Car loan from dealership vs. Financial Institution: Advice Being Sought

[Fromspace]

Just been speaking with my trusted service advisor at a Toyota dealership about buying a new car. He suggests using the dealership financing program and not the financial institution's.

Pushing aside for a moment, the interest level for each option, what arguments could you come up with for going the dealership route?

Your expertise and experiences welcome.

 

[MattRoxx]

I'm no expert but since the dealership is going to add in its own cut, you're probably better off dealing directly with the financial institution.
I remembered reading this article, give it a look:

http://www.cbc.ca/news/canada/briti...l-robbed-by-25-interest-td-car-loan-1.2483342

 

[hilroy]

I'm no expert but if the interest rate is the same and there is an option to buy out early or make lump sum payments then the only benefit to using the dealerships institution is most likely there benefit.

 

[Ceiling Cat]

FYI - You can bargain for your financing program at the dealer and/or at the bank. If you have the time I would check out at least two banks or more and present them with the Toyota finance plan and ask them which plan is least expensive, their plan or Toyota financing. They can calculate to the penny what your final cost is on both plans. If the bank plan is not the better one, they will adjust it to be more advantageous. Then you can take that plan to Toyota and they will try to beat it if they can.

I have a personal strategy these days on cars. I buy the car with a 6 year warranty. ( you can bargain the warranty price down as well ) Keep the car in good condition and sell it after 3-4 years with a 2-3 year warranty. What you pay extra in the extended warranty will get you near dealer price in a private sale.

 

[enoughisenough]

Worked at a bank for years.

Unless you're rich in assets, or borrowing against your house (but then why even take a loan?), the dealership will almost always offer a better rate. However, that rate will come with a price that normally isn't as discounted as much as cash.

This is a decision that is case-by-case and requires a little bit more of a breakdown (i.e. potential length of loan, accelerated payments, cash price vs. financing price).

 

[Ceiling Cat]

Fortunately, I can give you feedback from only last week. Someone close to me bought a Toyota Venza at zero percent from the dealership. Total price with taxes was about $46,000 and she had a hard time getting them to take $10000 deposit. A loan from TD would have been at 5%. She has excellent credit.
Now, the drive is another matter altogether compared to my Audi.

I do not know the details of the 0% offer, but if it was truly a no interest deal then she should have help on to the $10k till the end of the deal. If she had a 5 year (60 month) plan she could have made approx. 16% on her money for 4 years ( not compounded ) The first 48 months would be paid off as she intends to do now. Meanwhile if she kept the $10 and bought a very safe stock that paid a -/+ approx. 4% dividend like TRP. she would have made approx. $1600. and possible stock appreciation*. In the final year she could cash in her stock and pay off car payments.

* Betting keystone-xl will go through.

 

[basketcase]

The question is whether the cash incentive makes up for the lower interest rate. Sites like carcostcanada can give you a full breakdown of the incentives the dealership might not tell you about.