Mighty Bargain Hunter

A Black Friday special — on loans?!

Stumble it! Tip it! Facebook it! | 11/23/11

I have to hand it to my credit union.  Their marketing is pretty good!  They advertised an unsecured loan special, good through today, at rates starting at 7.5% for up to 12 months for amounts between $500 and $2,500.  It ends today presumably so that people can have the money in hand to shop Black Friday.  The term is no more than 12 months so that it’s a sure thing that it will be paid off before the holidays next year.

Everybody’s looking for business — even banks and credit unions

Black Friday, the quasi-official start of the holiday shopping season, has taken on a life of its own the past few years with door-buster deals, super-early openings, lines around the building, hot chocolate for diehards, “leaked” circulars weeks prior, and much more.  With the economy not really recovering with bells on, retailers are needing more than ever to capitalize on tradition.

The same is true for banks and credit unions.  Despite all of the bad press that banks have gotten for raising their fees, loans are their bread and butter.  And like retailers, they occasionally run promotions to encourage more business.  (The rate I got on my used car loan was a promotional rate, and it’s pretty hard to beat.)

Handle with care!

I’m not debt-free.  I do have an auto loan out there now.  Although I would have preferred to pay cash for the vehicle, we do plan to retire this auto loan ahead of schedule, and the total interest paid won’t exceed 6% of the loan amount in any case.  (Like I said, it was a great loan.)  All in all, if we had to take out a loan, this was the best way to do it.

Borrowing money to spend on holiday presents is a bit different, though.  It’s so easy to overspend during the holidays, and it’s tough to find things that don’t depreciate heavily after you buy them (especially from retailers).  So the $2,500 is gone, and then it’s $217 per month for 12 months, and that lasts the whole year.  (A lot of the presents bought with that money have probably worn out their welcome by March at the latest — maybe New Year’s Eve?)

Everyone wants to sell you a bargain.  It’s certainly a good deal for the person selling you the bargain, especially this time of year.

It’s up to you to determine whether the bargain is a good deal for you.

Posted in Banking, Bargains, Holidays | 1 Comment »

15-year fixed mortgage rates are below 3%

Stumble it! Tip it! Facebook it! | 11/15/11

Fixed-rate mortgages are almost as cheap as the teaser rates on adjustable-rate mortgages of a few years ago.  The average rate on a 15-year fixed rate mortgage for today (November 15th, 2011) stands at 2.97%.  (Note: It was at the time I wrote this post.  Rates change all the time.)  Rates haven’t been this low in at least fifty years.  Some new car financing isn’t this low, and the terms on new car loans aren’t anywhere near 15 years.

Why are rates going further in the basement?  A few reasons:

• It’s harder to find qualifying borrowers.  A lot of people are living life after foreclosure and just flat-out don’t qualify for a mortgage, let alone a mortgage at the best rates available.
• Banks are lending less.  This is related to the search for qualifying borrowers, but from the supply side of the equation.  Banks on the whole are gun-shy after the bath that they took when housing crashed.
• The economy is still below par.  Unemployment is still north of 9%.  It was under 5% four years ago.

Let’s say that I got a 30-year fixed-rate mortgage five years ago, when the rate was about 6.25%.  On a $150,000 loan, my payment would have been $923.58.  After five years I’d owe almost exactly $140,000.

If I refinanced the remaining $140,000 at a 15-year fixed rate mortgage of 3% — which is the going rate! — my payment would go up only by $43 per month, and I’d shave a full ten years off of my mortgage.

I didn’t think rates would get still better from this year’s lows, but I was wrong.  If you haven’t refinanced in a while and your credit is sparkly-shiny, run some numbers and give it some serious thought.  These are crazy low mortgage rates.

Posted in Mortgages | 9 Comments »

Getting better deals by giving business

Stumble it! Tip it! Facebook it! | 11/9/11

Our new (to us) car is now in our driveway.  Pretty much everything is settled with this vehicle, and we sold the old one that had the broken transmission.  We continued “money lessons for kids” with our daughter by showing her a few — OK, two dozen — $100 bills and a cashier’s check with a bunch of zeroes on it.

We had the opportunity to negotiate a couple of times during these transactions.  We got some of what we wanted in both cases.

Negotiation Opportunity #1:  We bought our new used car from Carmax.  Overall this was a great experience.  There was one little hiccup at the end: When we went out to pay off our financing with Carmax (which they allow within three business days without paying a dime in interest) neither one of us caught that I had to sign the cashier’s check.  (The big one, with a bunch of zeroes.)  We were halfway home when my wife got a call on her cell phone asking us to come back.  Going back would set us back an hour in driving time alone.  I suppose I should have caught that I needed to endorse the check, but I do this once every few years, and they do it dozens of times every day.

Anyway, I went back to the dealership, and when they brought the check back for me to sign, I asked:  “Any way I can get a voucher for an oil change?  This set us back 30 minutes of driving one way.”

A few minutes later, I walked out with a $25 gift certificate.

Negotiation Opportunity #2:  Our long-time mechanic bought our old car after we had it towed to his shop and after he gave the estimates to us to have the transmission fixed.  He likes the kind of van we have, except for the transmission.  He’s fixed up a few of them and uses them as loaners for customers.

He said that it would be well worth it to him to pay $500 for the van.  I’ve had “cash for your junk car” tow away other vehicles of ours for far less than that, so $500 wasn’t bad at all for a vehicle that needed about $3,000 worth of parts and labor to be roadworthy again.

My wife was the one who took the title over to him.  She asked if the offer could be more if he gave it in store credit.  (We have no reason to look elsewhere, as we’re quite happy with his service.)

He bought the van for $750 in store credit — 50% more than he offered in cash.

Store credit is cheap for the store

The connection between these two wins is that we made it clear that store credit was just fine with us.  I don’t think that I would have gotten cash back from Carmax for my trouble had I asked for it, and I know that we would have gotten less for the van in cash.

There are at least three reasons why this make sense:

• The money is locked up in the business.  The business owner keeps their money for now and pays in future goods and services.  There’s a small risk that the business could go under and the money would go with it.  But if there’s a good relationship and both parties will continue to do business together, then great.
• Store credit is cheaper for the business than an equivalent amount of cash.  It’s not going to cost Carmax $25 to give me $25 worth of service.  It’s not going to cost our mechanic $750 to give us $750 worth of services.  If it does, then they’re working for nothing.  This is the same reason why restaurants love giving out soda: “Buy two hamburgers and get a medium drink for free.”  The drink costs them about a nickel, but the value to the customer is $1.19.
• You’re on their side with the transaction.  Indirectly you’re saying “I want to continue doing business with you” when you suggest compensation in store credit.  It gives the business that warm, fuzzy feeling.

Any other opportunities you’ve had to barter in store credit or something similar?  Did you get more than you thought?

Posted in Bargains | 4 Comments »

A surefire way to get your kids asking you questions about money

Stumble it! Tip it! Facebook it! | 11/2/11

(And no, the answer is not to give $50/week allowance to a six year old!)

Last week our minivan’s transmission bit the dust.  (Thankfully it bit the dust in our driveway.)  Over the next couple of days my wife and I discussed what to do: whether to fix our car, whether to buy a new-to-us one — buying a new car didn’t enter the picture! — which kind to buy, and how to pay for it.

We had a very level-headed discussion about the whole matter.  I’m glad that we’ve learned a thing or two now that we’re approaching our tenth anniversary.  At some points in the discussion, when it was getting serious and when we were trying to make sure that we understood each other, our daughter came in to ask this or that, and at first we asked her to let us finish the discussion privately.

After we got through that part of the conversation, we called her in to let her know that nothing was wrong and that we needed to think carefully about what to do because it was a lot of money.

At some point, either my wife or I made the observation that this topic really wasn’t over her head, or something that we needed to shield her from.  We really didn’t have to discuss the financial questions of getting a car privately.

So after that point, we involved our daughter in buying the car.  My wife took her to CarMax and she got to ride in the cars, and tell her which one she liked better and why.  But probably the more important part was that she learned that we were going to borrow money to get the car.  We explained that we were going to ask our credit union to lend us money to buy the car, and that we had to pay it back or else they’d be able to take the car, because we didn’t really own the car until the loan was paid back.

Then tonight my daughter asked me, “Daddy, why are you getting a loan for the car?”  Music to my ears — not necessarily because we’re borrowing, but because this is the most advanced money question my daughter has asked about to date.  I got to explain some things about investments to her.  I explained that we could sell some of our investments to pay for the car, but at this time we didn’t want to.  I got to explain the concept of interest to her, and that it wasn’t free to borrow money.  I also got to explain the concept of creditworthiness to her; because Mommy and Daddy pay their bills on time, the bank didn’t charge us much interest on the loan.  (We got approved for a very good rate on our used car loan.)

It was great to see her asking questions about personal finance.  I think the trick was not to hide the family’s personal finance from her.

Posted in Kids and money, Personal Finance | 12 Comments »