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I do not understand why people want to "save up" for a down payment. To me, I would rather use any disposable income on performance upgrades. Why blow hard earned cash on down payment? Maybe my credit is exceptional, but I never come out of pocket to buy a new car, and I have bought several cars. Can someone explain this to me.

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I dont like paying interest and I want to pay off the car quickly. I am putting a 20% down payment. I probably wont be putting any mods on except for rims and lower it.
 

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mplscivic said:
I dont like paying interest and I want to pay off the car quickly. I am putting a 20% down payment. I probably wont be putting any mods on except for rims and lower it.
There are actually several reasons to drop a DP. The biggest is the savings in interest. Not only is your base that interest is calculated on smaller but banks will also give you a better rate if you are not financing 100% of the vehicle's sale price. Some states wont tax your down payment either so you pay less taxes. Does this answer your question?
 

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Kadenx, thanks for pointing that out. I didn't personally have any questions about it. I think the down payment is the way to go.
 

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kadenx said:
There are actually several reasons to drop a DP. The biggest is the savings in interest. Not only is your base that interest is calculated on smaller but banks will also give you a better rate if you are not financing 100% of the vehicle's sale price. Some states wont tax your down payment either so you pay less taxes. Does this answer your question?
I agree that you save slightly on interest, but I disagree about the loan rate? I bought my 2005 civic ex se with no money down @ 2.5% with 100% financiing. The doesnt get much better than that considering Honda will probably never give 0.0%.

$1000 down x 2.9% x 48 (or 60) months doesnt equal big savings. Keep the cash, invest in a cd @ 4% and then prepay your loan the $1000 + interest and keep the difference. Is that a rebuttal to your arguemnt?
 

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okay here's a good reason

unless you pay all cash it's better to put at least 500 down it looks better on your credit score, i read it in consumer reports, that the companies show the number who put nothing down means their kinda cheap, so put something down and don't blow all the cash on upgrades, wait at least till you pay the first payment!!
 

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jsw05exse said:
I agree that you save slightly on interest, but I disagree about the loan rate? I bought my 2005 civic ex se with no money down @ 2.5% with 100% financiing. The doesnt get much better than that considering Honda will probably never give 0.0%.

$1000 down x 2.9% x 48 (or 60) months doesnt equal big savings. Keep the cash, invest in a cd @ 4% and then prepay your loan the $1000 + interest and keep the difference. Is that a rebuttal to your arguemnt?
The 2.9 percent financing is called an incentive. Most banks give the dealer a rate that they ahve to pay for a contract. Usually called a buy rate. The dealer then marks it up calling it the sell rate. If Honda offers an incentive like 2.9 financing then Honda basically says to the dealers, do not mark up the buy rate at all, we will give you a discounted cost or invoice. The idea of paying a downpayment is now you have equity. You are less of a risk of dropping and walking. Banks hate risk so they will give you a better rate if you put a DP down generally speaking. Yes you would do better saving the downpayment for a cd but you were talking about using your money for modding, not cd's in your first post.
 

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Let me ask you this, because I am not sure how this works either:

I have heard people say that they have an 04 civic and they want to trade it for a 06 SI. What happens to the balance of the loan? Do they roll what you owe into the next loan or are you forced to pay off the first loan to get the loan for the new car?
 

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i will trad ein my 04 vic
get abotu 17 for it and i ow 15. so i will walk awayf romt he trade with a whole 2 grand to show.. woww.. then i put that down on the new car

basicly thats how it works :)

heres a good way to look at it:

on a 60 month loan. every 1000 bucks u owe on your loan in roughly 20 dollars a month

so if you have 500/mnth payments. u to a DP of 100 your 500 a month becomes 480.

reason a dp is good if u have the cash. means for people who are tighter on cash dont have to scrimp the full 500 each month. maybe only 450 or 400 if they dropped enough of a DP

ill be putting a 5000 down payment on my car :)

^^ all canadian funds btw. but same principle. jsw hope that answered your last question also :)
 

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jsw05exse said:
Let me ask you this, because I am not sure how this works either:

I have heard people say that they have an 04 civic and they want to trade it for a 06 SI. What happens to the balance of the loan? Do they roll what you owe into the next loan or are you forced to pay off the first loan to get the loan for the new car?
Well, basically, the dealer purchases a trade in at whats called a trade allowance. This is what they are giving you for the trade. It could be more or less what "true value" or "market value". This really doesnt matter, what matters is the payoff. If the trade allowance is is greater than the payoff, then you have positive equity that is applied as downpayment. If your allowance is less than the payoff, you have negative equity. Most banks want negative equity covered by cash or rebate before the loan is guaranteed. Some banks are willing to finance negative equity and others are not. Usually, large banks will finance up to say 115% of the value of the vehicle in order to cover neg equity but in that case you cant finance after markets or life insurance or gap for instance. There is a limit that the bank is willing to loan. All in all, sell your car out right...you get more money for it. Take the profit and keep it in your pocket. Go in to buy your car with "no money down" then they have to finagle deals and you usually get a better price becasue they have less places to hide charges plus they are at the mercy of the bank. When you get a price you are satisfied with and you are completing the paperwork, then you drop your downpayment. You can literally take the price you agreed to and subtract your downpayment. If you put the DP up front, they are more likely to inflate charges for other things like doc and gap because they want to finance that entire 115% of the vehicles value. If you have no downpayment, that 15% would be taken up by taxes and fees. So spring the DP as the lst thing before you sign. If they give you greif, walk away and do the same thing at a different dealership. Dealers will more than likely walk through hoops for a customer that is leaving. Thats money out the door for them
 

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paradoxblue said:
i will trad ein my 04 vic
get abotu 17 for it and i ow 15. so i will walk awayf romt he trade with a whole 2 grand to show.. woww.. then i put that down on the new car

basicly thats how it works :)

heres a good way to look at it:

on a 60 month loan. every 1000 bucks u owe on your loan in roughly 20 dollars a month

so if you have 500/mnth payments. u to a DP of 100 your 500 a month becomes 480.

reason a dp is good if u have the cash. means for people who are tighter on cash dont have to scrimp the full 500 each month. maybe only 450 or 400 if they dropped enough of a DP

ill be putting a 5000 down payment on my car :)

^^ all canadian funds btw. but same principle. jsw hope that answered your last question also :)
Remember to save your down payment for last. Dont tell the dealer you have that kinda cash. They will ultimately give you less for your trae to keep some of your downpayment! If you get a regular person to pay 17 for an 04 civic, your doing good.....if you get a dealer to pay 17 for an 04 civic....you got a dumb dealer!
 

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ok sorry if this is a dumb question...but here it goes. I have a friend that has an 05 cobalt and they just go it beg of this year...they already financed negative equity from another vehicle when the bought the cobalt...and I know it's probably a waste of money, but if they get the 06 si would it be impossible to get honda to finance the negative equity when the use the cobalt as the trade in....sorry I guess they got the car for reasons that sounded good at the time but now it's turned into a bad idea and they want out of that car and into a honda...and I suggested the si :) thanks!
 

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I think that question was already answered by kadenx:

"Some banks are willing to finance negative equity and others are not. Usually, large banks will finance up to say 115% of the value of the vehicle in order to cover neg equity but in that case you cant finance after markets or life insurance or gap for instance."
 

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There is no mention of 15% APR here. They were talking about a loan of 115% of the MSRP, so if your car's MSRP is $20,000, the bank will loan you no more than $23,000.

The extra $3,000 helps cover any tax, title, license, extended warranty, negative equity from a trade-in, and gap insurance charges you may want to cover, and so that you don't have to put any down-payment if you don't want to. The APR is something totally separate.
 
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