Buying basses with credit [poll]

[factory presets]

I've even bought cars in cash,

Did that once. Well, bank check, coz that's how they do over 10k. Wife was there as well, coz that was how the day shook out. So we're sitting in the office, looking all young and poopie, and the salesman is like "I bet this is the biggest purchase you've ever made." And we're like "We're paying cash, m8. What do you think?"

 

[gln1955]

thank you for pointing this out. Tons of rich people use credit wisely to their advantage. The assumption is there is no way to use credit wisely is pretty foolish and easily discredited…no pun…ok pun.

That said if for most people are against using cards is not at all a bad thing because you won’t fall into a trap or hard times from credit because life happened.

The corollary is you don't need credit cards to do foolish things with your money.

 

[Rob112]

The corollary is you don't need credit cards to do foolish things with your money.

thats facts

 

[BadSanta1281]

In 2002, when GMAC first introduced 0% financing, I had to talk a multi-millionaire into using it when he bought a new $60k Cadillac Escalade for his wife.

He wanted to write a check for the full amount because he had always paid cash for cars before that.

I asked if he was unclear on the concept. He just knew there had to be a catch to it.

 

[tb-player]

In 2002, when GMAC first introduced 0% financing, I had to talk a multi-millionaire into using it when he bought a new $60k Cadillac Escalade for his wife.

He wanted to write a check for the full amount because he had always paid cash for cars before that.

I asked if he was unclear on the concept. He just knew there had to be a catch to it.

A friend of mine was the manager at a car dealership. I bought a car from him at 0%. I asked how he did it. According to him, on traditionally slow months, a car dealer will buy down the rate from the bank so they can move more cars. The profit from the sale of the cars more than makes up for the cost to get the rate to 0%.

The mistake most people make is looking at it from an individual standpoint, wondering “how can they make money when “I” am not paying any interest?” The Law of Large Numbers is how every financial institution hedges their bets. And they win most of the time.

That being said, I’ll take credit card points or 0% every time, as long as I’m getting the best possible price on what I’m buying.

 

[James Collins]

Chase can give tb-player $2,000 a year in cash back because for every tb-player who pays off their full balance every month, there are many many many more Chase credit card holders who do indeed pay loads of interest and even fees, every month. The financially undisciplined card holders (which is most of them), pay for the perks of the few who are disciplined.

Plus credit card companies sell and rent their equipment to do credit card transactions.

 

[BadSanta1281]

A friend of mine was the manager at a car dealership. I bought a car from him at 0%. I asked how he did it. According to him, on traditionally slow months, a car dealer will buy down the rate from the bank so they can move more cars. The profit from the sale of the cars more than makes up for the cost to get the rate to 0%.

Not the case in my story.

GMAC introduced 0% for 60 months after 9/11 because sales dropped after the attack. It was a radical idea at the time. It worked... we sold record numbers. It was subsidized by General Motors, not the dealer.

I was in the car business for a long time we never bought down a rate. Quite the opposite in fact.
Often the rate from the bank got marked up a couple of points by the dealer.

 

[g-dude]

Yeah, and ironically people who have paid off all their debts see their FICO score take a nosedive...

That’s not correct.

Closing your accounts is what causes scores to drop, if the ones you close decrease the average age of your credit.

Again, lots of people don’t understand the algorithm.

Obtain credit early, use it wisely, slowly expand your sources of credit so that you never over-utilize them, have a good diversity of credit types, pay your bills on time.

Do this and you end up being able to obtain credit whenever you need it at the most favorable terms possible unless you’re doing something so idiotic that you are outside underwriting guidelines for mainstream lenders.

 

[g-dude]

Not the case in my story.

GMAC introduced 0% for 60 months after 9/11 because sales dropped after the attack. It was a radical idea at the time. It worked... we sold record numbers. It was subsidized by General Motors, not the dealer.

I was in the car business for a long time we never bought down a rate. Quite the opposite in fact.
Often the rate from the bank got marked up a couple of points by the dealer.

Dealers are never going to buy down the rate in this day and age. The F&I department is an important source of income given how complicated the financial relationship between manufacturers and dealers has become.

Now, the dealer may tell you they’ll get you a better rate, but that just means they are giving up some profit - potentially to make it back elsewhere.

 

[jmattbassplaya]

I needed to see this. In my late 20s here, currently in a lot of debt but I'm estimating my debt to be paid off by age 34..

Best of luck to you. It sounds like you have a plan and now you just need to work it

 

[MrClassicMetal]

In 2002, when GMAC first introduced 0% financing, I had to talk a multi-millionaire into using it when he bought a new $60k Cadillac Escalade for his wife.

He wanted to write a check for the full amount because he had always paid cash for cars before that.

I asked if he was unclear on the concept. He just knew there had to be a catch to it.

That 0% deal is always offered at the expense of something else, and with a car typically it means that the overall price will be higher. That's because you can get a discount if you pay cash, or it could be something else you could wring out of the dealer. Like for example free oil changes for a year. There are no free lunches.

The reason why 0% financing is almost always minus the manufacturers rebate is because the dealerships only profit from the actual sale, so they'll very rarely agree to bargain down the price. So stripping away those rebates helps them make their money back.

And because of this, a no-interest loan usually costs more than the savings you’d get negotiating on price. And without those rebates, a car you were looking at before the offer could have its price tag increased by $1,000 or more.

There is always a catch. That millionaire knows this, that's how he got rich and/or stayed rich.

 

[g-dude]

That 0% deal is always offered at the expense of something else, and with a car typically it means that the overall price will be higher. That's because you can get a discount if you pay cash, or it could be something else you could wring out of the dealer. Like for example free oil changes for a year. There are no free lunches.

The reason why 0% financing is almost always minus the manufacturers rebate is because the dealerships only profit from the actual sale, so they'll very rarely agree to bargain down the price. So stripping away those rebates helps them make their money back.

And because of this, a no-interest loan usually costs more than the savings you’d get negotiating on price. And without those rebates, a car you were looking at before the offer could have its price tag increased by $1,000 or more.

There is always a catch. That millionaire knows this, that's how he got rich and/or stayed rich.

If you do the math, the amount you save on 0% financing in nominal dollars is equal to the amount of cash incentives you get today for not using that 0% financing. Therefore, you should only take the 0% over the cash if you can earn a rate of return that is higher than what the normal interest rate would be - roughly speaking.

That being said, liquidity is king.

 

[BadSanta1281]

There is always a catch. That millionaire knows this, that's how he got rich and/or stayed rich.

Actually the millionaire took the 0%, got a substantial discount off sticker, thanked me for pointing out the error of his thinking and became a loyal customer who bought several more cars.

 

[g-dude]

Actually the millionaire took the 0%, got a substantial discount off sticker, thanked me for pointing out the error of his thinking and became a loyal customer who bought several more cars.

The next fun trick is the business owner who wants a standard full size pickup. If they buy a 3/4 ton pickup (or larger), they get a nice tax write-off.

 

[MrClassicMetal]

Actually the millionaire took the 0%, got a substantial discount off sticker, thanked me for pointing out the error of his thinking and became a loyal customer who bought several more cars.

Yeah, I got that from your previous post.

I'm surprised he's not leasing.

 

[BadSanta1281]

There are no free lunches.

That's a common thought but sometimes there are.

You just have to recognize a free sandwich when it's right there in front of you.

 

[turf3]

I never buy luxury or recreational items on credit.

As far as I'm concerned, for my comfort credit is only used for mortgages or emergency and very large spending (heart transplant? no problem, use credit - need to replace the dishwasher? pay cash).

I've heard all the arguments about "you can earn more in the stock market on that borrowed money" but I remain unconvinced.

 

[BadSanta1281]

Dealers are never going to buy down the rate in this day and age. The F&I department is an important source of income given how complicated the financial relationship between manufacturers and dealers has become.

Now, the dealer may tell you they’ll get you a better rate, but that just means they are giving up some profit - potentially to make it back elsewhere.

At all the dealerships I've been at...

The F&I manager will argue with the lender on your behalf for a better rate but will never sell a loan at a loss.

They get paid on the profits their department generates, not on the profits on the vehicle itself.

I've seen lots of cases where the F&I made more profit on a deal than the sales department did.

But it's usually the service department that generates the most money at a new car store.

 

[turf3]

Did that once. Well, bank check, coz that's how they do over 10k. Wife was there as well, coz that was how the day shook out. So we're sitting in the office, looking all young and poopie, and the salesman is like "I bet this is the biggest purchase you've ever made." And we're like "We're paying cash, m8. What do you think?"

I've actually bought three different cars, from dealerships, with a personal check. I guess they figured they know my address and could repo the car if the check bounced. Buy $40 worth of groceries with a check and they want your ID, buy a $$ car (I won't say how much but well over $10k) and they look at me and say "no, we don't need a cashier's check, personal check will be just fine".

 

[factory presets]

I've actually bought three different cars, from dealerships, with a personal check. I guess they figured they know my address and could repo the car if the check bounced. Buy $40 worth of groceries with a check and they want your ID, buy a $$ car (I won't say how much but well over $10k) and they look at me and say "no, we don't need a cashier's check, personal check will be just fine".

Banks here would rather do a check than involve themselves in the extra step of reporting cash transactions above the drug dealer limit. Expect it would be like that pretty much everywhere.