Question: Is it financially sound to refinance a car loan immediately? I want to trick the car dealer into giving me a lower selling price by letting him do the financing!

October 25, 2005

Hello Tony

Your site is the best resource I have seen bar none. Thank you.

My question:

Is it financially sound to refinance a car loan immediately?

Scenario:

I am trying to get into a used 05 Honda Odyssey Touring model with 4,000 miles and extended warranty. The dealer thinks it is worth $32,588.

I am willing to pay $30,000. The long term financing will be through my credit union. But what if I accept some sort of dealer financing for a shorter term or higher rate they might agree too?

I would buy the car on dealer terms and a day later refinance the loan through my Credit Union. In effect, asking them to pay off the dealer loan and open a new one at the lower Credit Union rate.

What do you think? Sounds brilliant to me, but you’re the one with experience.

Thanks you in advance for your time.

Lawrence

Answer:

Hi Lawrence,

I really appreciate your kind words about my website.

Listen Lawrence, what advantage would you have by letting the car dealer finance the deal? Do you think they will give you a better price if they handle the financing? That's highly unlikely.

Additionally, each lender has some kind of early payoff penalty. They vary from lender to lender. Some won't let you pay the loan off for the first 90 to 180 days, and others charge a set amount for an early payoff. This will more than offset any advantage you think you might get.

Just pound these guys on the price. Don't negotiate a payment or a trade . . . just the selling price of the vehicle. Get the best price you can, and if you're not satisfied tell them you are going to shop around. They're not going to let you walk unless your offer is so ridiculously low that they can't make anything on it.

Everytime the salesperson brings up the financing tell him you just want to negotiate the price of the car. That's it. You'll probably have to keep leading him back to the price.

If you finally come to an agreed price be prepared for the Finance Manager to try to switch you from you Credit Union to their financing. They make a lot of money on the financing so they're going to push hard. Just stick to your guns, and if it gets too rough walk out and go to another dealer.

Just finance at your Credit Union and keep everything as simple as possible.

Look Lawrence, I know you think your idea is brilliant, and it shows you're working all the angles in your mind...that's good, but if you start playing games with the car dealer you'll end up screwing yourself. They are the masters at this kind of stuff so be careful!

All my very best...

Tony Iorio