Hacker News Reader

Comment by djao | Hacker News Reader

1. Cross out the upper left corner, the one that says "trade in". You're not trading in your old car. You're selling it private party for more money.

2. Cross out the lower right corner, the one that says "monthly payment". You're not taking out a loan. You're paying cash.

3. Cross out the lower left corner, the one that says "down payment", and write 100%. You're not taking out a loan. You're paying cash.

4. All that's left is the price of the car. That is what you negotiate. (Although -- be careful about add-ons such as the $2000 rustproofing.)

Some dealers won't take cash, because it eliminates their ability to engage in deception. If you encounter such a dealer, walk out. If they refuse to let you walk out, call the police.

Tip: you can avoid 100% of dealer nonsense and idiocy by buying a car without going through a dealer. For new cars in the US, the only way to pull this off is to buy from Tesla or a few other boutique EV carmakers. The vast majority of carmakers have no sales channels for new cars other than dealers. You could of course always choose to buy a used car and avoid buying them from dealers.

View on HN

> 2. Cross out the lower right corner, the one that says "monthly payment". You're not taking out a loan. You're paying cash. > > 3. Cross out the lower left corner, the one that says "down payment", and write 100%. You're not taking out a loan. You're paying cash.

Nope, if you have cash don't mention it, otherwise they will play hardball on the price since they now know they will not make money on the financing.

Tell them you are willing to go with their financing if you can get the price down. Get the financing then immediately payoff the loan in the first month.

That's called stooping to their level. Yes, you can profit that way. But there are other ways to recoup that same profit, for example by being a better negotiator, or choosing a car that isn't sold through dealers and therefore is sold at a fixed price (as I mentioned in my original comment).

I know dealers engage in deception to increase their profit. I would prefer not to do the same in my personal life. I want to live ethically and honestly.

Paying off a loan early is deceptive?

See my other comment above. If they sell you a car based on the assumption of financing profits, and you don't produce those financing profits for them, then yes, in my view, that is deceptive.

Ten years ago, there was no real alternative. Now there is, so I just figuratively tell dealers to fuck off and take my business to a competitor that doesn't play deceptive pricing games.

Nah, you're under no ethical obligation to do anything for them whatsoever. If you were, you'd pay their asking price from the outset.

I agree I am not under any obligation to be honest. I have been very clear that this is a personal preference.

that is an absolutely insane take.

first of all, if a loan allows early payoff without a penalty, then it's your prerogative to take that option anytime you feel like it with absolutely no moral qualm. that's the point of written down contracts. you are under no obligation to discuss your future financial plans with the sales staff, nor what strategy you plan to take. they in turn are free to make any deal they wish, and if they offer a deal whereby you have an option, they have offered you a deal whereby you have an option. you don't need to lie, but it's really irrelevant because the only thing that matters is the contract - if either side actually cared about something that isn't written down, then shame on them. "assumptions" is no part of it.

secondly, it factually just doesn't work that way. you could straight up tell them you want to pay it off tomorrow. they won't give a shit. if they "make money on the financing" via some incentive, they get paid when they close the loan regardless of when you pay it off. if you pay it off early they don't even know about it and could care less. and if the finance company cared, it wouldn't be an option or it would have a penalty.

you don't need to, nor should you, "stoop to their level". simply go in, pick a car you like, tell them what you want to pay. if they say "there's a better price if you finance" then either take that deal, or counter-offer the same in cash, or don't and leave. if they say, sorry i can only do that if you finance, then either take the financed deal (sometimes the rates really are quite good) or ask if it has a prepayment penalty: "so, if i pay that off in full next month, there's no penalty and you still give me this price?". then make them show you in the paperwork where it says that.

it's fine to not want to play games with deceptive dealers, but you are certainly under no moral or ethical obligation other than to hold up your end of whatever deal that is made.

I'm with you except the part where you say to "simply go in." I see no reason why I should go in. The aggravation of interacting with a dealer is not worth the pennies I might potentially save (but only potentially, and only if I do everything perfectly, and at the risk of losing my shirt if I mess up even slightly).

I want fixed price transactions. Dealers do not give this to me. Tesla does. Therefore, I go with Tesla. You don't have to. But you can't, and you shouldn't, advise me to do something that I plainly dislike doing. I have already made it clear that the money is not the issue, it is the principle behind the thing. Lack of fixed pricing is the precise thing that I find objectionable.

If a dealer, or anyone else, gives me a different price depending on my method of payment, then I am not going to be your customer. Full stop. I'm not going to try to game your pricing. I want to know that you are engaging in this practice, not so that I can exploit it, but so that I can avoid it.

meh it's an axiom from caveat emptor. I'll pay off a loan as quickly as I like as long as I stick to the text of the agreement, it's not dishonest in anyway.

I much, much prefer simply to take my business elsewhere. It makes me happier, and it serves them right.

There is no deception, I believe the dealer makes mon ney when delivering the loan, they do not partake in the interest. The lending banks acccount for this in the offered terms. Some banks may claw back from the dealer when a loan is paid off quickly but I think that is rare.

Eh, look, I think there are times when you should withhold information and can do so ethically. If you really want something desperately in a negotiation, best not to let them know how desperate you are. But I don't feel that financing is one of those situations. If I know that I won't finance but I choose to lead the dealer to believe that I might finance, then the price I get in the end isn't the true price, it's the "price assuming I finance." The dealer won't be happy, and you know what they say about car buying -- you're buying the dealer as much as you're buying the car.

Ever since Tesla has emerged as an alternative, there's just no point in going to a dealership anymore. Tesla doesn't care how I pay them.

But then you have to drive a Tesla? Limiting the available cars you’re willing to purchase strictly to adhere to a perceived moral high ground feels incredibly naive to me. And privileged, tbh. Teslas are in no way affordable.

Who buys a car for themselves based on an arbitrary criteria of what other, unrelated people can afford?

The person buying the car shouldn’t be shamed for prioritizing what they feel is important in the buying process. It’s being driven by the person buying the car, not the broader public.

A Tesla costs less than an average new car in America. If Teslas are unaffordable, then so are other new cars.

I also mentioned buying used cars. My approach in no way limits the range of cars available for me to purchase.

If you don't like it, well, it's my life, not yours, and I detest the dealership experience. I get to live my life how I want. In a nation of entitled whiners, this is the one thing we are truly entitled to do. You can be different.

> A Tesla costs less than an average new car in America. If Teslas are unaffordable, then so are other new cars.

Not if you compare apples to apples. The cheapest model 3 is significantly more expensive than a Toyota or Kia with equivalent seating and trim.

People with kids will end up paying 90-100K for the model X vs minivans which are in the 35-40K range.

Tesla has a luxury premium and it’s a bit silly to claim otherwise.

An apples to apples comparison means ... you should be picking cars that are roughly equal in price. You didn't. So it isn't an apples to apples comparison. You're contradicting yourself.

Look up what the word "average" means. If you are accusing Tesla buyers of buying privileged expensive cars, then you are necessarily also accusing the vast majority of new car buyers of the same thing. There's no way around it.

Toyotas and Kias are not representative of average new cars in America. Teslas are.

Apples to apples means comparing based off of the objectively observable traits of the cars in question: seating and storage capacity, etc. The price of the cars is more or less arbitrary. Comparing cars on price alone makes no sense. A porsche 911 is multiple times the cost of a minivan, does that mean its utility is that many times higher than a minivan for a family of 4?

The point remains. If a Tesla is a privileged expensive purchase then so is the average new car. There is no possible way of refuting this statement. It is simply mathematically unavoidably true.

The fallacy you demonstrated is called “begging the question” or “assuming the conclusion”.

The point remains. If a Tesla is a privileged expensive purchase then so is the average new car. There is no possible way of refuting this statement. It is simply mathematically unavoidably true.

Worse: Teslas are prices like luxury cars, but they're not built like ones.

Tesla redefines luxury. Traditional luxury car snobs object mightily to this new definition. In a way, I can understand their view. If some new group of people comes in and redefines a word that you've been using for decades, then it's normal to be upset. For example, for me, crypto will always mean cryptography, but it seems that normal people think crypto means cryptocurrency now.

For now, let's get past this initial disagreement by using a different name. I've seen people use the phrase "techno-luxury" to describe what Tesla is doing and to distinguish it from the usual notion of luxury cars.

Luxury cars, as I understand it, are characterized by some or all of the following things: physical comfort, richness of sensory experiences, quality of materials and build, noise reduction, and at the very high end of the market, "quirks and features" such as automatically opening and closing car doors, refrigerators in the back seat, umbrellas inside the door jambs, and so on. There is a category of luxury such as Ferrari or Bugatti that emphasizes performance to a certain extent, but I really really doubt that many people will take their Bugatti out to the track for a day.

Techno-luxury, on the other hand, emphasizes entirely different quirks and features: app access, long-term climate control (4 hours+) for when you're sitting in the car a long time, in-car youtube, in-car netflix, in-car video games, autonomous driving capability, built-in dashcam viewable from the app, location tracking, valet mode and other security features, and so on. There is some overlap between luxury and techno-luxury, in that some traditional luxury cars have some of these features, but Tesla still does it better than anyone else if you are specifically looking for techno-luxury, which I am.

Luxury is build quality: not just a list of features, but the care and effort taken in assembling all the parts into a car: tolerances, alignments, finish quality.

Tesla fails all, with frequent misaligned panels, paint bubbling, ill-fitting parts, etc. It has software bells and whistels, but shitty build quality for the hardware.

20+ years ago, we did a trade-off in the datacenter, replacing single piece of expensive hardware with multiple copies of cheap hardware, with software to patch over the deficiencies. That doesn't work as well when the product is a single piece of hardware.

With some smart software, I can run 3 servers at 50% uptime each, and get 100% uptime. I can't get one nicely assembled car from two shitty ones.

I've not heard of build quality described as luxury. I think for most people functionality and bodily integrity is a basic requirement of a car, not a luxury item.

You're not buying a new car every day. As long as you have one good car, it doesn't matter very much to you how badly the other ones of the same model are built.

My car is 5+ years old and still working fine.

Agreed on the Tesla, on my second.

There is nothing dishonest about paying off a loan in one month. It's all fair in the contract.

By that token, there is nothing dishonest about a dealer selling you an extended warranty. It's all fair in the contract.

Absolutely. You need to do some honest evaluation would it be fair deal for coverage and what is your risk tolerance.

We then fundamentally disagree on the principles that comprise honesty and integrity. I do not agree that just because something is in a contract it is automatically honest and ethical.

Contract or not, almost anything you to do a car dealership is moral IMHO. Just as it is the first duty of a prisoner to escape, it is a consumer's duty to rip off all businesses (as distinct from real people) that you interact with, and dealerships are among the most reprehensible.

Even if you adopt that point of view, I still argue that not buying from a dealer at all is the best way to stick it to dealers, far better than becoming their customer and attempting to win at their game.

The terms of the loan would allow you pay off at any time. That's fine. Ethically, it's exactly like paying off your credit card at the end of the month instead of making the minimum payment. Or paying off your mortgage when you have the cash.

This is a straw man. We all agree that legally, one is allowed to pay the loan off early. The question is: do you lie to the dealer and say that you're going to finance, when you're not really going to finance?

I once got a long-term mortgage and paid it off in full within two months. The contract of course allowed me to do this without penalty. But in this case I told the underwriter that I would be doing exactly this. They were still happy to underwrite my loan.

Personally, I would rather tell the lender the truth in this instance. If they don't want my business as a result, then I want to know this information, because it affects my purchasing decision.

I would say costing them money is better than not giving them money, if you goal is to rip them off. This is what happens if you get the "we'll finance you" price but pay it off on month 1 with cash.

That may be strictly speaking true, but it conflicts with another equally important priority: I want to minimize interaction with dealers as much as possible, precisely because I find them reprehensible.

I agree with your last paragraph generally, but I absolutely do not agree that it applies to this situation - there’s nothing unethical about getting financing for a big purchase, then paying it off early with cash. You don’t have any responsibility to explain why you’re seeking financing when you could technically afford to buy it outright - that’s none of their business.

Edit - nevermind, you explain your reasoning in other comments, though I still can’t empathize with it.

This is pretty much my approach. I did buy a new jeep in 2017 but went through Costco car purchasing which has a fleet contract (I guess?) - because I was dealing with the fleet sale guy. We were able to get all the options we wanted, paid cash, came back two days later and picked it up. Painless.

I bought a Subaru with Costco as well a couple years ago. Super easy, walked in, was presented a price list for the vehicles I was interested in showing the total price. The price was slightly better than I thought I could negotiate for.

Dealing with fleet sales in general is one of the better strategies and if you have the hookup with someone who deals with fleet dealers it can save you time and money.

Pandemic market craziness made a lot of them not as good as they used to though.

> add-ons such as the $2000 rustproofing

I've only ever bought cars in UK and South Africa, and never once heard of a rust-proofing option.

Must be hard work living in a country where you're always the victim of someone's hustle.

I live in the United States and never heard of a rust proofing option either, and I live in the wet PNW. It’s a big republic separated into 50 individual states. There’s a lot of variance; some places have hustle but most don’t.

It's not about wet, it's about salt. You're on the wrong coast to have to think about rustproofing.

Rustproofing is less necessary on modern cars than it used to be, and dealer rustproofing is pretty much universally worse than third-party (RustCheck, Krown, Corrosion-Free, etc.) but if you drive on salty winter roads for 1/3 of the year it definitely helps things not rust out on you as soon as they would otherwise.

This is incorrect. Rust is a reaction of iron and oxygen. Salt accelerates the process because it is ionized, but not necessary. You can flash rust pure iron in seconds with distilled water.

Furthermore, ice alone is basically inert at the timescales that we experience. It would take eons for pure ice to react enough for visible rust to form. Even if it was cold enough for salt water to freeze, the difference would be negligible because salt and water separate from each other as the water crystallizes into ice.

Also, we salt the roads here. Our freeze/thaw cycle is more frequent allowing for rust reactions to occur throughout the season, whereas a colder climate will only see reactions in the spring. There is no shortage of rust here.

Only the higher elevations in the PNW get snow, and I don't know how much salt the highway departments use.

My wife said that when she moved from upstate New York to San Francisco, the first mechanic she took her car to asked whether she drove it to the beach a lot. He was not used to seeing the effects of road salt.

Yes, sorry - I was in a flippant mood and generalised a bit :)

I've never bought cars in the UK, but as I understand it, the standard way to "buy" a car in the UK is not actually to buy one, but to lease it. Leasing is its own category of hustle, entirely different from purchasing.

I want to look into leasing.

We bought an EV with cash, and the range have almost halved since we bought it. With lease, I guess I get a fresh car (and battery) every few years. And insurance is included.

What kind of hustle can I expect with leasing? (I'll do some research when the time comes for the next car, as we're currently a 4-person 1-car family.)

1. Leasing is like a car purchase but with mandatory financing where the true underlying interest rate can legally be obfuscated behind cryptic language that you can't understand. Quick -- is a "money factor" of 0.0074 an attractive interest rate?

2. Leasing is like a car purchase but with a mandatory trade-in (you are going to be trading back the car that you are leasing, at some point in the future when you return your lease). Unlike a normal trade-in, where you have your car as-is and you can ask around for its value, in a leasing situation you have to predict what the value of your car will be in five years. The dealers do this professionally. You do not. Guess who wins?

3. Leasing means it's not really your car. This is an issue most frequently for people who drive a large number of miles. Going over your mileage limit on a lease is very expensive.

4. If your circumstances change such that you need to exit your loan obligations by selling your car before fully paying off your contract, it's easier to sell your way out of a purchase / finance situation than a leasing situation. Ending your lease early is not an option, as car leases (unlike apartment leases) typically carry a heavy early cancellation penalty.

5. In places like the US, where leasing and purchasing are both possible, this enables a unique type of scam: a "sale" where the buyer thinks he's getting a purchase but the paperwork actually says it's a lease. So you're paying full price for the car and you don't get to keep the car in the end.

Thanks for the advice!

How old is the car? Most EVs I’ve seen have an 8 year warranty on the battery.

It's a 2020 model, but I bought second-hand from an authorised dealer, and it was actually owned by the sales person. I'll ask about a warranty, thanks!

TruCoat https://www.youtube.com/watch?v=B2LLB9CGfLs

An auto loan isn't necessarily a bad move when you can often get one that is at a lower interest rate than what your cash will yield in a high interest savings account. For instance, you can get a 48 month loan on a civic at 3.9% and a 5.0% yield on that cash.

Which bank has these mythical 5% interest savings accounts? I’m pretty sure that for most middle-class people, savings interest isn’t a real thing and can be safely disregarded when making decisions.

Credit unions and online banks. http://www.cnet.com/personal-finance/banking/savings/these-h...

If you’re willing to settle for 4%, they’re everywhere now.

Tons of banks are offering around 5% on savings accounts and CDs. I have a 6-mo CD right now at 5.05%. My Apple savings account is at 4.50%

Times have changed.

https://www.nerdwallet.com/best/banking/high-yield-online-sa...

I've gotten a lot of mileage out of NerdWallet over the years. Hope it helps you too.

Cash in a brokerage account. Admittedly, not a "bank".

Vanguard VMFXX - 5.28%

Fidelity SPAXX - 4.97%

In the US? Ally offers savings accounts with great rates (usually 50% off prime, so currently 4.25%) and in my experience is a fantastic bank. Way better than credit unions I’ve banked with. https://www.ally.com/bank/online-savings-account/

Hilariously, Ally used to be GM’s finance division.

Wealthfront's checking account is at 5% right now.

well - for starters, my current primary HYSA has a 5.15% APY atm lol

These are stupid games. Yes, if you have the cash to buy the car, you might consider playing stupid games. (But watch out for income taxes on that "5.0% yield". You might be playing for nothing.)

If you don't have the cash, which is the case for the vast majority of people who take out auto loans, there is no possibility of playing the game anyway. Don't buy a car you can't afford.

This isn't elitism or gatekeeping. Nobody needs a new car. We are on Hacker News. Compound interest is the ultimate financial life hack. Either you use it to your advantage, or other people use it to take advantage of you.

I like the idea of having enough cash to pay off the loan immediately but having the loan (and interest arbitrage, however small) to keep myself liquid + make the monthly cashflow of My Personal Self, LLC, work for me in more optimized ways.

The credit score boosting as a result is also attractive.

But I recognize this requires me to have that much liquid cash anyways. Which a lot of people don’t so they get unfortunately put on the losing side.

Even pre-tax interest arbitrage opportunities are rare, never mind after-tax arbitrage. Think about it. If you can get 5% by depositing money in a bank, so can the dealer. If the dealer can get 5% by depositing money in a bank, why would they lend to you at a lower rate? The only possible reason is if they've made enough money on the car sale (or indirect money such as future service profits) to subsidize the arbitrage loss. It's fundamentally wrong to think that you can somehow beat the system. What's really happening is that you just aren't aware of how you are ultimately the one paying for your so-called profit.

I agree. There is only one situation where this arb truly exists: rate hikes that occur after you secure the loan.

Any other arb requires you to take non-risk free investments which, has obvious drawbacks.

That being said, I still dislike all cash upfront

I mean, out of college a while ago, I literally got a 0.5% APY car loan that my accountant told me I should, under no circumstances, pay down early. I bought a new car that I've essentially done nothing but do oil changes on for 10 years and I can essentially sell it for about what I paid for it 10 years ago and got compound interest on money I didn't have at the time, to buy a car that was essentially as cheap of a new car as I could get.

It's not that it's likely, but you can do the math on if the rate offered is worthwhile. It's probably not the case now that rates aren't in the 0-1% ranges and there's a chance they'll go down in the future, but "getting a loan for 1% and then investing in something that gets 4%" is essentially the underpinning of the fractional reserve banking system that's making a lot of money. You may as well see if they'll let you get it.

> These are stupid games. Yes, if you have the cash to buy the car, you might consider playing stupid games.

Huh? You were the one advocating paying cash.

It's a stupid game because it's really really rare for this kind of arbitrage to exist in the system, especially if you do the computation correctly and count after-tax income rather than pre-tax income.

In the rare instances where you profit, congratulations, I guess? I haven't ever heard of a single person who got rich off of car loan arbitrage. None. But I know tons of people who got rich off of never borrowing a car loan. A $700 per month payment stream invested at 5% over 30 years is half a million dollars. I'd rather have $500000 than a permanent car loan.

I see your point, but I don’t know if people in the financial position to do this do it to get rich. I always saw it as creating small bits of edge in the game.

Also, to this point, the interest arb doesn’t work out the way most people use it because they don’t account for the principle. You’re still going negative into a depreciating liability if you only invest the value of the car. It’s just you’re not going negative with interest.

To go fully not negative requires a lot more cash to generate the interest income to cover the entire payment.

Autobytel used to be a great option to go directly to a fleet sales guy. I'd check them out, although you should definitely do your own research on this. used to work for them a long time ago.

No way am I selling my own car. Dealing with someone else’s financing paying off my financing. Letting people drive it around. Potentially sitting on it for months, losing money ever second it sits there. No thank you.

The first problem is automatically avoided if you didn't finance your car in the first place, as I am suggesting. For the rest, if you drive your car until it has lost all value, which is what I do, and typically takes 20 years, then there's no further loss of value no matter how long it sits, and the risk from people driving it around is also lowered. If you really don't want to go through any hassle, then just sell the car to a junkyard as the dealer won't offer any meaningful trade in on a junk car anyway.

Reply on news.ycombinator.com