Private Party loans

LaCroix · 08-03-2010, 04:44 PM

I'm sorry if this is in the wrong section, or a repost, but I didn't really know how to search for something.

My bank, Capitol One, no longer does loans to buy cars privately. I really don't want to buy from a dealer, because I won't be able to get what I want for the right price. I suppose I'm wondering what my realistic options are. I've looked into credit unions, loan sharks, the mafia, ect.

Anyways, I want to take out a loan for ~32k to buy a 135 from a private party, but this doesn't seem to be the easiest thing to do. Any suggestions? Also, what kind of interest rates should I expect?

Thanks,
Jeff

Cuz5150 · 08-03-2010, 08:35 PM

Hows your credit? If its good, shop other banks. Used car rates are high 7-8 %.
If all fails, loan sharks or mafia do have better rates on the street.

GoGeo · 08-03-2010, 09:29 PM

Penfed.org I've financed a couple of used car through them...usually 3.99%.

LaCroix · 08-03-2010, 10:56 PM

Quote:

Originally Posted by GoGeo

Penfed.org I've financed a couple of used car through them...usually 3.99%.

For how long? On their website I got the impression for 5-6 years you're looking at ~15%, which is astonishingly high.

GoGeo · 08-04-2010, 09:10 AM

It looks like up to 60 months @ 2.99%. You'll have to join them, I think that you make a donation of 20 dollars and then you're a member. Google them and read about them, my experience has always been good. You could always try a local credit union, they tend to have the best rates.

https://www.penfed.org/productsAndRa...s-299AUTOLOANS

bradleyland · 08-06-2010, 02:18 PM

I'm going to offer some personal finance advice. I hope you won't take offense, because you didn't ask for it, but it seems a lot of people are a bit delusional about what constitutes a good financial decision these days. I'm not just going to tell you "don't do it", I'll give specific reasons. I hope you'll read this and consider what I'm saying, but I understand if you want to do it your way

If you need to finance a used car for 5-6 years, you need to lower your purchase budget a bit. Cars are always a losing proposition. They depreciate like crazy, so you have to pick a strategy that makes sense, then stick with it.

To own or not to own
Car ownership makes sense if your strategy is to hold on to the car for a long time. The longer you hold the car, the longer you can amortize the value of your investment. Taking a 5 year loan on a used car that is (for example) three years old means that you're going to have an 8 year old car at the end of the term. Maintenance costs on an 8 year old car are going to start going up dramatically. You'll be approaching 100k miles (or more) if you drive an average distance. The resale value of a car drops like a rock once it passes 100k miles. Pretty much any dealer is going to wholesale a car with over 100k on it. That means you'll get less than black book.

In order for used car financing to work, you need to fit the car in to a 48 month term, but ideally 36 months. The consequence of this is that the monthly payment for a used 135i financed at 36 months is going to come in at around 80% (or more) of the cost of a new one, and that's if you can get good financing. The big benefit of buying used is that you pay less overall for the car.

Some people try to take advantage of the lower purchase price and spread the financing out over a ridiculous term. This is a great way to end up "upside down" in the loan. The same people roll loan after loan in in to each other, and next thing you know they're paying $750/month for a Honda Odyssey to tote their three kids around in.

When leasing makes sense
Your grandfather would run me out of the house for saying this, but if you like cars, and you like to change it up, you should consider leasing. You have to meet some pretty specific criteria though:

You don't drive a lot of miles
You are certain you want a new car in three years
You are going to stick to a luxury brand

If you meet these criteria, you're a good candidate for leasing, but you need to look at some specifics. Stick to cars with high residual values. Also, lean on the dealer as hard as you can for a good deal. Because leasing means paying the difference between residual (MSRP * residual) and the capitalized cost (negotiated price plus fees), you stand to benefit from capitalized cost reductions in a bigger way than when you're financing a purchase. Ironically, the inverse is true of MSRP value, so if you're considering options, and you're going to lease, get what you want. The residual value goes up and down with the MSRP at a factor that is greater than half, so the cost of options are diffused greatly.

A lot of people have said to me, "You should just buy the car and sell it at the end of the term you'd normally lease it for." Yeah, well, I've been down that road. Selling a car that is worth $15k-$20k is not easy for a private seller. People who buy privately want a deal, so getting what the car is worth (it's "worth" what someone will pay you, btw, so don't believe what you read on Edmunds/KBB/etc) is a pain in the butt. It can take months and there are costs associated with keeping that listing going. My time isn't exactly free either. No thanks.

Plan C - buy in the sweet spot and finance well
The problem with buying new is that you get your butt kicked by the year-1 depreciation. Buying used can make a lot of sense for people who want a new car every three years, but the financing has to be right. There's a sweet spot between two and five years where a car holds its value well. Past that, it goes off a cliff again. If you buy a two year old car, finance it for three/four years, then get out of it before year five rolls around, you can usually do pretty well. Financing for 5+ years kills this equation. End of story.

The problem is, this approach takes an insane amount of discipline. I'm talking Navy SEAL levels of discipline. The benefit of leasing a new car is that your agreement is structured up front. You have guaranteed the terms of the use and sale of your vehicle. Leasing is like buying a car with a pre-arranged agreement to sell it to someone after the end of the term. Actually, that's exactly what leasing is. Problem is, you can't lease used cars, so if you take the plan C approach, you have to:

* Find a car that is two years old at a reasonable price
* Get reasonable financing
* Be prepared and start the sales process a few months before the car's value starts to drop like a rock

All three of those are hard to do. That's why I abandoned buying new and "plan C", and just went back to leasing.

If I were you, I'd run the numbers on that car you just found, then compare it to a new and lease finance term. Hell, I'll run the numbers for you! Just post what your considering here and I'll do the math. I've got spreadsheets for all this stuff. If you really want a new car, plan to change cars in three years time, and you don't drive over 12k miles a year, you should consider the lease. You'll save yourself a lot of the headache associated with selling the car when you're done.

Freakazoid · 08-06-2010, 02:45 PM

i miss capital ones blank check loan to private parties...it's really the only reason I was able to buy my first 'expensive' car (15k :P)

jpd · 08-06-2010, 05:25 PM

Lot's of good advice in this thread, but a few caveats regarding leasing: leasing new makes good sense if you keep the car in pristine shape. Private buys may be good under the right circumstances. You never mentioned how old the car is? How much money are you putting down on the car? Credit union loans with generally favorable interest rates require as much as 20% of your own money. In addition, credit unions will rarely go beyond 48 months. As said in this thread, the value of your car will drop like a rock if you are not careful.

08-03-2010, 04:44 PM	#1
LaCroix Private 3 Rep 97 Posts Drives: 2008 MazdaSpeed3 Join Date: Mar 2010 Location: Oklahoma iTrader: (0)	Private Party loans I'm sorry if this is in the wrong section, or a repost, but I didn't really know how to search for something. My bank, Capitol One, no longer does loans to buy cars privately. I really don't want to buy from a dealer, because I won't be able to get what I want for the right price. I suppose I'm wondering what my realistic options are. I've looked into credit unions, loan sharks, the mafia, ect. Anyways, I want to take out a loan for ~32k to buy a 135 from a private party, but this doesn't seem to be the easiest thing to do. Any suggestions? Also, what kind of interest rates should I expect? Thanks, Jeff
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08-03-2010, 08:35 PM	#2
Cuz5150 Major 215 Rep 1,489 Posts Drives: 06-M3ZHP/04-M3 Vert/02Duc998 Join Date: May 2008 Location: NJ iTrader: (0)	Hows your credit? If its good, shop other banks. Used car rates are high 7-8 %. If all fails, loan sharks or mafia do have better rates on the street. __________________ -Diplomacy is saying, "nice doggie while trying to find a rock"- 07-Z4 coupe-Black/Black/6MT/sport/premium/X 04-M3 vert-Black/Imolla/6MT/Cold/Xenon/HK/ 06-M3 Coupe-Mystic/Black/6MT/ZCP/Xenon/HK/ 09-135i- AW/Bk-Lette/6MT/M-pac/Nav/Hi-Fi/Usb-Ipod/SOLD
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08-03-2010, 09:29 PM	#3
GoGeo Private 10 Rep 94 Posts Drives: 135 Join Date: Jun 2010 Location: Southwest iTrader: (0)	Penfed.org I've financed a couple of used car through them...usually 3.99%.
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08-04-2010, 09:10 AM	#5
GoGeo Private 10 Rep 94 Posts Drives: 135 Join Date: Jun 2010 Location: Southwest iTrader: (0)	It looks like up to 60 months @ 2.99%. You'll have to join them, I think that you make a donation of 20 dollars and then you're a member. Google them and read about them, my experience has always been good. You could always try a local credit union, they tend to have the best rates. https://www.penfed.org/productsAndRa...s-299AUTOLOANS
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08-06-2010, 02:18 PM	#6
bradleyland TIM YOYO 1504 Rep 3,283 Posts Drives: 2013 M3 Join Date: Jun 2010 Location: Vero Beach, FL iTrader: (0) Garage List 2019 BMW R1250GS [0.00] 2013 BMW X3 xDrive28i [0.00]	I'm going to offer some personal finance advice. I hope you won't take offense, because you didn't ask for it, but it seems a lot of people are a bit delusional about what constitutes a good financial decision these days. I'm not just going to tell you "don't do it", I'll give specific reasons. I hope you'll read this and consider what I'm saying, but I understand if you want to do it your way If you need to finance a used car for 5-6 years, you need to lower your purchase budget a bit. Cars are always a losing proposition. They depreciate like crazy, so you have to pick a strategy that makes sense, then stick with it. To own or not to own Car ownership makes sense if your strategy is to hold on to the car for a long time. The longer you hold the car, the longer you can amortize the value of your investment. Taking a 5 year loan on a used car that is (for example) three years old means that you're going to have an 8 year old car at the end of the term. Maintenance costs on an 8 year old car are going to start going up dramatically. You'll be approaching 100k miles (or more) if you drive an average distance. The resale value of a car drops like a rock once it passes 100k miles. Pretty much any dealer is going to wholesale a car with over 100k on it. That means you'll get less than black book. In order for used car financing to work, you need to fit the car in to a 48 month term, but ideally 36 months. The consequence of this is that the monthly payment for a used 135i financed at 36 months is going to come in at around 80% (or more) of the cost of a new one, and that's if you can get good financing. The big benefit of buying used is that you pay less overall for the car. Some people try to take advantage of the lower purchase price and spread the financing out over a ridiculous term. This is a great way to end up "upside down" in the loan. The same people roll loan after loan in in to each other, and next thing you know they're paying $750/month for a Honda Odyssey to tote their three kids around in. When leasing makes sense Your grandfather would run me out of the house for saying this, but if you like cars, and you like to change it up, you should consider leasing. You have to meet some pretty specific criteria though: You don't drive a lot of miles You are certain you want a new car in three years You are going to stick to a luxury brand If you meet these criteria, you're a good candidate for leasing, but you need to look at some specifics. Stick to cars with high residual values. Also, lean on the dealer as hard as you can for a good deal. Because leasing means paying the difference between residual (MSRP * residual) and the capitalized cost (negotiated price plus fees), you stand to benefit from capitalized cost reductions in a bigger way than when you're financing a purchase. Ironically, the inverse is true of MSRP value, so if you're considering options, and you're going to lease, get what you want. The residual value goes up and down with the MSRP at a factor that is greater than half, so the cost of options are diffused greatly. A lot of people have said to me, "You should just buy the car and sell it at the end of the term you'd normally lease it for." Yeah, well, I've been down that road. Selling a car that is worth $15k-$20k is not easy for a private seller. People who buy privately want a deal, so getting what the car is worth (it's "worth" what someone will pay you, btw, so don't believe what you read on Edmunds/KBB/etc) is a pain in the butt. It can take months and there are costs associated with keeping that listing going. My time isn't exactly free either. No thanks. Plan C - buy in the sweet spot and finance well The problem with buying new is that you get your butt kicked by the year-1 depreciation. Buying used can make a lot of sense for people who want a new car every three years, but the financing has to be right. There's a sweet spot between two and five years where a car holds its value well. Past that, it goes off a cliff again. If you buy a two year old car, finance it for three/four years, then get out of it before year five rolls around, you can usually do pretty well. Financing for 5+ years kills this equation. End of story. The problem is, this approach takes an insane amount of discipline. I'm talking Navy SEAL levels of discipline. The benefit of leasing a new car is that your agreement is structured up front. You have guaranteed the terms of the use and sale of your vehicle. Leasing is like buying a car with a pre-arranged agreement to sell it to someone after the end of the term. Actually, that's exactly what leasing is. Problem is, you can't lease used cars, so if you take the plan C approach, you have to: * Find a car that is two years old at a reasonable price * Get reasonable financing * Be prepared and start the sales process a few months before the car's value starts to drop like a rock All three of those are hard to do. That's why I abandoned buying new and "plan C", and just went back to leasing. If I were you, I'd run the numbers on that car you just found, then compare it to a new and lease finance term. Hell, I'll run the numbers for you! Just post what your considering here and I'll do the math. I've got spreadsheets for all this stuff. If you really want a new car, plan to change cars in three years time, and you don't drive over 12k miles a year, you should consider the lease. You'll save yourself a lot of the headache associated with selling the car when you're done. __________________ His: *2019 R1250GS* - Black Hers: 2013 X3 28i - N20 Mineral Silver / Sand Beige / Premium, Tech Past: 2013 ///M3 - Interlagos Blue Black M-DCT Past: 2010 135i - TiAg Coral Red 6MT ///M-Sport**
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08-06-2010, 02:45 PM	#7
Freakazoid Captain 181 Rep 962 Posts Drives: Saturn Redline Join Date: Dec 2009 Location: Pittsburgh iTrader: (0)	i miss capital ones blank check loan to private parties...it's really the only reason I was able to buy my first 'expensive' car (15k :P)
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08-06-2010, 05:25 PM	#8
jpd Lieutenant 5 Rep 572 Posts Drives: Alpine White 135 Join Date: Mar 2010 Location: USA iTrader: (0)	Lot's of good advice in this thread, but a few caveats regarding leasing: leasing new makes good sense if you keep the car in pristine shape. Private buys may be good under the right circumstances. You never mentioned how old the car is? How much money are you putting down on the car? Credit union loans with generally favorable interest rates require as much as 20% of your own money. In addition, credit unions will rarely go beyond 48 months. As said in this thread, the value of your car will drop like a rock if you are not careful.
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