Auto loans

[chestynuts]

Hello, my mother and I are planning to purchase a family vehicle that we can also use for our business. We are thinking of getting an auto loan, Do you think it's a great idea? And also, Can u recommend a company/firm that offers great deals to assist us better? Thanks!

[bjl584]

You'll need to provide ALOT more info if you hope to get a meaningful answer.

All that I can tell you is that rule of thumb for an auto loan is to make sure that the payment is not more than 10% of your monthly take home pay and the term of the loan is no more than 36 months.

[Jluke]

I thought your sister was buying a car (Personal finance blog thread).

If it's for a business, maybe you can lease it.

hope this is a real question

[dczech09]

Personal vehicle, or business vehicle, it does not matter. Mathematically, it is all the same. Especially if you own the business.

Do not lease - leasing is the most expensive way to own an automobile.

I recommend paying cash. If you must go for an auto loan, make sure that it is small enough that you could comfortably pay it off within 2 years.

Make sure the auto you purchase is no more than 50% of your annual income. You do not want too much of your financial life to be tied up in a car that will go down in value.

New cars are usually not worth it. If you have like millions of dollars, then by all means go for a new car. Otherwise find a used auto that is reliable and in good condition. You want to look for a good deal.

I am assuming that you will be pounding some mileage on this car. If that is the case, you definitely want to make sure you find something less expensive. It makes no sense to buy a brand spanking new car and pound a lot of mileage onto it as that will destroy its value. I know this because my employers gives up new cars for business use. And trust me - that thing does not look like a new car after a couple months of driving!

[greenskeeper]

Personal vehicle, or business vehicle, it does not matter. Mathematically, it is all the same. Especially if you own the business.

There is a big difference between a personal vehicle and one for business...every vehicle expense becomes an expense to run the business which effects the bottom line of the business and taxes.

[snafu]

Before you get to 'loan' stage, work out what you need in a vehicle? Lots of mileage like pizza delivery driver or florist? miles per gallon! Haul stuff around? Easy lad up, offload, small/no lift over. Do you need a mini van, SUV easy access for passengers? etc easily visible yellow, orange.

Do you know your FICO [credit] score? That and the percentage of your credit that you use will affect your interest rate. Go on line to bankrate.com and similar to see what is being listed for interest and monthly payment for no more than 36 months! Before making a final decision, talk to your insurance agent as they can differ based on make and model.

[TexasHusker]

Dealerships are often offering financing for as little as 0%.

I honestly don't know why you wouldn't borrow for as long as they would lend it to you, for free or close.

Yes, you could get "upside down" on the car - but stash back a few $ grand as insurance in that event.

I just did a 3 year lease - the ultimately no-no - but I love new cars and this is a way I can get one hassle free every 30 months or so and not have to worry about maintenance, trade in values, etc.

I pay for expanded cable, too.

[chestynuts]

Thanks guys, love all the helpful info.

Let's just say FICO score isn't healthy but my mom's FICO score is 780+ and can afford to pay at least 30% of the total price so I have a good feeling she'll get approved for an auto loan from her bank.

She's got a medium sized bakeshop so the van will be mainly used for completing deliveries. She's also pretty frugal on purchases and is aiming for a used van instead of a new one. Our main concern is the interest rates on car loans. We don't want to get approved by her bank or any lending agency and end up getting our auto loan refinanced. We'd like to stick to one lender as much as possible and pay the loan amount with 24 months.

[Nutria]

We don't want to get approved by her bank or any lending agency and end up getting our auto loan refinanced. We'd like to stick to one lender as much as possible and pay the loan amount with 24 months.

Huh?

Refinancing an auto loan is not mandatory, and banks/CUs almost *always* offer lower rates than dealerships. (0% offers mean higher sales prices.) If she's got a high score and will put down 30%, her bank -- having a business, she *must* have a bank! -- will offer her a great loan rate.

It might be for 36 months, though. No big deal: just pay it down as if it were a 24 month loan.

[TexasHusker]

From a former car dealer, negotiate the best price FIRST, without regard to financing. After a price has been agreed to, you can THEN look at your financing options, including possible zero percent at the dealer.

Zero percent does not mean a higher price. The dealership is controlling the price; the manufacturer is underwriting the financing. Two different animals.

Although they might toss you a nice rebate if you pay cash for the car and/or use third party financing.

Your local bank might or might not be competitive with the dealership financing. Usually they are not. However, credit unions certainly can be very competitive.

Good luck.