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New Visitor
Posts: 5
Registered: ‎04-29-2013
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First time auto loan

I'm looking for a bit of advice on auto loans. I have a credit score around 750 but I'm only 19 and had credit history for about a year. The only downfall is I work part time and make only 8.50/hr with about 25-30 hours per week. I would like to get an auto loan from my credit union but not sure how it works. Do I ask them if they'll finance me for a certain used vehicle that's about 20,000? Or will they just tell me how much they're willing to loan me?
Valued Contributor
Posts: 2,110
Registered: ‎12-29-2011
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Re: First time auto loan

You won't be able to finance alone 20k working part time at 8.50 an hour. You will need a co signer. Banks take into account your annual income and total hours worked plus expenses such as rent and utilities. .your annual income if my math is correct is only around 10k..have you considered getting a junker?
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Regular Contributor
Posts: 156
Registered: ‎07-11-2012
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Re: First time auto loan

Credit score while important, is defintely not the most important factor of qualifying for a loan. Believe me, you don't want a car payment being close to 40 percent of your take home! (PErsonal experience...)

 

I'm assuming you're full time and at 8.50 after takes you're looking at maybe 1100 for the month. You want to finance 20K and let's just say with a cosigner you get an APR of 8%, you're looking at a $350 payment!

 

I agree with the other response, there are very good reliable used cars out there that can be had for what you can afford right now!

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Valued Contributor
Posts: 2,110
Registered: ‎12-29-2011
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Re: First time auto loan

[ Edited ]

jm00ser wrote:

Credit score while important, is defintely not the most important factor of qualifying for a loan. Believe me, you don't want a car payment being close to 40 percent of your take home! (PErsonal experience...)

 

I'm assuming you're full time and at 8.50 after takes you're looking at maybe 1100 for the month. You want to finance 20K and let's just say with a cosigner you get an APR of 8%, you're looking at a $350 payment!

 

I agree with the other response, there are very good reliable used cars out there that can be had for what you can afford right now!


+1

And yes, lenders don't only take your FICO score into consideration. What they are looking for is account age and a long history of timely payments..a person with a 660 FICO and 18 years of history will get a better rate than a person with a FICO of 750 and 1 year of history...

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Regular Contributor
Posts: 158
Registered: ‎03-10-2012
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Re: First time auto loan

[ Edited ]

Some financial gurus say no more than 20% of your monthly net income. I suppose there are some exceptions, like recent graduates, home owners with paid off mortgages, if one spouse earns far more than the other, etc.

 

Keep in mind:

Insurance... full insurance is required by law, since technically you do not "own" a car not paid off. It can also be expensive depending on where you live in the States. I recommend you go online and run a basic insurance quote for whatever car you may consider. Strangely enough I did this once, a Hyundai Elantra vs. Sonata - the Elantra's premium was $20/month more (thats $1200 over 5-years).

 

Maintenance and fuel cost... SUVs require more service, and everyone knows they consume more fuel.

 

If you can, put money aside, into a savings account for example, to see how comfortable you will be with a car loan payment. I would do this for at least 1 year.

New Visitor
Posts: 5
Registered: ‎04-29-2013
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Re: First time auto loan

That was going to be my next question, if I go directly to the credit union and ask them to find me a vehicle do I still need a down payment? Also I found that for the vehicle I looked at my insurance would be about 273 monthly. Honestly I was curious to see if I could get something a bit more recent or just get a bit more money to go with what I have and buy an older vehicle if its well maintained
New Visitor
Posts: 5
Registered: ‎04-29-2013
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Re: First time auto loan

I also forgot to add that I don't have any other expenses currently. My friends and I are staying in my mothers owned house and since we split the bills we don't really come out of pocket much
Frequent Contributor
Posts: 436
Registered: ‎03-19-2010
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Re: First time auto loan

Even with no monthly bills and no credit card debt you're still gonna need a co-signer due to not enough credit history and lack of income.

New Visitor
Posts: 5
Registered: ‎04-29-2013
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Re: First time auto loan

I understand that much and was expecting it. I won't ask for as big of a loan because I will be living out of my means. Do financial institutions give small loans where I could write a check to a private seller or would it be considered a high risk?
Valued Contributor
Posts: 1,265
Registered: ‎09-14-2012
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Re: First time auto loan


Volpes wrote:

Some financial gurus say no more than 20% of your monthly net income.


IMO 20% for a car payment is way too high. 

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