850 credit score but 9% interest

[marcuzx]

so my brother just bought a used lexus and he has 9% interest on it despite being 850 credit score!!!

 

 this way too high, do you think they scammed him?

 

I think he should have gotten like 3% interest 

[Ravendarat]

How old is he, certainly sounds high but used vehicles generally have higher interest rates. Where was it from and who was the financing through

[Heliian]

Credit score can help get you a better deal but it never guarantees it.

 

You gotta shop around and get a better deal.  4-6% would be my target for that kind of transaction. 

 

However, if he's dead set on that car he'll have to get the loan from somewhere else, like a bank.  Some people get conned into over 10% at used car dealers.

[marcuzx]

dealership told him is that high cuz the car is 12 years old and the car wasn’t cheap at all, i personally think it’s too high

 

 he bought a brand new car recently and got 2% interest while on this used car he got 9%! 

 

they told him at the dealership that the 9% was the lowest which I think is a lie tbh, definitely a lie

[Middcore]

He's financing a 12-year-old car...?

[marcuzx]

1 minute ago, Middcore said:

He's financing a 12-year-old car...?

yah, paid it 11k too rofl so dumb

[Middcore]

5 minutes ago, marcuzx said:

yah, paid it 11k too rofl so dumb

 

Well, no bank is going to give a loan on a 12 year old car, so the dealer basically had him over a barrel. Not surprised they ripped him off. If you're buying a car that old, it should be a beater that's cheap enough you can pay cash for it, or if it's a "future classic" or your "dream car" or whatever then you ought to put off purchasing until you can buy it outright. 

[marcuzx]

2 hours ago, Middcore said:

 

Well, no bank is going to give a loan on a 12 year old car, so the dealer basically had him over a barrel. Not surprised they ripped him off. If you're buying a car that old, it should be a beater that's cheap enough you can pay cash for it, or if it's a "future classic" or your "dream car" or whatever then you ought to put off purchasing until you can buy it outright. 

yea the dealership told him 9% is lowest cuz of age+mileage of the car and not to mention it’s a luxury car so if anything goes wrong well it’s gon be expensive repair 

[Needfuldoer]

1 hour ago, marcuzx said:

yea the dealership told him 9% is lowest cuz of age+mileage of the car and not to mention it’s a luxury car so if anything goes wrong well it’s gon be expensive repair 

Which model Lexus? There's a big difference between an LS (their flagship sedan) and an IS (a V6 Camry with leather seats).

 

Hopefully he didn't get taken for a ride, scummy dealerships are preying on the starry-eyed and desperate even more than usual in today's market. "Buy here, pay here" lots are even worse.

[IAmNik]

There's so many things that go into determining these things. Did he finance through the dealer? Finance through a credit union bank? those 2 things alone can change alot. I just financed a 2021 GMC Terrain Elevation Edition, and got quotes from 2 banks, my personal bank (a credit union) and another popular credit union, I got a better rate at the credit union I DIDNT have an account at lol went with them and my personal bank, ive financed and paid 3 other cars off with lol none of it makes sense really. Welcome to Capitalism 

[cmndr]

The dealer probably made money on that loan.

If you buy a car, come in with a loan pre-qualified. I think I could've shaved off about half a percent on my car loan but I was kind of busy/lazy at the moment. That works out to something like $200 extra in interest total for me.

I think my interest rate on my car is something like 3.5% and it's also used and I have something like an 830 credit score.

Either way, my car loan is lower than the rate of inflation so I'm not sweating it too much. I could pay it off tomorrow if I wanted to. I'd rather have more money in stocks. I'm young and I can accept the risk.

9% is awful though. Get that refinanced.

[Heliian]

23 hours ago, marcuzx said:

yah, paid it 11k too rofl so dumb

That makes more sense now.  It's still better than a loan shark. 

[Montana One-Six]

Financing is just dumb imo. If you have the money buy it if you don't don't. The only exception would be a house but other than that just don't.

 

But yeah 11k for a 12 year old car seems like a bad deal if it isn't something special.

[dalekphalm]

On 4/20/2022 at 8:38 PM, marcuzx said:

so my brother just bought a used lexus and he has 9% interest on it despite being 850 credit score!!!

 

 this way too high, do you think they scammed him?

 

I think he should have gotten like 3% interest 

Did he shop around, or only go with the financing provided by the dealer? While Credit Score is incredibly important, there are other factors.

 

If he shopped around, he probably could have secured a better interest rate from his regular bank, or a local credit union, etc (CU's largely depend on where you live, what country, etc).

[dalekphalm]

43 minutes ago, Montana One-Six said:

Financing is just dumb imo. If you have the money buy it if you don't don't. The only exception would be a house but other than that just don't.

 

But yeah 11k for a 12 year old car seems like a bad deal if it isn't something special.

For cars, financing can make a lot of sense. In 2014, I bought my Jetta brand new with a 0% loan. Yep. VW lost money on that loan. I would have been stupid to pay cash for it.

 

Otherwise, saying "financing things is dumb" is just kind of... not practical a lot of the time. Sometimes you need a vehicle. Sometimes you need it now, and can't wait until you've saved up cash to pay for it. Sometimes you can afford to finance a newer/better vehicle, and sometimes it's better financial sense to finance the vehicle instead of cashing out investments, etc.

 

Financing small purchases? Stuff you'd put on a credit card, "rent to own", etc? That's a lot different.

 

Financing makes sense for a few things:

1. Houses

2. Vehicles (depends on the specific details)

3. Home renovations, or major home repairs

 

Possibly a few more things. Otherwise, you're correct - people should try and pay cash in full for things they need, and save up for things they don't need right away.

[Montana One-Six]

4 hours ago, dalekphalm said:

Financing makes sense for a few things:

1. Houses

2. Vehicles (depends on the specific details)

3. Home renovations, or major home repairs

Like I said I disagree except for number one.

 

I put aside money regularly for emergencies and bigger investments (e.g. a car, car repairs, home repairs,...). If you live from paycheck to paycheck and cannot put aside any money because you spend as much as you earn in one month you are doing something wrong and need to adjust your expenses to better suit your monthly income. That's my opinion which reflects the way I was raised and that put me in a very good spot financially early in life so I'm sticking to it.

[cmndr]

6 hours ago, Montana One-Six said:

Financing is just dumb imo. If you have the money buy it if you don't don't. The only exception would be a house but other than that just don't.

 

But yeah 11k for a 12 year old car seems like a bad deal if it isn't something special.

Financing is dumb if you're using financing to live beyond your means.
Financing is less dumb if you're using it to keep more of your money in more productive assets (stocks, bonds, etc.)

It's perfectly fine to get a car loan at 2% if you would've sold an ETF of corporate bonds that pay 5% to buy the car... you come out ~3% per year ahead, before tax implications.

 

32 minutes ago, Montana One-Six said:

If you live from paycheck to paycheck and cannot put aside any money because you spend as much as you earn in one month you are doing something wrong and need to adjust your expenses to better suit your monthly income.

THIS is the issue. If you're living paycheck to paycheck you need to do some mix of
1. Increasing income
2. Decreasing recurring expenses

When I bought my car, it was about 1 month's worth of pay for me (something like $16,000). I got a loan on it. That loan is currently UNDER the rate of inflation. Leaving more money in stocks is generally the optimal strategy in that instance (though I think my stock portfolio has mostly been flat in that time span).

The thing that matters is that any "luxury" you buy is cheap enough that it's not a burden.