First Time Buyer Woes

[Anonymous]

OP:

Your problem lies within your monthly budget.  As a previous poster stated, $215/month ties you up to a sub $10k car.  Banks are more and more hesitant to lend against older cars with higher mileage that don't hold value well (domestics). 

If you are not picky on a vehicle, look at dodge avengers, neons...ford focus...nissan versa that are 2008 and pre-owned.  You should have no problem finding something in the $8-9.5k range as my establishment sells many of these in that range every month. 

Now the good part, look up local credit unions in your area.  There should be at least one that you can join contingent upon you living/working in their member area.  Also, check your university's bank/credit union.  The good part about financing a late model pre-owned is that they determine the LTV (loan-to-value) by using invoices from when they were new....not the bottomed out trade-in values domestics are known for.

The reason you're having problems with the big lenders, i.e. FMCC, GMAC etc. Is because they have greatly shifted their loan programs to filter out thin files and transparent 700+ that got there with signer/co-signer status on someone else's good payment history.  Until a couple weeks ago, GMAC would not buy any auto loan without a 700+T.U., 5 year on file, and a good mix of installment/revolving with no derog.

Most times, the person who decides yea/nea at a credit union is the banker you sit down with.  It gives them a chance to get to know you and gives you a chance to show them you can pay.  Also, don't be intimidated because you're not already a member.  Credit unions THRIVE on loans, so check online first to make sure you meet the member guidelines then march right in there to get on your way to reliable transportation. 

p.s. previous poster's idea of old car is not a good one.  the safety systems on vehicles are designed to function 10 years in most cases, not to mention repairs, maintenance, and the possibility of leaving you stranded that can all be avoided by going with a late model pre-owned that is still under warranty (under 36k miles most times).

Message Edited by AutoLender on 01-27-2009 08:46 AM

Message Edited by AutoLender on 01-27-2009 08:46 AM

[Anonymous]

Hi,

I was in the same boat a few years ago & TRUST ME, that interest rate is not worth it - you probably will have a high-risk only lender & I think just the name was enough to look bad on my credit report.  I had just suffered Identity Theft, so my score was in the tank.

When I graduated college, I got a 2.9% LEASE on my car - not a smart idea long-run, especially if you go over on the miles, but the rates are definitely out there for no-credit-history first time buyers, though I don't know if you'll find one on a domestic product.  March and August are good months to get a good price (in Aug you can buy the former years' vehicle at a rediculous savings).

I'd be careful about opening up several credit accounts - that could be one of the reasons you are being denied new credit because it makes it look like you are trying to get any and all credit, versus selectively shopping.  You want to have a good mix - 1 installment loan, 1 good credit card, etc.  If you start shopping for multiple items and they're not immediately within a short period of time of each other, you will ding your score further (i.e. 3 credit card applications within a week/few days only indicate you're looking for a good rate, and won't kill your score too badly - 3 credit card applications along with a loan for a car or a personal loan over 4 weeks makes you look irresponsible and the impact on your score reflects that.)

Use bankrate.com or msn money calculators to see how much car you can really afford based on your budget.  I had a brand new Olds Alero when I graduated, making about the same... but again it was a lease and then I owed $2K on mileage when my job situation changed and I no longer had a company car so I racked up miles.  I am almost certain you can/will find an attractive FTB rate for purchase via one of the companies - call around & search - and when you get that, be SURE not to miss a payment and your score will go up.  My advice?  Most companies have direct deposit for paychecks, and most of them allow $X to go to one account and the remainder to a second.  IF you have that, set up a second account that your auto payment automatically comes out of (or you can set up on auto-pay through that account), and have the monthly amount of your car payment /2 sent into that account (on average 2 pay periods per month, and when there are 3 you are inadvertently [a good thing!] building a cushion).  That way there is basically no way you can spend that.  1 year of responsible payments on that (and I mean NEVER late) and on your credit card, your score should jump dramatically.

Last, do NOT close the card you do have, and to be safe, keep a $10 balance or so on it so they do not close it on you - it's your longest credit history item, and it will hurt you if it gets closed.  Yes, you'll pay interest on the $10, BUT, it's far less than the cost of higher interest on larger items because your score goes down (as you've seen with the 19% car payment - that's exactly what I had).

One final source you can try is Road Loans - I didn't end up needing them, but they weren't that bad either.  If you go that route, the APR will likely be ~14%, so make sure to buy a smaller car.  Keep in mind too unbudgeted items like car insurance and gas - get a quote from an insurer w/sample cars to get an idea of what you will pay.  I now pay on an annual basis for car insurance what I was paying every 2 months at your age (I'm 31 & married now).

Good luck!!!

[Anonymous]

Well, I was in a similar position as you . I am 20yo, sophomore in college and employed full time. I make 32k a year and I got approved through Ford. I got the focus at 15k. I got approved with one collection account, 75% util on my credit cards but with $3000 down. I have 3 credit cards that are about the same age as yours and a small personal loan from Navy Federal and yet I still got approved. My suggestion to you would be to come up with a bigger down payment. I came to Ford with 1k at first and was given conditional approval so I had to come up with $2000 more. I had no co-signer and I am a first time buyer. Call back your dealer and ask for conditional approval, just see what they ask for, more then likely its more money down......... BTW I am in  Virginia/DC area

[Anonymous]

Thanks to everyone who recently commented. I appreciate it!

I need to clear up some things though. First I was looking to buy a used car, not a new one. Secondly I don't have any baddies on my report, and the only inquiries are from auto loan shopping in a 14 day window. I'll take all the suggestions into consideration (March/August hey!!!). Right now I'm concentrating on saving and joining a credit union. I haven't applied to any CCC's as yet and I'm only going for two more cards. I only plan on doing so when my scores hit around 750-780 so that they don't plummet. I was definately looking for cars in the 6-9K range...I don't use Excel (rebellion...LOL), I use the calculators on BankRate and CapOneAuto. Teehee!

[Anonymous]

First of all, since you recently have been trying to apply for credit everywhere it negatively affects your credit rating. Each time you apply your score will drop for a period of time.

You might wanna hold of for a couple of months before trying to apply for anything again. Right now your best bet is to increase your limit on the card that you already have. (Should probably have been your first step) now you might not want to try to do that right away as you just have dropped your score by applying for car and other credit cards. If you pay your card off in full or keep a very low balance (with a $500 limit you want to stay under $75) also make sure to make small purchases every month. Or larger purchases (like groceries and make the payment immediately afterwards) but make sure they are paid off before the end of the billing cycle. You want to show that you deserve more credit.

Now getting a car loan at a ridiculous rate just because you have "fresh" credit will not help you in the long run at all! Keep in mind that the dealerships makes money from the creditors to give you the highest rate possible. With negotiation a 19% rate can be dropped down to 12% (Neither is still god enough but you'd be surprised.)

STORE Credit cards are easier to get than actually credit credit cards... so go to your local mall and apply for a credit card to build your credit in a store where you like to shop. Those credit lines are usually generous but are limited to the store. Now, only use what you can pay off right away...thats how you build your credit!

There's a million things to do to build your credit relatively fast....but as of right now....you probably want to take care of the card that you already have and let your fico recover from all the recent credit pulls for a couple of months!

[Anonymous]

I always found going to a credit union was way less of a hassle than going to a corporate owned bank...not trying to constantly upgrade my accounts or sell me a loan.  As a resource, go check out this link:

http://www.creditunion.coop/cu_locator/index.html

That was by far the easiest way to find one that was close to me, and not trying to take more of my money.  They tell you everything you need to qualify for memberships before you even have to contact anyone.

[Anonymous]

elixandrea

You are doing the right thing...mizi directed tyou to the right source about CU's.  I believe they still have their members in mind and do not try to sell you everything.

If you like calculators...may I suggest a TI BAII Financial Calculator. You can pick one off the shelf of a Target Store for $30 or so.

First, buying a car for CASH is the way to go, if it was CASH that you saved up.  Taking an advance on your Credit Card is not considered CASH.

But if you are having to borrow money...then use the calculator above.

What this calculator will tell you are two very important things when buying a car.

If you put in a Payment (i..e. $215 - as I remember) an APR and Term (both you would received from your credit union) then by pressing two buttons, you could get an "amount financed."  This is not the price of the car...you must estimate, but the actual car price.  As an example, lets assume the amount financed is $10,000.  The car price would be 10 - 30% below 10,000.  Why 10 - 30%?  This is where things like sales tax, fees, dealer prep, and other types of addons such as GAP Insurance, Service Contracts, etc are purchased.

This always takes estimating...but a good rule of thum is to predetermine a % of the car as the maximum you want to spend on these taxes, fee's and etc.  I like to use 20%.  That means no matter what the cost of the car is, you can easity assume it will cost you 20% more for these addon purchases.  So if you were to buy a $6,000 car, then know your amount financed will not exceed $7,200 or $10,000 car would end up costing you no more than $12,000.

If you buy from an individual, you don't have to worry about the extra's....  If you are buying from an individual, verify the asking price by looking up the values in kbb.com, nada.com and edmunds.com.  Do all three, because all three are different.

Then go to autocheck.com or carfax.com, pay the $25 or so and look up the history.  Then take the car to have a mechanic check it out.  Looking under a car can tell a lot of things that don't show up anyplace else.

Good luck,!

[Anonymous]

I would suggest you take the $215/mo, plus the $100 or so you'll be paying for insurance, you plan on using for a car payment and bank it. Be patient say 24 months, walk into the dealer and pay cash. In 24 months at $315/mo you can get a nice used car. It's much easier to negotiate with cash then when your depending on them for credit. In the 24 months you will continue to build credit history with your CC, have a longer history and no car payment. After you pay cash for your vehicle continue funding your savings with the $215/mo and in 36 to 48 months trade up and pay cash again... See the pattern here.

Credit is necessary for emergencies and home purchases but CASH is KING.

[Anonymous]

I graduated a year ago with a BS in Chemical Engineering and I'm in the same situation as you. I have a 695 FICO, $67k a year, and had the job for a year.

I've been denied by a credit union (penfed.org) for their 4.75% due to "unsufficient credit history." My credit report shows the length of credit history as 9 years 6 months (i'm 26 years old).

I was trying to buy an '05 BMW m3, but it looks like I may have to just hold on to my current beater car for a while. I have 15% total debt ($4500 out of $30,000)