surveys, appraisal fees, and anything else imaginable for which to be charged. Though many of these fees can be rolled into your loan, over the long term, you may be paying an extra 10% in unnecessary Financing Fees that are loaded into your loan!

What if there was a quicker, easier, and less intrusive way to take your share of the American Dream? What if you could look at homes without having to pay a Realtor fee, pre-qualify for a loan, and go through a 3 month home buying process? After all, we ARE in a BUYER’S market in Real Estate, so why shouldn’t we be able to buy?

Consider the possibility of declaring a New Rule. Instead of working with (and paying for) a Realtor, why not work with the Seller directly? Especially if that seller is a Professional Real Estate Investor who is not only willing to sell the house in a quick and simple matter, but is also will to FINANCE the sale of the house on a short-term basis!

Earlier in this eBook, we went over the process of the Tradition Bank Financing. Now, we shall detail the 7 Easy Steps of Purchasing Your Home with Owner Financing:
* Contact the Seller of the Home without having to pre-qualify for a loan and look at the home to decide if you want to purchase.
* Settle on a price
* Agree to a down-payment and interest rate
* Once you’ve agreed to a price, down payment, and interest rate, complete a Deposit to Hold form and pay this 1% fee applicable to the sales price of the property. This fee will take the property off the market while you are closing on the home.
* Fill out credit application; provide 2 most recent paycheck stubs and bank statements as proof that you can afford the monthly payment.
* (Optional) If you chose, you can order your own home inspection to review the condition of the home
* Close in 2-5 business days

Buying a home from a Professional Real Estate Investor is quick and easy. Once you have settled on the price and monthly payments, you have minimal paperwork to complete and can close on the transaction within one week! The following is a summary of some of the benefits of Owner Financing compared with Traditional Bank Financing:
* In many cases, there is no minimum credit score required
* Instead of 10% Traditional Bank Finance Fees / Closing Costs, your Owner Finance Fee averages to 5% of the transaction.
* Unlike Traditional Bank Financing, your down payment for Owner Financing may come from almost anywhere (as long as it is a legal way to raise the funds). You can borrow the money from family, friends, others. There are also some tax incentives for you to use part of your retirement savings. Either way, with Owner Financing, you are allowed to raise your own down payment as you see fit!
* You and the Owner Finance Seller will agree on a time to “close” on the home and may close within 5 business days!
* Your Owner Finance loan is dependent on your down payment and ability to pay the monthly payment and NOT on your credit or having a W-2 Job. Therefore, Business Owners, Entrepreneurs, Independent Contractors, and the Self-Employed may qualify for Owner Financed Homes!
* You are not required to provide extensive documentation to obtain your loan

Due to the efficiency, simplicity, and cost effectiveness, you can see why buying directly from an investor with Owner Financing is the New Rule for Buying Homes. Owner Financing interest rates may be a little higher than market price when you initially purchase your home, however, this higher rate, along with a sizeable down payment, will actually help you obtain conventional financing at a lower rate down the road when you decide to refinance!

A good way to look at Owner Financing is that is a solution to buying a home with short-term financing. Once you have paid your Owner Financed note on time for say 12-24 months, it’s easier to refinance your existing note with a traditional bank loan at a lower interest. It’s much quicker, easier, and less intrusive to refinance a home into traditional financing then it is to purchase a home with traditional financing!

The following example will detail the process and the costs of owner financing:

o John chooses to purchase a beautiful home for $150,000 with a traditional bank loan. John’s credit score is 590 and the bank will not loan him any money until his credit score is at least 620. John understands the importance of owning a home and wants to buy something now.
o John finds a home that is being offered for $150,000 with Owner Financing. John has $15,000 to put down and wants to close in 5 business days. John’s new loan is at an 8.5% rate for 30 years and the sellers would like John to refinance his loan in 24-36 months. John’s monthly payment is $1,350 and it includes Principle, Interest, Insurance, and HOA fees. John is happy because he can afford $1,350 per month and is able to take his part of the American Dream!
o As John pays on time for, say, 24 months, John has an excellent payment history with his current lender. John will also need to be working on his credit in those 24 months to raise his score to the current minimum of 620.
o When John approaches a traditional bank John will be able to demonstrate the following:
o John’s $15,000 down payment shows that he has ‘skin in the game’ and is not just going to bail on his house payments
o John CAN afford and has been paying $1,350 a month at a 8.5% rate for his loan
o John’s credit score is now above the minimum required 620
o If John can afford $1,350 a month at 8.5% interest, John can easily afford a $1,100 a month payment at 6.5%!

It is much easier to refinance a loan rather than trying to get a loan for the original financing! Since you are already in the house, there is no inspection required, no lengthily closing procedures and there is no longer all that extra red tape that is associated with buying a home with traditional financing!

As you can see, purchasing with Owner Financing can be easily done and quickly closed for those who cannot use a traditional bank loan but deserve to own a home now.

Summary

In today’s market, due to tough economic times, there are many people selling their properties. Yet, despite the fact that this is a ‘buyer’s market’, it is tougher to buy a home with Traditional Bank Financing than ever before. Following the old, unwritten rules will lead you to a long and unhappy life in an apartment complex. Motivated home seekers looking for their piece of the American Dream are unable to achieve this great promise by traditional and conventional means due to stringent lending requirements initiated by the very same financial institutions that gladly took over 1 billion of our tax dollars to bail them out! Banks tightening up on their lending practices is causing a shortage of homebuyers in the market. This is one of the biggest reasons that real estate values continue to free fall because there are not enough people who can qualify for available homes while following the unwritten rules.

Inspired home seekers, looking to break away from the old rules and ready to write his or her own New Rules to Home Ownership will be able to take advantage of this buyer’s market, and with Owner Financing, you will see more and more people purchasing homes. If you are in the market to buy a home however, you cannot qualify for a traditional loan, I strongly recommend you contact a company that specializes in Owner Finance Homes.

Small Business Finance Finding the Right Mix of Debt and Equity

Financing a small business can be most time consuming activity for a business owner. It can be the most important part of growing a business, but one must be careful not to allow it to consume the business. Finance is the relationship between cash, risk and value. Manage each well and you will have healthy finance mix for your business.

Develop a business plan and loan package that has a well developed strategic plan, which in turn relates to realistic and believable financials. Before you can finance a business, a project, an expansion or an acquisition, you must develop precisely what your finance needs are.

Finance your business from a position of strength. As a business owner you show your confidence in the business by investing up to ten percent of your finance needs from your own coffers. The remaining twenty to thirty percent of your cash needs can come from private investors or venture capital. Remember, sweat equity is expected, but it is not a replacement for cash.

Depending on the valuation of your business and the risk involved, the private equity component will want on average a thirty to forty percent equity stake in your company for three to five years. Giving up this equity position in your company, yet maintaining clear majority ownership, will give you leverage in the remaining sixty percent of your finance needs.

The remaining finance can come in the form of long term debt, short term working capital, equipment finance and inventory finance. By having a strong cash position in your company, a variety of lenders will be available to you. It is advisable to hire an experienced commercial loan broker to do the finance “shopping” for you and present you with a variety of options. It is important at this juncture that you obtain finance that fits your business needs and structures, instead of trying to force your structure into a financial instrument not ideally suited for your operations.

Having a strong cash position in your company, the additional debt financing will not put an undue strain on your cash flow. Sixty percent debt is a healthy. Debt finance can come in the form of unsecured finance, such as short-term debt, line of credit financing and long term debt. Unsecured debt is typically called cash flow finance and requires credit worthiness. Debt finance can also come in the form of secured or asset based finance, which can include accounts receivable, inventory, equipment, real estate, personal assets, letter of credit, and government guaranteed finance. A customized mix of unsecured and secured debt, designed specifically around your company’s financial needs, is the advantage of having a strong cash position.

The cash flow statement is an important financial in tracking the effects of certain types of finance. It is critical to have a firm handle on your monthly cash flow, along with the control and planning structure of a financial budget, to successfully plan and monitor your company’s finance.

Your finance plan is a result and part of your strategic planning process. You need to be careful in matching your cash needs with your cash goals. Using short term capital for long term growth and vice versa is a no-no. Violating the matching rule can bring about high risk levels in the interest rate, re-finance possibilities and operational independence. Some deviation from this age old rule is permissible. For instance, if you have a long term need for working capital, then a permanent capital need may be warranted. Another good finance strategy is having contingency capital on hand for freeing up your working capital needs and providing maximum flexibility. For example, you can use a line of credit to get into an opportunity that quickly arises and then arrange for cheaper, better suited, long term finance subsequently, planning all of this upfront with a lender.

Unfortunately finance is not typically addressed until a company is in crisis. Plan ahead with an effective business plan and loan package. Equity finance does not stress cash flow as debt can and gives lenders confidence to do business with your company. Good financial structuring reduces the costs of capital and the finance risks. Consider using a business consultant, finance professional or loan broker to help you with your finance plan.