3. Getting Vehicle Financing

Hello and welcome to this module, Getting Financing. So at this point, we have a really, really clear game plan in terms of the car we want and the amount of car we can afford. We get the stickers, all this good stuff. So let’s just break down the most effective way to get financing. So here’s what we’re going to cover. So the first thing I’m going to break down is just help you understand what options you have available. When you’re looking to obtain financing for your new vehicle, your new or gently used vehicle or new to you, then I’m going to break down shopping. And really when I say shopping, not shopping for the car, cause we already covered that more. So shopping for the best lending or loan, then I’m going to get into, um, looking at a local bank and how that could be working or how that can be important.

Local bank or credit union. I’m going to break down some online resources that I would use if I were you, dealership options. Then I’m going to get into hard inquiries and why and how they impact your score during this process, because I’m going to really just break down inquiries. So that way you don’t get bent out of shape or you feel good about the process. So what are the options that you have when it comes to purchasing your vehicle? Well, the first option, which is an option is you can actually buy your car cash. Now, although typically people don’t have the, the amount of money just sitting around in cash. You could just buy your car cash. And if you did buy your car cash, technically this would save you the most amount of money because you wouldn’t have any interest that you’re paying because you’re just paying for the car cash.

The question would then become, okay, well, what’s the opportunity cost of that cash? What could I have done with that money? Had I not bought the car cash? Then we can start getting into what if I became own bank, but moral of the story regarding this purchasing the vehicle cash is this typically is the most cost effective option. Because once you pay it, pay the vehicle, you go, you, you, you pay the cash and you walk out. Technically there’s no interest in actually there’s no interest in that transaction. So if you happen to see that the vehicle is going for 25,000 and you say, Hey, look, I have $22,000 cash right now. There’s a check. So strong chance. They’re going to take you up on the deal because it’s cash. So cash is by far the most effective cost effective way to purchase a car because you don’t have any interest and you have a lot more buying leverage.

However, if you’re like most people like me and everybody else who doesn’t just have cash just sitting around to deploy the purchase of car. Your next best option is non dealership financing. And this means that we will be going to a bank or credit union, and we’re really obtaining the financing before we get to the dealership. So although we did our searching and we’re looking to get the best deal before we even start communicating to dealerships, we need to get financing in place. So non dealership financing is those banks, those credit unions, that kind of thing. Uh, also you can go and do financing options at the dealership. Now what’s crazy about this is that non-financing options at the dealership are by far the most expensive of the three options. Cash is the cheapest non dealership financing means you’re going to get a loan from your bank.

So you might get pre-approved with your actual bank or credit union first, but most people go to the dealership because of their thinking that they should do it there. And the dealerships, most consumers don’t know that dealerships can add on points. And when I say points, really what I mean is they can add on extra interest rate points that they add onto the loan. And then now you’re paying all these additional fees and interest on an auto loan because the dealership made the deal sounds so good, but you didn’t really understand. So this by far is the option. That’s the most expensive, but it’s the option used by 90% of people, which, which I’m going to break down the pros and cons. But if you’re doing the financing option at the dealership, you want to already have financing in place first, not make that your only option.

So I don’t want to paint the picture to say that all dealership financing options, aren’t good because you can really get really good the other financing, but don’t make that your only option. So the only my suggestion is you want to find the best financing, um, possible period. So if it’s your bank, local credit union, online resources, um, from what I’ve noticed outside financing is going to give you the most effective way, because typically for what I just explained, it’s going to give you the ability to get the lowest interest rate. Now let’s, let’s talk about shopping. So you want to compare all of your quotes. So let’s just say you go to your bank and your bank says, yeah, we’ll approve you for a, you know, 4% interest rate or a 5% interest rate. Okay, well, cool. So thank you for my approval.

Now I want to go and I want to look at, go apply for some other, other, um, low options here. And you may be wondering what about increase? Not to worry, I’ll cover our increased work. So don’t, don’t get too bent out of shape right now. You want to compare all of your quotes, then you want to select the best deal. Obviously. So one bank is offered and you want to do apples to apples quote. So this is something that can get people. You can have a 4% interest rate. Let’s just say it’s a five-year 60 month deal. And it’s a 4% interest rate. You want to compare all of the quotes in any quote that you get. You wanted to be five-year five-year deals because there’s no, if you’re trying to compare a deal, you can’t compare an apple to an orange.

You want to compare it to the same. Then once you’ve gotten all the quotes from the different lending options, I’m going to cover, then you just want to select the best deal, make a business decision. And if it’s, uh, outside resource, meaning you, you were, you are approved from a bank credit union or an online resource and you, and you obtain the financing upfront. Then you’ll, you’ll get a blank check. I’ve seen this happen multiple times, even for people in the community where they have a blank check and then they go to the dealership with all the negotiation, and then it’s up to the dealership to try to do the song and dance, to try to win their business. So this is really what you want to do now, the local bank. Again, if you already have your relationship with your bank, I would say that would probably be the first place I would go.

Especially if it’s a larger bank, you already understand the importance of having your credit score, but you can probably find a good deal with your bank, right? They’ll be able to allow you, because if you already have a banking relationship with them, they already have, they already know your spending transactions. They may already know your credit score because you’re already banking with them. So my suggestion would be applied for a loan at your local bank, just to see how competitive they would be. And then once you’re approved, you can see what happens after you finalized the deal. So typically once you get approval at the bank, if you’re going into your local bank, you already will get that pre-approval you already know where you stand. And then that’s the, you already identified how much car you can afford and all that good stuff. So this is the option.

Now, the other option, once you have gotten the local bank option, once you have already been approved for local bank, the other option I choose, I really recommend going to this online options. So there’s two options. I would suggest looking into one is lendingtree.com. And they’re like an online broker. And another one is myautoloan.com. So I went and I tested this out and I’ll just show you. So I signed up, um, for a lending tree account and they sent me some offers. So like I was saying, I was like, I was saying before, I’m really hell bent on trying to get that up. And then I go and, um, that, that, well either, either one of the three cards I told you about. So I asked him to get out of this and just make this bigger. There we go. So you can see, I just went and applied it for $70,000 auto loan.

And it looks like, um, at the time I was looking for a 2018, um, AMG GT Coupe, um, would be about $70,000, highly depreciated and all the things that I already covered, but they’re giving me different quotes from this particular company called livestream, which, um, one is saying, Hey, look, we’ll give you a 4.9, 4% with this monthly payment. Then there’s another one saying 7.7, 4%. So they’re basically saying the same exact deal. Um, then there’s another one saying, Hey, look, we’ll give you a 60 month term for 4.6, 9%. And there’s the monthly payment. Then a 36 month deal for 3.9, 9%. So they’re saying, Hey, look, if you do a shorter term, I’m going to give you the lower interest rate on this, but it’s going to be a ridiculous car payment. But again, I just wanted to show you how this works.

So they just pre-approved me based off my credit file when I, when I did it. But the other thing that’s pretty cool about them is they give you like a little dashboard and it’s just really cool to see, you know, how everything kind of pans out, with your dashboard and how it all works and all this good stuff. So at the time when I did this at a humble 732 credit score, but again, it’s just a nice little resource to kind of see how this will work. Uh, the other option that I would suggest you take a peak at is myautoloan.com. And I did not go through the process of my auto loan.com, but it works very, very similar to lending tree. And you can really just go and see, um, you compare, you can, you can compare up to four offers in minutes and you can just choose what type you want.

So I would just say again, if you wanted to do used, you hit continue, then you just put your information in and it’s going to give you a pre pre-approval. Typically it’s not going to give you an inquiry. They may or may not. And it would be able to tell you where you, where you stand. So these are both two really, really powerful resources to get those additional loans. Um, again, remember we already broke down this tier system so we can see that I was really at that, that, um, I was really in between tier two and tier three. And it really was because that particular score, I think they pulled was my Equifax. So couple of points more, I’d be at a tier three, but when I looked at it, they were giving me anywhere between, uh, they were really giving me between a 4.3, 4% and a 5.9, 7%.

So I was right there between tier one and tier two. So if you remember, that’s what I was saying, like your score isn’t necessarily going to determine like the prime or subprime. It’s more so along with the score and the content of your report, right? And all the other good things that they’re taking into account that will determine the potential interest rate that you’ll receive on the loan. But again, you want to use that as a resource to see if you can get a better offer right now. Here’s the, here’s the biggest question that everybody has. Should I allow the dealership to run my credit? Because Kenny you’ve told me to, I don’t have the cash. And you told me to get a, get a, get a, a loan from apply for a loan at my local bank. That’s an angry, then I need to go and look at lending tree and they’re going to run my credit.

And then this my auto loans, Kenny, what’s the deal with all that it’s should allow the dealership to run my credit as well. And my answer is yes, because we’re trying to get the best deal. So case in point I had no business last year was the last year, two years ago, I had no business going in purchasing another car. I didn’t need to buy that car. I just wanted the car. And I told myself years ago that I was going to get the.. You know, what was it? It was the, it was a Ford GT 350 Shelby, Ford GT 350. It was a 2016. And I had been searching for a wow for that car. I can just, I can only find it for like 50,000 49,000. And I got a pre-approved for financing through USAA. That’s the bank I primarily bank with personally.

And I was approved pre-approved for up to 50,000. And they approved me at like a 5.1, five interest rate. So it wasn’t the best interest rate, but it was still a solid interest rate. So I’m on, um, I’m using the stuff that I’m telling you. I think at the time I was using true car because I didn’t know about auto typist and going through this process, I found that the GT 350, I find it for $41,000, I couldn’t believe it. I could not believe that. I found that dad going to $50,000 car for $41,000. I was in a positive equity situation right out the gate. And the reason why I was able to find this car is because it was a trade-in at a Mercedes-Benz dealership and they were just trying to get rid of the car. Right. So I try to get it down to like 39. It wasn’t going for it. I was like, bro, come on, you already know how much car this car is worth. We were just trying to sell it because we sell Mercedes. We don’t sell Mustangs, make a long story short.

I’m signing the paperwork in the back office, getting everything done. And I’m like, Hey, look, I want to make sure I add gap insurance because USAA happens to not offer gap insurance. So I wanna make sure I have gap insurance. And by the way, I’m glad I’m bringing this story up. Gap insurance is definitely something you want to include because it’s going to pay for the amount of the loan that your auto insurance hasn’t paid for. Assuming the car is total. So I’m like, Hey, look, you know, what’s up with the gap insurance. He’s like, yeah, we can give you, give you the gap insurance. There’s only going to be like 800 bucks for the entire loan. I’m like, yeah, sign me up. I’ll pay that right now for my car, with my credit card. And he’s like, cool. But I really think Kenny, I really think that I can, I can beat this deal that you have with USAA.

I mean, I’ve got to run your credit in anyways. So why don’t you just see if I can beat it? I’m like, okay, cool. I’m like, what do you gotta run my credit for? Like, well, I mean, I’ve already kind of did a pre pre-run just to verify who you were. It was a soft pool, but I can shop it for, to, to some of my lenders through TransUnion and see what will happen at the time. My TransUnion score was like a 780. I’m like, yeah, we are, go ahead. So I get them to do it. He comes back and says, yeah, Bank of America will actually approve you for a 4.1, 5% interest rate. So I’m like, shoot, sign me up. Now. I wouldn’t have been able to get that deal through bank of America at that such low interest rate, had I just stuck with my USAA deal.

So I said, well, if we get you USA, I’m out of that. Matter of fact, I think that matter of fact, none of them thinking about it. I think the interest rate that USA was giving me was like 6%. Matter of fact, it was like 6%. It wasn’t five point. It was like 6%. So I’m like, I saved 2% interest and get a good deal on this car. Yes. So that’s my story, but that’s why you still allow the dealership to run because they may have, they may have special incentives with their, with their financing, through their loan because of the volume that they do now. And the other thing is having more inquiries at this point will not hurt your score. And this is why all loan inquiries count the same within a 45 day period. So now that you’re going and you’re shopping for all of these different loans, if you get 50 inquiries, even though it’s not going to look good, um, it’s not going to count any differently than one inquiry because the credit bureaus know that when you shop for loans, you’re going to be shopping around.

So inquiries really, really impact your score. Within the first three months, after six months, they still have an impact. And then after a year, it doesn’t even have any impact at all. And then after two years, they fall off. And then if then you, then if you went through and you’ve gone through this process about the 700 Credit Score Academy, you know how to get inquiries removed, not account holding inquiries. So worst case scenario, you can still get those inquiries removed without it, without an issue, but I’m just making it clear that inquiries are going to count the same within that 45 day timeframe. And remember, we should already have financing before communicating with any dealership anyways. So that’s why we still want to ensure that if we, if they can’t beat the deal, then we’re going to go ahead and move forward and not waste our time and move forward with the vehicle. Okay. So that is really how you go about obtaining financing. Again, apply the principles here, use a resource outline and get the best financing that you can get. I will see you in the next module.