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Old 02-10-2014, 09:15 AM   #1
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Dealer Creative Finance Techniques?

Hello there! I enjoy the site and have a question and would like to hear your comments.

Have been looking to trade in my class A for a new model and I don't understand these finance techniques. Went to a local RV Show and this is what happened.

My Class A still has 38K owed to the bank, its resale is approximately 52K. The dealer will take it as a trade-in and pay off the $38K owed but then turn around and add the $38K into the price of financing the new coach. In other words, I am financing the new coach plus refinancing my old "trade-in"? Then he turns around and sells my trade-in for $52K?
Am I wrong in thinking that he is basically getting my trade-in at $0 cost?

This seems to be the norm among the dealers.

Please let me know what you think.
Thanks!
Ed
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Old 02-10-2014, 09:17 AM   #2
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Me thinks you're right. You're paying them to take your motorhome. It wouldn't surprise me that your $52,000 motorhome is only worth $38,000 to a dealer, but you shouldn't see that show up on the contract for your NEW motorhome. What a crock.
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Old 02-10-2014, 09:20 AM   #3
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Quote:
Originally Posted by Edski1999 View Post
Hello there! I enjoy the site and have a question and would like to hear your comments.

Have been looking to trade in my class A for a new model and I don't understand these finance techniques. Went to a local RV Show and this is what happened.

My Class A still has 38K owed to the bank, its resale is approximately 52K. The dealer will take it as a trade-in and pay off the $38K owed but then turn around and add the $38K into the price of financing the new coach. In other words, I am financing the new coach plus refinancing my old "trade-in"? Then he turns around and sells my trade-in for $52K?
Am I wrong in thinking that he is basically getting my trade-in at $0 cost?

This seems to be the norm among the dealers.

Please let me know what you think.
Thanks!
Ed
Sounds like that to me. Not a good deal. Walk away.
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Old 02-10-2014, 09:55 AM   #4
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Sorry, but, the way I see it....

You are trading in an asset for which the dealer must realize full value. The dealer will be "paying off the debt" but it is on your behalf with your money.

Your $38K debt does not disappear. It must be paid off by you up front or be carried into the next loan.
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Old 02-10-2014, 09:57 AM   #5
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The $38k debt should disappear when the OP trades in his $52k motorhome.

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Originally Posted by CampDaven View Post
Sorry, but, the way I see it....

You are trading in an asset for which the dealer must realize full value. The dealer will be "paying off the debt" but it is on your behalf with your money.

Your $38K debt does not disappear. It must be paid off by you up front or be carried into the next loan.
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Old 02-10-2014, 10:01 AM   #6
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The $38k debt should disappear when the OP trades in his $52k motorhome.
True. But the bottom line value of the trade is now $14K.
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Old 02-10-2014, 10:09 AM   #7
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Uh huh. So why are they trying to add $38k to the total he's financing?

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Originally Posted by CampDaven View Post
True. But the bottom line value of the trade is now $14K.
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Old 02-10-2014, 10:13 AM   #8
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Are you sure the $38K doesn't simply show up as a down payment on the contract?
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Old 02-10-2014, 10:16 AM   #9
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Quote:
Originally Posted by Edski1999 View Post
Hello there! I enjoy the site and have a question and would like to hear your comments. Have been looking to trade in my class A for a new model and I don't understand these finance techniques. Went to a local RV Show and this is what happened. My Class A still has 38K owed to the bank, its resale is approximately 52K. The dealer will take it as a trade-in and pay off the $38K owed but then turn around and add the $38K into the price of financing the new coach. In other words, I am financing the new coach plus refinancing my old "trade-in"? Then he turns around and sells my trade-in for $52K? Am I wrong in thinking that he is basically getting my trade-in at $0 cost? This seems to be the norm among the dealers. Please let me know what you think. Thanks! Ed
The dealer is giving you $38,000 for your coach. The price you pay for your new MH should net $38,000 less. Is he deducting the $38,000 from the price of the one you will buy?
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Old 02-10-2014, 10:22 AM   #10
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The dealer is giving you $38,000 for your coach. The price you pay for your new MH should net $38,000 less. Is he deducting the $38,000 from the price of the one you will buy?
The $38000 is a wash. He owes $38,000 and the dealer has taken it as trade and pays off the $38,000. Now the question is how much did the dealer value his trade, $38,000, $40,000 or $52,000. That is the magic number at $38,000 a wash nothing subtracted or added to the financed amount. Anything more than $38,000 should reduce the financed amount. But if the dealer is adding $38,000 to the loan then he has valued the tared as $0.00. Smoke and mirrors. Sell your coach yourself would be my suggestion.
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Old 02-10-2014, 10:26 AM   #11
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Well, if you sell the coach yourself and get $52K, you then pay off the loan and end up with $14K. Anyway it happens the loan gets paid and the value of it is financed. Review the math on the dealer proposal and see what happens?

Some dealers get real "creative" and would magically burry the $38K in the deal. But it is still in there! We will always pay what we owe, and sometimes more!
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Old 02-10-2014, 10:53 AM   #12
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Be sure you understand the numbers. It is true that sometimes the finance paperwork will not match what you discussed, but it is also true that the bottom line will be the same as to what you discussed. An example is that the dealer will have to make it look good to the lender, by adjusting the numbers so that the loan shows that you are putting down 10%. What I do is first get in writing what the deal you worked out is, then have the dealer go through the loan agreement and show you how it comes back to the bottom line of your deal. There will be taxes, doc fees, title and registration that will also be included.

Before signing any thing, I make my own spreadsheet of the deal and then I take the final paperwork and do another spreadsheet and keep working at making them cross foot to my satisfaction. As long as the bottom line that you are financing is what you agreed to, the other numbers above that are mostly not relative. Even though you need to be careful that it does not cause you to pay more taxes than you would have had to. An example is that in NC you pay 3% sales tax on the difference between the sales price and the trade in value. That sales tax is capped at $1,500. Therefore, if you have to pay the full $1,500, using your numbers, than if they play around with the numbers a bit at the top, and the taxes are still capped at $1,500, and the bottom line agrees back to my original deal, the rest really don't matter to me.
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Old 02-10-2014, 11:14 AM   #13
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The numbers should reflect: Agreed upon sales price of new MH MINUS trade in allowance PLUS amount of loan payoff PLUS taxes and fees.

If you are buying a $100,000 mh less your trade in of $38,000 but you still we $38,000 then your bottom line is you still owe the dealer $100,000 for the new unit. The dealer is essentially fronting you the $38,000 to pay off your old loan. What the dealer then sells your old mh for is of no consequence to this transaction except to make you mad when you find out the price.
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Old 02-10-2014, 11:31 AM   #14
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No. He is not deducting the $38K. We made our deal on the new coach before talking about our trade.
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