Has anyone traded in a car with an outstanding loan on it?

[Rothman]

I try to avoid anything that automatically deducts any sum from my checking account on a given date. I want to be in control of when that money comes out of my account in case there's a cash flow issue.

Having a steady income that covers one's expenses would definitely affect the decision to use autopay or not, especially if one needs to play the grace period game in getting their bills paid.

1.  A steady income is a vapor, dispelled by the loss of a job or a major unexpected expense.

2.  Does not address the disadvantage mentioned earlier about not having the freedom to pay extra one month or every month.

If you lose your job, you just cancel the autopay.  It isn't hard at all and can be done online.

I have never had a problem paying more on a loan that has had autopay on it.  You just arrange a principal only payment with your creditor.  Paid a car loan off two years early that way.

[TheArkansasRoadgeek]

I'm not looking to buy a vehicle in the US, but I'd never heard of the concept of a "payment book" before.  I have purchased two new cars in my life, and during both transactions (through different automakers), I agreed to a term, and a price, and then provided a void cheque to the dealer, and then every two weeks, the agreed payment amount was automatically withdrawn from my bank account through the credit agency without any action on my part.

CBC Marketplace ran a segment on how US car manufacturers aren't selling to Canadians. You may want to look into that... I am not saying they are anyway right, just saying that that could possiblely the case or not, but it is something to look into.

[PHLBOS]

Since 1988, I've had 4 car loans; all of them of which I've done via payment books.  And like HB, I want to be in control when that money comes out of my account... especially if I want to double or even triple my payments on a given month (when I'm financially able).  Doing such enabled me to pay off the loans (4 or 5-year terms) 2 to 3 years earlier.

The only time I did not pay off my car loan early was when I traded in a car that still had a lien on it circa 1992 for a newer model that I financed; the remaining amount was rolled into the new loan.  About a year later, I refinanced that loan to get a lower interest rate & monthly payment; which, over time, allowed me to pay off the loan earlier by doing the fore-mentioned doubling/tripling the monthly payments.

I don't think that is exactly the same type of loan.  If I were to buy a car using a third party credit agency, I would have an account like that you're talking about where it would just have a negative balance and it would be up to me to ensure money gets into that account on a timely basis.

If I instead finance the car through the dealership, I just have monthly (or in my case biweekly) payments that are automatically withdrawn from my account.  In my case, I financed my current car through Ford's credit service at 0% financing.  (I know that the financing costs of the car are just built into the windshield price of the car).  But that said, because it is financed in such a way, there really is no incentive for me to want to pay the car off any faster than the term, as there are no interest charges over the term.

If I'd have negotiated a car loan at a third party credit agency and then paid the cash purchase price to the dealer, I could have an account set up the way that you speak of it, and then would probably want more control over my repayment schedule to try and minimize interest.

Forgive me but when you say "I don't think that is exactly the same type of loan."  What exactly do you mean by that?  A car loan's a car loan regardless of payment method and financial institution involved.

It's worth noting that just because one makes loan arrangements w/the dealership for even a new car (as opposed to a used one); such doesn't automatically mean that the financial institution will be the one that's linked or part of the company (i.e Ford Credit or GMAC).  When I financed my 2007 Mustang at my local Ford dealership (almost 10 years ago); the loan was actually handled by Citadel Bank and not Ford Credit.  The reason: the interest rate via Citadel was lower than what Ford Credit was charging at the time.

My earlier-mentioned 4 car loans (2 used & 2 new) I did at the dealership and provided a down-payment.  My first and my last car loans were handled by third-party banks (Baybank for the first one and Citadel for the last).  I did not provide any of them my bank account numbers; such was intentional on my part.  The first two (1988 & 1992) were likely far enough back in time that auto-pay was either in its infancy or didn't exist at all.

[AsphaltPlanet]

^ I've only purchased two new cars in my life, and in both cases the financing was provided directly by the automakers financing agencies.  In both cases, I set up pre-authorization.  There may have been another payment option, but I don't recall there was.

From experience with my family, the only direct financing options that I have encountered through dealerships themselves is through their respective credit agencies.  From my experience, to get credit from a third party agency, I would have had to have set that up outside of the car dealership itself, and not gone through the automakers credit arm.

It would be different if I bought a used car however, as a used car dealership wouldn't need to have credit provided by their first party agency.

[corco]

Maybe it's different in Canada, but in the U.S. it's quite commonplace for new cars to be financed at the dealership through third party financing.

[AsphaltPlanet]

For the last few years a lot of dealerships have been offering 0% financing for new cars in Canada.  As I mentioned before, there is a financing charge built into the price, as the cash purchase price of a vehicle is always lower than the full finance costs, but I haven't encountered third party financing offered through the dealership.  Of course it's possible to finance with another creditor, it would just have to be arranged through a different financial institution.

Pre-owned vehicles are an entirely different ballgame.

[hbelkins]

Maybe it's different in Canada, but in the U.S. it's quite commonplace for new cars to be financed at the dealership through third party financing.

Last vehicle I bought was seven years ago, and it was used. The dealer checked several different financing options, including GMAC, but found a third-party outlet (Huntington Bank in Ohio) that had the best rate. That's who I used.

Incidentally, that bank didn't offer online payments unless you had an account there, and it made little sense for me to have an account with a bank 4 1/2 hours away, so I was sent a payment book and mailed them a check every month.

Years ago, I bought a used car and secured my own financing for it through my local bank. They gave me the cash and I went to the dealership and counted out stacks of $100 bills to pay for it.

[TheArkansasRoadgeek]

Maybe it's different in Canada, but in the U.S. it's quite commonplace for new cars to be financed at the dealership through third party financing.

Last vehicle I bought was seven years ago, and it was used. The dealer checked several different financing options, including GMAC, but found a third-party outlet (Huntington Bank in Ohio) that had the best rate. That's who I used.

Incidentally, that bank didn't offer online payments unless you had an account there, and it made little sense for me to have an account with a bank 4 1/2 hours away, so I was sent a payment book and mailed them a check every month.

Years ago, I bought a used car and secured my own financing for it through my local bank. They gave me the cash and I went to the dealership and counted out stacks of $100 bills to pay for it.

Only if we could all just do that! Be Mr. Moneybags for a day!

[kphoger]

The last two cars we bought, we paid the full price by personal check.  They were used, but they were still $8,000 to $10,000.

The first one was a combination of savings (meager), tax refund check, and a contribution from my parents.  Then I wrecked it several months later, our insurance company wrote us a check for the value, we deposited into the bank, and then wrote a check to buy our new one.

You should see what a dealer does when you tell him you're paying full cash price for a car!  The one we have now, there was another couple who had already put a deposit down and was waiting for word back on financing.  We told him we were leaving town in a new car, whether it was this one we came to see or one from a different dealership.  The dealer called his finance officer on his day off during his kid's football game in order to get an answer on the other couple; either the answer was "denied" or the dealer talked him into making the answer "denied."  Either way, we drove away in our new car.

[bulldog1979]

I've financed two cars through my credit union. The first, I bought from my parents. In that case, after I signed the appropriate loan documents, the loan officer printed a check made out to my parents. I walked it over to them in the lobby, and they deposited into their account. Then we drove to the Secretary of State office to finalize the title transfer and register the car in my name.

The second, I bought from the dealership. In that case, a dealership employee filled out the loan application for my credit union here in town, had me sign it, and they forwarded the paperwork to the credit union and Secretary of State. I transferred my existing plate to the new car, and the dealership even installed it for me before I left.

In both situations, I had a half month's payment debited from my checking account every biweekly pay day. I received two interested rate deductions from the credit union: one for the auto payment and other for the longevity of my membership (I had been a member since shortly after birth.) The first loan was paid off about 9 months early by making 26 half-month's payments per year. I  paid the second loan off even faster because I used the check from an insurance claim from a hail storm to wipe out my remaining loan balance in 2007 2.5 years into the loan. I know I was probably on pace to pay off a year or more early on that schedule.

[Zeffy]

Well, I'm happy to report that my old loan has been indeed paid off and I have my new account information for my new loan which I already went and setup autopay on.   

[kkt]

Well, I'm happy to report that my old loan has been indeed paid off and I have my new account information for my new loan which I already went and setup autopay on.   

[SP Cook]

IMHO,

- I have heard over the years of car dealers who were going under who did these deals where they would pay off your loan (add it to the loan on your new car) only they did not do it, people ended up with a new car loan and still owed the old car loan.  Dealers got in criminal trouble, but that did not help the people that got screwed over.

- The only check (cheque to our friends from the GWN) I write is to the tax man.  But there are two ways to do electronic payments.  You can "autopay" where you let the vendor deduct from your account via a voided check or you can pay your bills via your bank's website.  The later is far better.  Possession is 9/10th of the law, as the saying goes.  We all hear the stories where somebody like the water company screws up and send you a $10000 bill.  Well, with autopay, it will take (or try to) $10000 out of your account.  At the best your account ballance will be zero.  But if you make them send you a bill, and then pay it online, you can dispute the charges and tell them to pound sand.  Much better.  The only "autopay" I have is to Allstate, and that is only because it gives me a discount, and sends me an e-mail 30 days in advance during which I can cancel (state law here).  There is no way I would let anyone else have access to my accounts, not without a benefit to me.

- In my experience, car lots have a plethora of financing partners.  Car lots make money on the "backside" of a loan, generally a couple of hundred dollars for "placing" the loan with a particular lender, plus stuff like junket meetings and free materials for the dealers.  Generally dealers only place loans with the manufacturer (who pay nothing on the backside) when it is one of those incentive deals like 0%.  They will generally have a set of banks they use otherwise, often banks that are not local.  The last car I financed was in a major wreck and while not totaled, I had it fixed and then sold it.  The bank (which was local) was impossible to deal with.  I wrote them a check and asked for the title.  Took them a month to admit they lost the title.  I had to go to the DMV and get a duplicate, and then get them to sign the release and then get another one.  Ended up getting paid back for the DMV at least.  Never do business with them again.

- Payment books are still a thing.  I had a Ford in the 90s and the cover on it (this was before Ford sold off New Holland and its big truck businesses) had a 1950s era car, truck, big truck, tractor and endloader on the cover.  Had not been changed in 40 years.

- A lot of car lots have a "special finance department" and people with bad credit are told to call and ask for some made up name like "Chris Johnson" (always a non-gender specific first name).  Of course, there is no "Chris Johnson", nor is there a "special finance department", the switchboard just gives the call to whoever is on duty and they know that they have a deadbeat to work with.

[slorydn1]

When I bought my F-150 in March of 2004 I had a payment book from Ford Motor Credit. I don't remember what was on the cover, though.

Both Mustangs were financed through 3rd party lenders, my 2014 through my credit union. I don't remember who my wife's 2012 is financed through (I want to say Sun Trust for some reason). Both are auto pay on dates my wife selected, designed to come out during different pay periods so other bills can be paid as well. My wife's car will be paid off later this year, mine has 23 months to go and then I'm done making car payments, probably forever.