Trying to understand the fine print of financing

[contourious]

So I finally test drove a Fiesta ST this past weekend! It drives really well. I didn't explore the car's power too much (being a test drive, and that it wasn't properly broken in yet) but I could feel the pull in 2nd gear . I also kept in mind that this was with the truncated stock tune, which is nice to know that there is room to easily grow. After the test drive, we went inside to discuss financing. They had only one ST on the lot, and it wasn't exactly the options that I wanted, so I plan to order one (Tuxedo Black, navigation, moonroof, standard seats, Rado Gray wheels, and the ST protection package). Unfortunately, the dealer was about to close, so we only discussed financing options, rather than setting anything in stone. However, before leaving, I was told that I had two options: $1000 "Switch Cash," or 0% APR. I asked the salesman what my interest rate would be if I opted for the Switch Cash instead of the 0% APR, but he did not have that info off hand. I was curious to see which is the better deal. To get a rough idea, I went home and researched a few random banks' auto financing. It looks like the average rates today are around 2.5% to 3%. However, being that Ford wants to sell cars, their rate may be a bit lower than say Bank of America's would be. Checking the "Ford Credit" website didn't yield a clear answer either. Does anyone on here know?

I will probably be returning before the end of the month, as Ford's website says that I must "take new delivery from dealer stock by 2/2/15." I'm hoping that means that I can place the order by 2/2/15, as it's highly unlikely that I'll take "delivery" before then. I hear that it will take weeks for an ordered car to arrive. That's fine by me, as the rock salt season will be ending lol. Though, should I hold off even longer, until next month to make the purchase? Will they have better deals after 2/2/15? Usually the longer you wait, the better the incentives. However, I don't want to wait too long and miss the cut off for placing a custom order. When is the deadline to make a custom car order? I'd like an ST, but one just for me! ha. All the ones that I've seen on lots so far are either fully loaded, or base model STs.

I noticed something strange in the fine print of the 0% APR offer, "0% APR financing for 60 months at $16.67 per month per $1,000 financed regardless of down payment." What exactly does this mean? This seems a little fishy. It's not truly 0% if we have to pay for the 0% rate. It seems like an interest charge, simply re-worded. That could come out to be an extra car payment tacked onto the loan.

I also noticed that in the fine print (bold print above) there was no mention about the $16.67 charge being applied for 48 months. It only mentions a charge for 60 months. With a true 0% APR rate, I was planning on going with 60 month financing, paying off more per month when I can. However, if I have to "pay" for a 0% APR on a 60 month loan, should I opt for the 48 months instead? I mean, if 48 and 60 month financing were both 0% APR, the 60 month option would be the better choice, as I can always pay more per month if I wanted, but if I have to "pay" for financing, it will probably cost more in the long run to opt for 60 months over the 48 months, right? A whole car payment more actually (~$23,000 x $16.67 = $384). The "regardless of down payment" part is also very lame, because even if someone had $5,000 to put down, they'd still have to pay that $16.67 on the full price of the car?

Also, for reference, my credit rating is in the 700 range across all three bureaus. I was told that I wouldn't have an issue getting approved.

Hopefully someone can help clear this up for me! I'd love to get behind the wheel of an ST , but I want to fully understand what I'm getting into before I walk back in that door.

 

[FocusMike]

That fine print you will see on most manufactures that offer 0% financing. Basically the $16.67 per $1,000 is the money you will need to repay towards the principle in forms of monthly payments. It's not an amount added to the loan and you are still getting 0% APR.

For example:
If your car is $25,000, (25x$16.67=$416.75) $416.75 is going to be your monthly payments. Now if you take $416.75 x 60 months you will see that you're paying off about $25,000 in 6 years.

In essence $16.67 per $1,000 is payment ratio for 60 months, $20.83 per $1,000 for 48 months, $27.78 per $1,000 for 36 months, etc.

 

[westcoaST]

FYI, the financing you speak of (0%) is for dealer stock, according to your post, if you order an ST, make sure they give you 0%. You will probably get a 2.5% interest rate for an ordered car @ 60 months. Dealers like to finance 48 months. You should shop around, especially if you are a member of a credit union. Rates are between 1.24 and 2.5% with .25% less if auto paid. You have good credit, so you should get a good rate. Even if you go with Ford credit, you can always change your mind and go with a different financing. There is a truth in lending document they must provide you, before you sign financing paperwork. This has all the actual details of what you are really paying. Lots of loans have an early pay back restriction. You can always take the paperwork with you after you agree to finance the car, then have someone at your bank or credit union deciper it for you. I just purchased a used 2012 Fiesta for my daughter from a Fiat dealer. They really wanted me to finance with them. I asked for a truth in lending disclosure, and their rate was higher, even though they said they could match my credit union rate. The dealer makes a lot of money from financing cars through their parent company. Your loan is then resold within a year.

Also remember, everytime you ask for a financing agreement, do not sign the agreement if you do not want your credit rating to go down. Every time they run your credit, it appears on your credit report, potentially reducing your rating. The Ford dealer I purchased my ST ran my credit 3 times, and my credit rating dropped from 810 to 780. Lesson learned. The interest rate you get charged depends upon your credit rating

 

[ryst]

Even if you go with Ford credit, you can always change your mind and go with a different financing.

But keep in mind, most of the incentives are 0% financing for 60 months OR $1000 cash rebate ... Depending on the amount you finance, the cash rebate + 3rd party financing might be a better deal than the 0%...

Cars.com has a calculator to help you decide which is better http://www.cars.com/go/advice/finan...&tcLoan=23410&rate=&microsite=false&mode=full

For example, if the car is $21,000 financed at 2% interest for 60 months with the $1000 cash back, you just about break even with the 0% 60 month deal through ford (it's within $150)... This is also assuming you don't pay off the loan early (which would be silly with 0% financing)

The dealer I worked with said if I ordered a car (i didn't end up doing this). I could lock in any rebates that were currently available, AND if better rebates existed when the car arrived I could use those instead... it was a win win, but I needed a car asap, so I bought one off the lot which hd almost everything I wanted.

 

[contourious]

Thank you so much ATXFiST, westcoaST, and ryst! I really appreciate the examples. I've never purchased a new car before, so this really helps a lot. I believe the two credit unions that I can join are Pinnacle and Affinity. However, Affinity offers 2.99% on 60 month new car loan, and Pinnacle offers 2.74%. I'm still not sure how to check Ford Credit's rate (if I were to opt for the $1,000 "Switch Cash" instead of the 0%). I assume that it may be a tad lower than what most banks/credit unions may be offering.

FYI, the financing you speak of (0%) is for dealer stock, according to your post, if you order an ST, make sure they give you 0%. You will probably get a 2.5% interest rate for an ordered car @ 60 months.

Oh wow, I really hope that's not the case. Do you have any more info on this?

Here are screenshots of the two credit unions that my job is affiliated with:
and

 

[westcoaST]

Usually, credit unions will cut .25% of of your loan rate if you do an autopay. Your original post says "I must take new delivery from dealer stock..." this means the ST you drove, since its in stock, not the one you want to order.

 

[contourious]

Usually, credit unions will cut .25% of of your loan rate if you do an autopay. Your original post says "I must take new delivery from dealer stock..." this means the ST you drove, since its in stock, not the one you want to order.

That's a good point, however Affinity unfortunately already includes that in their rates. "Rates quoted are lowest rates for qualified applicants and include 0.25% rate reduction for automatic payments from your Affinity account."

Ford's Incentive webpage says, "For all offers, take new retail delivery from dealer stock by 2/2/15." However, I recall the salesman briefly mentioning something similar to what ryst said: that I might be "locked in" to whatever promotion was going on, however this contradicts Ford's website. Does placing an order count as "taking new retail delivery from dealer stock." If so, then this would definitely be a win/win. Though, why the misleading fine print?

 

[Harvick]

"take new delivery from dealer stock by 2/2/15." means that's when the incentives expire and you have to purchase on or before that date to take advantage of it. Placing the order does not count unless they can get the car to you before the expiration date.