First time auto loan... Questions/help/advice

[Anonymous]

Hey there all.  I have a few questions..  First off, my credit score is in the 600 range. It fluctuates from 598-605.    I am wanting to buy a car.. I tried 2 years ago and was turned down due to my credit history.. It was a mix of no credit and derogetory medical bills.   I have never defaulted on a loan, as I have never had one..   So with being turned down 2 years ago I decided to focus on fixing my credit.  I got some of the derog stuff taken off my report.. Some of it is still on there..  There are 4 or 5 items on there that total less than 2000 dollars..   Some of the companies saying I owe, I cannot even get in touch with.    Anyways..    I got a secured credit card, paid it on time for well over a year.. And in the last 3 months finally got my first unsecured credit card and pay it on time as well.    So that brings me to my present score of 600 ish..

I am looking at a car that is 19,000  (used)..   I have 2500 saved to put down if needed.     Based upon the advice of a thread on this forum, i filled out a "pre qualify" thing from capital one and it came back as approved for up to 23k and interest between 3.9 and 12% .    I know that isn't guranteed approval, but how reliable is that in determining if I can get approved??   I understand and accept the fact that I will likely get a higher interest rate based upon my credit. I am ok with that.  As long as it isn't crazy high..   

Should I go to my bank and see if they will approve me?  I have heard you need to be around 700 before your bank will even consider you.. Any truth to that??

I am techcnially self employed but have plenty of bank statements showing my deposits to match my check stubs that I do recieve.

Sorry for the long message, just wanted to give some background..  Any help/advice is greatly appreciated. 

[Anonymous]

Cap1 is fairly accurate on their pre-qualifications. The interest rate you eventually would get from them will be based on the make, model and year you are financing.

If it were me, knowing that my scores are low I would NOT let the dealer run my credit for a better rate. I'd take Cap1 up on it, pay for a few months and see if I could refinance 6-12 months down the road if my scores improved. Their rate looks fair for the score you posted.

I'd finance the full amount, take my down payment and use that amount as my first payment so the loan isn't looking maxed out.

Just my 2 cents. Others may have a different opinion.

[Anonymous]

Thank you for the response..  I had wondered about the Cap one prequalification thing.  It says all I need to take to the dealership is proof of income..   Which is a slight issue.  My boss pays me in cash..  I put cash in the bank every week..  I can get pay stubs but they will be hand written.    I went to my bank today, I did not let them run my credit, but just talked with a banker.. He made a few calls and said as far as proving my income, it just depends on the underwriter.   To me, i have a history of showing cash being deposited every week.  He said they like to know where that money comes from, imo, what difference does it make as long as its legal?     But im kind of thinking on your side.  Go with the cap one, take paystubs, bank statements, and roll with it.   Im thinking they prequalified me because one of my credit cards is through them and they see my history of making payments and may not hassle me as much about documentation.    Also, I tend to agree about the down payment part..  Are you saying to take the 2500 and use it all for the first payment with the balance going to the principal?? 

Thanks again, any others feel free to comment/advise.. I will keep everyone posted.  Not in a huge rush.. I may even wait a couple more weeks and save up more cash.. 

[Anonymous]

Just wanted to provide an update..  I got financed today..  Capital one was offering to do the deal at 12.1%   and wanted me to pay a $1500 fee for being high risk or something to that effect.   But the dealership got the deal done with Hyundai Finance for 8.9% .   They only way they would do it was for me to agree too a mastertech warranty at 2000 extra..    I didn't really understand because the car is a 2014 with plenty of factory warranty left.  But they explained to me that it increased the book value of the car by 1,500 dollars  and made it hit the "sweet spot"  for the lender.  Plus I think it was also the lenders way of  dinging me for having less than desirable credit.   I threatened to walk but it didn't do any good.   They would have totally let me walk..    At the end of it, I wanted my payment to be $300 a month and im at $325 with an interest rate under double digits..  So I feel good about it..     I probably got hosed on the warranty thing, but hell, having all that protection isn't a bad thing..   Just a bad thing finance wise.     

[Chris679]

You probably got hosed on the warranty but single digit apr is reasonsble for someone in your shoes that's rebuilding. You can get your money back on the warranty if you keep the car awhile but so many people don't that's why they push them.

I would try to refinance in a year at a local CU, you don't need 700 and might be able to cut the rate in half.

Good luck

[Anonymous]

Yeah, the warranty still doesn't make sense to me since the car is still under factory warranty, but they insisted that the deal wouldn't happen unless I agreed to it.   But overall, I feel they were pretty honest with me.. They said the problem with my credit wasn't the score (645 for auto fianance)     It was that my credit file didn't have anything in it..   I have 2 600 dollar credit cards I opened a year ago.. Other than that its all old medical charge offs.    So they said that was the biggest reason for the APR and the other "charges"..      But overall, im happy.. I do plan to keep the car for awhile. And I do plan to try to refinance after a year or so..      They only way to build credit is to bite the bullet and do it..  And I feel they were fair with me given the circumstances.    

[Anonymous]

The dealer gets a large kickback for selling you that upmarked warranty.

Most extended warranties can be cancelled within a short timeframe. See what their website says.

[C7LT1]

Congrats on getting a new car...

I don't say this to be mean buy Not only did you get hosed on the warranty but they made you feel good about it. Most warranties has a return policy so I would look into that and get a full return. You have to find in it written because you ask the dealer they will make it sound like you have to keep it. If you want an extra warranty I would like at third party companies. You can most likey get the same coverage for less money. I went with USAA on my last car. 

You being approved and getting a warranty are not connected. Look at your contract. I bet it does not say anything about you been only being approved if you buy a warranty. 

Once a lender approved you it is for XX dollars at XX apr to be paid back over XX months. That is it. The amount they approve you for is based off the value of the vehicle you are trying to finance and the amount of debt they feel  you  can handle. Adding a warranty or any other extras can hurt your chances of approval because it add to the loan amount but not to the value of the car. 

Also, remember you are paying 8.9% on that $2000 warranty. Based on your expereience with this dealer I would not be surprise if you were approved for a lower rate and they added a point or two to the APR which some dealers can and will do to. My advise is only finance the amount of the car and pay cash be and extras you want like warranties, TTL, doc fees, etc unless you are buying a car well below book value. 

[Anonymous]

It's not that I feel good about the warranty. I feel good that I got the car I wanted for the payment I wanted. Every one that I've talked to is pretty impressed that I got an 8% Apr as a first time buyer with a low score and shaky credit. Cap one offered me 12.1% and my own bank offered 16.9% and another bank flat refused. I agree, I think they took advantage of me on the warranty. But reality is that they are business out to make money. I misworded my statements by saying they made me take the warranty. The car was priced well below book of 17900-19900. I ended up financing with the warranty 18k. Probably a tactic of theirs pricing it below book. They just explained to me that the master tech warranty added another 1500 to the value of the car and would help the lender feel better abMattthe loan. I know u guys are all more knowledgeable with me on this. And next time I'll know to be more adament about refusing the warranty.

As far as cancelling it, I have to look at my paper work. Ive read some will charge a fee to cancel it. And then the dealership drags it's feet sending it in. So at the end of it you are lucky if you even get 1000 bucks taken off the principal. It won't lower the payment. Trust me, I know 1000 is a thousand. But just trying to say I'm happy with my payment and fully expected to get a little upside down in my first car finance. I will look at the warranty and let u guys know what it says. I sincerely appreciate all the wisdom and advice.


Matt

[C7LT1]

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@Anonymous wrote:
It's not that I feel good about the warranty. I feel good that I got the car I wanted for the payment I wanted. Every one that I've talked to is pretty impressed that I got an 8% Apr as a first time buyer with a low score and shaky credit. Cap one offered me 12.1% and my own bank offered 16.9% and another bank flat refused. I agree, I think they took advantage of me on the warranty. But reality is that they are business out to make money. I misworded my statements by saying they made me take the warranty. The car was priced well below book of 17900-19900. I ended up financing with the warranty 18k. Probably a tactic of theirs pricing it below book. They just explained to me that the master tech warranty added another 1500 to the value of the car and would help the lender feel better abMattthe loan. I know u guys are all more knowledgeable with me on this. And next time I'll know to be more adament about refusing the warranty.

As far as cancelling it, I have to look at my paper work. Ive read some will charge a fee to cancel it. And then the dealership drags it's feet sending it in. So at the end of it you are lucky if you even get 1000 bucks taken off the principal. It won't lower the payment. Trust me, I know 1000 is a thousand. But just trying to say I'm happy with my payment and fully expected to get a little upside down in my first car finance. I will look at the warranty and let u guys know what it says. I sincerely appreciate all the wisdom and advice.


Matt

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This changes everything. As long as you were not tricked into buying something. It happens to people everyday and it pisses me off everyting I read about it. I am not saying warranties are bad. I once brought a car so far under value that I was able to add a 100k warrranty, TTL and drive it back across country and still was under book value. It can happen!

Again congrads it sounds like you got a great deal and the car you wanted within your budget. Also, you  don't have to be upside down. Just throw whatever extra you get for the next few months at the car loan and you will be ahead for the life of the loan.