Interest Rates ?

[Scotty piffin]

You can always refinance when rates go down. Still better to keep investing that extra money and then refinance when rates are in a better place, rather than paying cash now.

I'd imagine the majority of Mercedes drivers either 1) have enough money that they wipe their tears with it and don't mind cash or 2) aren't financially literate.

The average middle-class person should not be paying cash for a depreciating asset and that's not even a controversial statement. This is advice every financial advisor will give you.

The asset is going to depreciate regardless, hard to see your point unless you are trying to say it’s better to pay an extra 10k in interest for that depreciating asset by not putting cash down. Also there is no indication that we are anywhere close to seeing a reduction in interes rates that will be meaningful so refinancing at a rate where it’s worth while could very well be a few years away and you’ve now borrowed extra money at 7% for three years waiting for it to happen. As I said previously, offsetting paying 7% interest is the best return on your money in the current market if a car purchase is an inevitability. You are going to pay an extra 10-12k in interest if you are financing 40k at current rates, that’s reality.

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[Wayfaring Ranger]

You are going to pay an extra 10-12k in interest if you are financing 40k at current rates, that’s reality.

Well sure but anyone financing 40k on a 45-50k truck isn't making the smartest vehicle decision as it is. That's why i prefaced my other comment with making sure you're not getting hosed on interest over the term of the loan.

If you're paying 8-10k interest over the life of the note just to afford a new ford ranger that is a clear sign that you should be getting a cheaper vehicle, before you end up underwater.

I'm saying you put enough cash down to get a good monthly payment, while still being cognizant of your loan rate, term and overall interest liability. I'm not saying any cash-down is bad, i'm saying a full cash payment with no loan is bad. Likewise, if you have to get a loan over 5-6 years just to afford the car, something is wrong.

In my example, I'll be putting around 10k cash down and a 15k trade in, which cuts the vehicle cost in half. That makes a 48 month loan very easy to manage while still pumping investment accounts/maxing 401k to get the best ROI.

 

[Scotty piffin]

Well sure but anyone financing 40k on a 45-50k truck isn't making the smartest vehicle decision as it is. That's why i prefaced my other comment with making sure you're not getting hosed on interest over the term of the loan.

If you're paying 8-10k interest over the life of the note just to afford a new ford ranger that is a clear sign that you should be getting a cheaper vehicle, before you end up underwater.

I'm saying you put enough cash down to get a good monthly payment, while still being cognizant of your loan rate, term and overall interest liability. I'm not saying any cash-down is bad, i'm saying a full cash payment with no loan is bad. Likewise, if you have to get a loan over 5-6 years just to afford the car, something is wrong.

In my example, I'll be putting around 10k cash down and a 15k trade in, which cuts the vehicle cost in half. That makes a 48 month loan very easy to manage while still pumping investment accounts/maxing 401k to get the best ROI.

The conversation isn’t about who should or shouldn’t be buying a car right now it’s about putting more money down or not when rates are high. My assumption is that if rates were 1.99 you wouldn’t be putting 10k cash down because that money would make you more elsewhere and the cost to borrow the money is cheap. However, currently that’s not the case which is why people should be putting down more money than they typically would if they are able to do so because it’s very expensive to borrow money right now, not sure how this is a controversial take.

there is the actual cost to borrow 45k at a 7% rate for 60 and 72 months. I would assume the scenario is semi realistic for a lot of people on here. Whether they should or shouldn’t be buying a car given these circumstances is a seperate conversation.

 

[Wags]

Paying 8 to 10k in interest is just crazy.

 

[Wayfaring Ranger]

The conversation isn’t about who should or shouldn’t be buying a car right now it’s about putting more money down or not when rates are high. My assumption is that if rates were 1.99 you wouldn’t be putting 10k cash down because that money would make you more elsewhere and the cost to borrow the money is cheap. However, currently that’s not the case which is why people should be putting down more money than they typically would if they are able to do so because it’s very expensive to borrow money right now, not sure how this is a controversial take.

S&P returns for the last 5 years

2019	31.21%
2020	18.02%
2021	28.47%
2022	-18.01%
2023	24.23%

Even at current interest rates, it will likely be smarter to borrow and continue investing the cash you have on hand. While it's impossible to predict the future and time the market, if we had the "pay cash" mindset every year since 2019, it would have been wrong 80% of the time and you would have missed out on amazing gains. And again I'm not saying take a long loan where you're gonna piss all that money away into interest, but get the principle amount to a point you aren't pushing the loan term beyond 3-4 years.

Above 8% interest rate is probably the point that I'd start to agree with you, but most of us are going to get in the 5-6.5% range.

 

[Scotty piffin]

S&P returns for the last 5 years

2019	31.21%
2020	18.02%
2021	28.47%
2022	-18.01%
2023	24.23%

Even at current interest rates, it will likely be smarter to borrow and continue investing the cash you have on hand. While it's impossible to predict the future and time the market, if we had the "pay cash" mindset every year since 2019, it would have been wrong 80% of the time and you would have missed out on amazing gains. And again I'm not saying take a long loan where you're gonna piss all that money away into interest, but get the principle amount to a point you aren't pushing the loan term beyond 3-4 years.

Above 8% interest rate is probably the point that I'd start to agree with you, but most of us are going to get in the 5-6.5% range.

lol, ok. I set up 10-20 of my own auto loans per month and see rates for every customer in the store which is probably another 80-100 deals per month. 5-6% very hard to come by when it comes to current rates and most of the loans I’m seeing are for people with excellent credit. Unless Ford is going to subsidize the rate on the Ranger, which I doubt they will since it will be a brand new model, I don’t think 5-6% is going to be type of rates the average Ranger buyer will be seeing. Additionally, the average auto loan term in the country is 68 months now due to rates being high. I sincerely doubt the average midsize pickup truck buyer is going to buck that trend and be comfortable at a 36 or 48 month payment. 45k loan at 36 months is about $1,400 per month which is about double the current national average car payment and I’m going to assume most people in here aren’t looking to carry that high of a payment to be comfortable given the cost of everything else in the world right now. I am hoping to see rates improve by the time the truck gets released for my own benefit but I am just giving you anecdotal data as someone who oversees 20 car purchases a month about how people are paying for cars right now, which is very different from the way the cars were purchased in the previous ten years of me doing this for a living. Everything has changed with the way people approach a vehicle purchase over the past two years.

 

[Craneop1972]

Sorry you couldn’t just get an answer to a question. Suddenly the forum is full of Dave Ramsey’s.

 

[Scotty piffin]

No one can predict future interest rates especially with everything going on in regards to inflation and federal rate cuts. most manufacturer owned banks (ford credit) release their monthly rates at the beginning of each month and generally, credit approvals are only good for thirty days. This is why it’s not possible to have a dealer tell you what your rate will be at this point in a vehicle that’s not currently available to buy and with no firm release date.

 

[Sevokevo]

The loan is one the last chances for the dealer to make money (by marking up the interest rate) when you buy a vehicle. Look at your local banks and credit unions to know what the competitive rates are. The dealer should be able to match them or maybe beat them by a small amount. It may not be through Ford though. I doubt Ford will be offering discounted incentive rates on the Ranger any time soon.

this is incorrect.. the dealer does not make any money off your loan interest… the bank that issues your loan is the one that makes money… the only thing the dealer gets is the check from the bank to pay your truck off to the dealer.. nothing more or less

as for interest right now.. expect them to be high right now… unless ford has launch specials at the time the truck arrives…. The Federal Reserve (The Fed) has not lowered interest rates yet which is why you see many 5%+ but from what it is said… they are looking to start lowering the Federal Interest rates starting this Spring and watching the market and inflation steadily to ensure the inflation rate stays low and the US GDP stays high (which are all good signs)

but for the time being… I would expect high interest rates and no specials or incentives for the time being… ESPECIALLY if you are getting a RR…. Its best to get the best you can get and pay the truck off ASAP to save you the money in the long run

 

[Scotty piffin]

this is incorrect.. the dealer does not make any money off your loan interest… the bank that issues your loan is the one that makes money… the only thing the dealer gets is the check from the bank to pay your truck off to the dealer.. nothing more or less

as for interest right now.. expect them to be high right now… unless ford has launch specials at the time the truck arrives…. The Federal Reserve (The Fed) has not lowered interest rates yet which is why you see many 5%+ but from what it is said… they are looking to start lowering the Federal Interest rates starting this Spring and watching the market and inflation steadily to ensure the inflation rate stays low and the US GDP stays high (which are all good signs)

but for the time being… I would expect high interest rates and no specials or incentives for the time being… ESPECIALLY if you are getting a RR…. Its best to get the best you can get and pay the truck off ASAP to save you the money in the long run

Generally speaking the “buy rate” from the bank are marked up by the dealer, most often at least 1% but depending on the dealership or salesperson the markup can be more substantial, this is known as finance reserve or backend profit and is how most finance managers (the guys you sign paperwork with in a back office) earn their living in addition to the marked up price of additional warranties and products. Even if the rate is not marked up their is still a flat rate paid to the dealership for setting up that loan, but I can tell you more often than not the rate you are being quoted from the dealer is marked up and it is definitely a profit center and was the reason dealerships could sell cars with almost no profit in the actual sale of the car up front for all the years prior to Covid because they were still making good money on the backend with the loan.

 

[Sevokevo]

Generally speaking the “buy rate” from the bank are marked up by the dealer, most often at least 1% but depending on the dealership or salesperson the markup can be more substantial, this is known as finance reserve or backend profit and is how most finance managers (the guys you sign paperwork with in a back office) earn their living in addition to the marked up price of additional warranties and products. Even if the rate is not marked up their is still a flat rate paid to the dealership for setting up that loan, but I can tell you more often than not the rate you are being quoted from the dealer is marked up and it is definitely a profit center and was the reason dealerships could sell cars with almost no profit in the actual sale of the car up front for all the years prior to Covid because they were still making good money on the backend with the loan.

yeah but more or less you can see this in terms of when your signing your paperwork…you will see the price of the truck.. the dealer issued add ons the dealer service fee, the TTL and all that.. it makes since on this matter… a dealer is out to make money.. not just sell a truck or car and not make money on it.. that’s how a business stays running…

Like for me… I saw my full breakdown on my RR I ordered… on top of the $5k mark up I have on the truck there is a standard $500 dealer service fee that’s on all their vehicle sales… plus the cost of the vehicle itself which is the same as my tag I put on order similar to the ford website… so yeah I can see why… but idk anything in terms of seeing a 1% mark up… maybe it’s just not my dealer.

 

[Scotty piffin]

yeah but more or less you can see this in terms of when your signing your paperwork…you will see the price of the truck.. the dealer issued add ons the dealer service fee, the TTL and all that.. it makes since on this matter… a dealer is out to make money.. not just sell a truck or car and not make money on it.. that’s how a business stays running…

Like for me… I saw my full breakdown on my RR I ordered… on top of the $5k mark up I have on the truck there is a standard $500 dealer service fee that’s on all their vehicle sales… plus the cost of the vehicle itself which is the same as my tag I put on order similar to the ford website… so yeah I can see why… but idk anything in terms of seeing a 1% mark up… maybe it’s just not my dealer.

They aren’t going to show you the actual approval from the banks or the markup just like they don’t show you the actually profit in the truck based on the price they sold it to you for, you are just going to see the disclosed rate on the contract. For instance if ford works the same way as the other two brands I’ve worked for (Mercedes and bmw) the online advertised rate of 3.99 special on an F150 or whatever it is they are offering this month is actually given to the dealer at a 2.99 meaning they could actually give it to you at 2.99 if they had to to keep a deal together. We are only allowed to mark up our special rates a maximum of one point but you can markup standard rates and rates from outside lenders more and i can tell you it is going to be the case in the majority of auto loans set up by a dealer.

 

[LFRR13]

Sorry if this has come up before and i just missed it. Anyone have interest rates that will be available for 48 , 60 , and 72 month loans from ford financing on the 2024 ranger yet ? I have looked hard and long but ford seems to keep this info under wraps. It says on the website to contact your dealer for that info so i did. He told me that info wont be available until my truck arrives. I find that hard to believe , but i guess its possible they will wait until then to decide. I understand it may depend on credit score , but there should be some general numbers out there by now in my opinion.

Retail Programs change monthly from nearly all manufacturers. Ford won't release anything on the Ranger until customers can take delivery. You can speculate all you want, but it won't do you much good. F150 rates and Bronco rates might get you in the ballpark, but even a 1% change can equal a couple hundred dollars are month. If you have decent credit, I'd probably opt for a credit union or your personal bank before taking dealer financing.

They aren’t going to show you the actual approval from the banks or the markup just like they don’t show you the actually profit in the truck based on the price they sold it to you for, you are just going to see the disclosed rate on the contract. For instance if ford works the same way as the other two brands I’ve worked for (Mercedes and bmw) the online advertised rate of 3.99 special on an F150 or whatever it is they are offering this month is actually given to the dealer at a 2.99 meaning they could actually give it to you at 2.99 if they had to to keep a deal together. We are only allowed to mark up our special rates a maximum of one point but you can markup standard rates and rates from outside lenders more and i can tell you it is going to be the case in the majority of auto loans set up by a dealer.

Love it when I see someone who A) works in the business and B) now their shit

 

[LFRR13]

2019	31.21%
2020	18.02%
2021	28.47%
2022	-18.01%
2023	24.23%

The average investment portfolio probably hasn't earned that, which is an average of 16%. And much of this has been artificially inflated by countless factors.

Remember...the stock market is not the economy, and the economy is not the stock market.

 

[JCG2042]

You can always refinance when rates go down. Still better to keep investing that extra money and then refinance when rates are in a better place, rather than paying cash now.

I'd imagine the majority of Mercedes drivers either 1) have enough money that they wipe their tears with it and don't mind cash or 2) aren't financially literate.

The average middle-class person should not be paying cash for a depreciating asset and that's not even a controversial statement. This is advice every financial advisor will give you.

I am not sure Dave Ramsey would agree with you... lol

I would add to this discussion that it depends on where you live. I lived my whole life in Western NY until 18 months ago - nothing depreciates faster than a car in the salt of the north. We typically leased when it made sense to cycle cars out under warranty and move on. Let them be someone else's problem.

Now we live in FL. I intend to drive my Ranger a LONG time. I will make a huge downpayment and a reasonable loan that I will pay off as quickly as possible.

IMHO, there is nothing quite like having a vehicle with a lot of life left in it that is paid for. I hate paying interest. I'd rather pay myself the interest. And with today's interest rates, even the S&P500 isn't beating a car loan by much.

Oh and lastly - We have a Mercedes - and I know my way around finances.

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