Financing options

It's a good idea to shop around a bit and get an idea of what's available before committing to Toyota financing. We found that our credit union has a special program for financing hybrids -- it's 1% less than financing a "regular" new car.

 

I think that's really good!

 

That's great. My credit union offered 4.99, and Toyota offered 4.95.

 

The rate your CU is offering you is pretty good. It doesn't hurt to find out how much Toyota Financial is offering when you go in. They might do a little better. They may not. The competitiveness of a dealer offered interest rate is often times based upon credit scoring when you are in the finance office. The better your credit score, the lower the rate will be. If you are a high credit score Toyota Financial's offer through the dealer will probably be within .5% of your CU. On the other hand if your credit score is lower the rate will significantly vary. CUs and other non dealer associated lending institutions can sometimes offer better rates than dealer financing because they want the business (it is a bit more work to bring in financing than to take it out of the dealer's office) and because the outside lender is going to usually require more paperwork up front to complete the transaction.

The best advice I can give you is to bring in a huge down, somewhere on the order of 40% of the out the door price of the vehicle. This gives you some flexibility to get a shorter term loan or have a lower payment. It also helps you prevent becoming upside down on the loan in the short term should you need to trade the vehicle early.

 

If you are a homeowner, have lots of equity (or own it outright), have a higher than current interest mortgage, and can use the tax benefits . . . consider the refi with cash out route. But only if all the above apply!

 

I work in the mortgage business and I see lots of folks who use home equity to make capital purchases, however I do not agree with any use of home equity. There is not enough tax "benefit" from borrowing against your home for an unrelated purchase to justify it, especially if your home is free and clear right now. There is a bottom limit to the dollar amount you can itemize based upon your standard deduction. Combine competitive lending interest rates with a relatively small balance home loan and you might not even pay enough interest in the first year to claim it on your taxes.

A $25,000 equity loan at 5.625% for 60 months, you will only pay $1,292.58 in interest that year, and that amount declines every year from that point forward. If you have no other interest payments which you can claim, there is zero benefit to you to have a lien put against your house for a vehicle.

In the subject of secured lending, if you are borrowing on something and a lien is placed against it, then the money you take out should be directed toward that purchase. So, if you are buying a car, there should be a car loan with a lien or security agreement on that piece of property. The same goes for a home. If you are taking out an equity loan, then the proceeds should be used for home improvement. It is just too risky to use one item of security to buy another. If you default on the equity loan, you may loose your home, but keep your car. Hmmm! That doesn't make a lot of sense to me. Oh well I'm super conservative with money, I suppose.

 

Shop around and check it all out, stay away from the home equity, there is no tax benefit unless you want to be dishonest with your government!

Do consider however how much less gas your new car will consumre compared to your old one. If you use any appreciable amount of GASOLINE, you stand to save 1/2 to 2/3 savings, usually compared to the conventional autos you would drive. If you already own an economy car, savings may be less, but with a little work the Prius can get you good mileage, and close to 1/2 or 1/3 less on gasoline costs. Toyota may offer good financing if you have good credit, as everyone is telling you, check out credit unions and commercial banks, you are getting a new car so financing will be lower. Enjoy the car and let us know how you are doing when you get the car, we'll help you get good mileage and you'll enjoy the good company in this chatroom.

 

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Granted - if you have just a few years left on a 30 year mortgage - LEAVE IT ALONE!!!! You have already paid the bulk of the interest and now most of the payment is going toward principal. But there is nothing dishonest about writing off mortgage interest. There are no strings attached to the usage of the refi money.

Just a few weeks ago in a conversation with a loan officer friend: “You wouldn’t believe the number of lazy people out there who are carrying eight percent or higher loans on half million dollar plus properties, have a balance well under $100,000, and yet they opt for the straight car loan and leave the high interest mortgage.â€

Just the savings on the lower interest mortgage is worth it. Plus there ARE tax benefits for most, but not all. If you don’t understand the US tax code like a tax CPA, then here is something you may not know: The cost of having a tax expert do your taxes usually saves you more money than the cost of them preparing your taxes. My tax CPA is worth his weight!

http://www.pioneerthinking.com/ara-taxes.html

 

I completely agree! Not only will they likely save you money, but you are also saved the aggravation. You don't have to keep up with the changes and don't have to worry that you are missing something. Best couple hundred bucks I spend every year.