FourT6and2

I'm a young guy. But I've worked hard the last few years to get to a point where I can afford my dream car—or at least one of them. I've got a few months before the car is built. So I'm not in a rush to make a financial decision right this minute. But I'd love some advice.

I can afford to buy the car outright. Without financing. By this, I mean it won't affect other areas of my financial situation to part with the cash. My credit history isn't long and I've got no history with real borrowing. I've always only bought things I could afford. So I've got no lines of credit out there except an AmEx card I use here and there and pay off immediately. My credit score is up around 765 last time I looked.

I'd rather just buy the car 100% on day one. But I get the feeling dealerships want you to finance for their own sake. My problem is I am not educated in the area of automotive financing. I've only ever had one car. And it was on the lot. I walked in and bought. No financing or anything because the car was cheap and it wasn't a big deal for either myself or the dealership. But on an expensive AMG, I feel it's going to be a different situation.

I'm in California, if that matters.

I'm wondering if I should approach the dealer with intent to just pay in full when I pick up the car. Or if I should play along with their desire to have me finance based on whatever down-payment I choose. I would want a no-penalty for paying off the balance. But I'm not sure how financing works exactly. Even if I financed and then paid off the balance, wouldn't I pay more in the long run? I guess it depends on how long I wait to pay it off and what the interest rate is.

What sort of rate is doable? Can it be negotiated? Should I tell the dealership I've secured my own private financing? Can the dealership bully me into using their financing? Can they refuse to sell me the car and sell it to someone else who is willing to play their game? It's a high-profile car. So I'm just not experienced in the matter. Will my (lack of) credit history come into play?

Sorry for all the questions. I've done some reading up on it online, but everything is fairly generic and vague.

FourT6and2

Oh also I guess if I go with financing, that will help my future credit-worthiness. And I can then just pay off the full balance of the car after the first month or something if there is no penalty?

SandSnip3r

Im in almost exactly the same scenario as you: same area, same credit score, probably not the same car. I'm in for answers. Here's some info I've gathered so far.

• This is just my guess, but I expect that financing the car vs paying cash wont affect the sale. I'm sure they'd be happy to make even more money off of you with a loan, but they're not going to refuse to sell you a car if you pay cash.
• You're certainly welcome to shop around for a loan beforehand and walk into the dealership already with as much as a blank check from the lending company.
• We should call our dealerships and ask what loan rates they offer. Some dealerships offer rates as low as 0%!

From what I understand, in our scenario, there are only two reasons to take out a loan:
1. Build credit
2. Invest the money at a return rate higher than the loan

Here's what I plan to do:
1. Shop around for a loan beforehand.
a. I'm going to look for a low rate, ideally <= 3%
b. Make sure that in the loan agreement there is NO pre-payment penalty or any other hidden contract stipulations (you want to be able to pay off the loan at any time without incurring the entire interest cost)
2. Finance maybe 20-40% of the cars sale value (this will be for credit building purposes)
3. Make regular payments for 1 year
4. Pay off the entire car after the end of one year
a. I believe its a possibility that paying off too early does your credit more harm than good. This topic requires more research
b. Maybe its better for credit to have a 1-year loan period rather than terminating a longer loan early. Also requires more research

I've roughly done the same thing with my current car. Like yours, my car was cheap. I went into the dealership, negotiated the car down to $18k. During the negotiation process, they were using the typical strategy of playing with the loan duration and those things to make the monthly rate look more appealing. I just let them do whatever they wanted with that because I planned on paying off the loan within a few days. I did make sure, before signing anything,that there were no pre-payment penalties. They started me off with a loan rate of 15.99% (I feel bad for people who fall for that). I sign the paperwork and roll home with my new little car. The next day the finance guy calls me and says "we bumped your rate down to 7.99%! Come in and sign the paperwork." I went ahead and did that as I was too lazy to go to the bank yet. Finally I went to the bank and found out they could do 1.99% for me. I decided to stick with that rate rather than paying off the loan because it was at this point that I learned about the benefit of having a loan to build credit. Now, with my 1.99% loan, I made payments of $1k/month. At the end of the first year, I payed off the remaining few thousand. I think i only ended up spending $50-$100 to build my credit.

Let me know what you decide. Also, lets go to the AMG Driving Academy together once we both have our cars!

drwolf

agree with above and add one thing to do it,

shop around for the car you want, if your looking new, go to a few dealers and see whats the lowest each dealer will offer the car you want, and this is before you do any financing/paying for the car, you have to go the dealer guns blazing (in my opinion if i may) so do your homework and good luck.

FourT6and2

The car I'm buying is the AMG GTR. So shopping around isn't exactly in the cards other than Dealer X wants MSRP vs Dealer Y wants $25,000 over sticker. But Dealer X might not have an allocation. Or they might have 10 people in line on the same car. And Dealer Y might have an allocation or one on the lot.

In my case, I have a production slot with a PO#. So it's not built yet. But soon.

drwolf

Oh wow i didnt even know, Well since its that high end i dont know what to tell you other than Good Luck, its a sweet ride

DTLAMBZSalesGuy

Should I Lease?

Pros:

• Generally lower monthly payments. Since you're not buying the car, but a certain amount of time using it instead, your monthly payment usually will be based off the depreciation of the car, or how much value the car loses, during the time you're leasing it. So if the initial price tag is $25,000, but your car is estimated to be worth only $12,500 after your lease is up, your monthly payments will be based primarily on the lost value of $12,500. For a three-year lease, the payment amount would then start at $347, in our hypothetical example. The final number would depend on additional factors like the length of your lease, interest rates, taxes and other fees.
  
• Flexibility. If you're the type of person who often moves great distances for work or by choice, factoring your car into the relocation can be a pain. For long moves, you may have to consider the costs of shipping your car to your new location and the hassle of finding a neighborhood with convenient street parking. But with a lease and a relatively short loan period that typically lasts three years, you have the freedom to turn in your car at the end of the lease and take off with no baggage on your shoulders.
  
• Newer cars. Every time your lease ends, you get to go out into the market and take a new car for a spin. You'll have something fresh and fun to test out every few years. Three years is also typically how long the car's warranty will last, so any necessary repairs are usually covered during your lease.

Cons:

• Extra charges. Leases often come with certain extra charges that wouldn't apply if you were buying a car. For example, lease contracts come with mileage limits, which typically range from 7500 to 15,000 miles per year. If you go over your limit, you could be charged high per mile fees like 25 cents per mile.
  
• Higher insurance rates. Most leases will require gap insurance (included with a Mercedes Benz lease) as part of the overall insurance coverage, which covers what's still owed on the lease at the time of an accident. This insurance generally only protects you if the accident creates a complete loss though.

Should I Buy?

Pros:

• Equity. This is probably the biggest benefit of buying a car. When you buy in cash or make that last payment on your auto loan, you have something to show for it. If you wanted to, though, you could also sell your car off for whatever it's worth when you're done with it.
  
• Freedom. If you commute long distances every day for work, you won't have to worry about a mileage limit stopping you from racking up miles. And you can give your car a shiny new paint job anytime you want. Go ahead and trick out your car.

Cons:

• Loan and maintenance payments. For those who can't buy a car outright, auto loans typically come with higher down payments, which could be about 10 to 20 percent of the total cost. You also will probably be responsible (outside the warranty coverage) for maintenance fees as your car gradually wears down.
  
• The hassle of selling. If you don't pass your car on to a friend or family member, you'll likely have to sell it eventually and deal with the headache of finding and negotiating with buyers. Sure, you'll make some of your money back, but many people find the process stressful. Note: Most cars, don't keep their value and you will never get what you paid for, for your vehicle. Purchasing a vehicle is not a great investment.
  
• Longer loan period. If you want an auto loan with lower monthly payments, it may take upwards of five years to pay it off, which gives lenders more time to charge you interest.

Bottom Line

Financing a car is one of the biggest decisions you'll most likely have to make. You could easily pull your hair out deciding which option is right for you, but when it comes down to it, your decision to lease or buy a car depends on your personal financial situation. Think about what features matter the most in your life and how you want to approach your budget. Some would say that buying a car makes more sense if you drive a lot, but if you prefer driving new cars and can keep them in good condition, you might lean towards leasing. It's all in the eye of the beholder.

If you have any questions, I'll be happy to answer them for you