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GP_Matt · 10-11-2012, 11:56 AM

Hey, I was wondering what the norm was for interest rates on new and used vehicles. I have only ever financed through a line of credit or the promotional rate when they have a 0.9% or something like that.

A girl at work was talking about it yesterday and for her first car she went to a dealership who convinced her to sign up for their credit (re)building program. She doesn't have bad credit, just not very much credit. AFAIK previous to the car she had a credit card for a few years and hasn't missed a payment but does carry a balance. They told her that because she didn't have much of a history she needed to start building credit and that they would help.

They then sold her a car for $15000 and setup financing at 29.9%. The schedule has her paying them $30000 over 5 years. They told her that she should make the payments for a year then come back and trade the car in for something new and if she makes all her payments then the next car will be 25% interest. Another year and they will sell her another car at 20% interest.

I was pretty dumbfounded when I heard this and told her that she should go talk to her bank about refinancing the loan at a better rate and bypass the dealer. The bank offered 11% right up front and will save her thousands of dollars the first year. That still seems high to me but far better.

She is young and went by herself but I still think they took advantage of her. In my opinion there are so many things wrong with what the dealership did to her. If nothing else, why would trading in your car every year help you improve your credit/ get a lower rate? Why not just refinance every year to get the lower rate.

Anyway, the whole thing got me thinking about rates and wondering if there are very many people who pay these crazy rates. I thought they were only for the guy who has declared bankruptcy recently and wants to borrow $2000 to buy a crappy car.

10-11-2012, 11:56 AM	#1
GP_Matt First Line Centre Join Date: Jun 2011 Location: Edmonton Exp:	Buying a Vehicle: Interest Rates Hey, I was wondering what the norm was for interest rates on new and used vehicles. I have only ever financed through a line of credit or the promotional rate when they have a 0.9% or something like that. A girl at work was talking about it yesterday and for her first car she went to a dealership who convinced her to sign up for their credit (re)building program. She doesn't have bad credit, just not very much credit. AFAIK previous to the car she had a credit card for a few years and hasn't missed a payment but does carry a balance. They told her that because she didn't have much of a history she needed to start building credit and that they would help. They then sold her a car for $15000 and setup financing at 29.9%. The schedule has her paying them $30000 over 5 years. They told her that she should make the payments for a year then come back and trade the car in for something new and if she makes all her payments then the next car will be 25% interest. Another year and they will sell her another car at 20% interest. I was pretty dumbfounded when I heard this and told her that she should go talk to her bank about refinancing the loan at a better rate and bypass the dealer. The bank offered 11% right up front and will save her thousands of dollars the first year. That still seems high to me but far better. She is young and went by herself but I still think they took advantage of her. In my opinion there are so many things wrong with what the dealership did to her. If nothing else, why would trading in your car every year help you improve your credit/ get a lower rate? Why not just refinance every year to get the lower rate. Anyway, the whole thing got me thinking about rates and wondering if there are very many people who pay these crazy rates. I thought they were only for the guy who has declared bankruptcy recently and wants to borrow $2000 to buy a crappy car.