As Jalopnik’s resident car-buying expert and a professional car shopper, I get emails. Lots of emails. I’ve picked a few of your questions and will try to help out. This week we are discussing how folks are able to get loans for cars with big markups, and the buying process for Polestar.
Wondering how banks and credit unions are handling the ADM? Are they financing that additional amount, or you have to come up with the cash? I’ve seen $10 to $12 grand asked on Tundras in my area (Southern Cal.) along with $1,295 to $3,995 for alarm systems. Are manufacturers financing this through their own financing arm? Mandatory gap insurance? Just curious, it seems you are very upside down driving off the lot. Interesting times.
This is a good question and the lending aspect you are speaking to is called the “loan to value ratio.” Basically, a lender looks at how much money you need and compares that to the market value of the vehicle then determines your approval and how much they will loan you. If the loan amount is substantially greater than the value the lender will either not approve the loan at all or only approve up to a certain amount. I can’t imagine that most lenders will approve something like a $60,000 loan on a $45,000 Kia.
If the lender decides the loan to value is too great, the buyer would then have to come up with the difference in cash. However, I think most dealers that are charging these markups are banking on folks with substantial equity in their trades to offset that markup. Therefore, they’d be making the loan more likely to be approved.
“I’ve been considering purchasing a Polestar 2. I test drove it and really liked it. The state and federal tax credits along with the high trade in value of my 2012 Subaru Impreza will knock off a considerable amount of the price. Have you ever dealt with Polestar? Do they negotiate or is the price fixed?”
I have not had any purchase experience with Polestar, but based on our reviews these seem like really excellent cars. According to the automaker’s website buying a Polestar looks to be very similar to purchasing a Tesla. You order your vehicle online, the price is fixed, and the car is delivered to you. Considering how difficult the new car market is right now, that is a good process. The only real caveat is production as many brands have either throttled their factories or shut them down completely due to the microchip shortage. All you should keep an eye on is that it may be a while before your Polestar actually gets made.
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