Good Auto Loan?

[BlueHusky]

My local CU is having an auto loan promotion this month...these are the following rates (which I qualify for, according to the guy when I gave him my FICO score).

36 mon - 2%

48 months - 2.25%

63 months - 2.5%

72 months - 2.8%

75 month - 3.3%

84 months - 3.75%

Are these good rates for an auto loan, or are there better out there? Also, which of these is the best deal? I think I'm leaning toward the 72 months - but I've never even heard of an 84 month before and I could definately get a more expensive car if I chose that one.

[p-]

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@BlueHusky wrote:

My local CU is having an auto loan promotion this month...these are the following rates (which I qualify for, according to the guy when I gave him my FICO score).

36 mon - 2%

48 months - 2.25%

63 months - 2.5%

72 months - 2.8%

75 month - 3.3%

84 months - 3.75%

Are these good rates for an auto loan, or are there better out there? Also, which of these is the best deal? I think I'm leaning toward the 72 months - but I've never even heard of an 84 month before and I could definately get a more expensive car if I chose that one.

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PenFed will give you 1.49% for up to 60 months.  Financing a car longer than that gets expensive.  I recommend you use an amortization calculator to see what your payment and total interest overall would be under different scenarios you are considering.  If you have to take the term out to 84 months you might be over-reaching.

Just food for thought - if you financed 20k at the above rates, here is what your payment and total interest for life of loan looks like:

@Anonymous mo @  2.5 - 339/mo pay 1,362 in interest

@Anonymous mo @  2.8 - 302/mo pay 1,750 in interest

@Anonymous mo @ 3.75 - 271/mo pay 2,771 in interest

Good luck!

[BlueHusky]

Thanks - do you know if PenFed goes to 72 months, and if so what the interest rate is? Also, do you know what FICO you need to qualify for the lowest rate?

I just resigned from my old job, offered a new job that I have yet to take, making about $40,000 per year. I'm young, single, and have no other expenses (my parents pay my rent and utilities) except for student loans. I planned on bringing in my contract to show my local CU as soon as I accept my new job (they said that was okay) - will Penfed allow that or will they require the paystubs?

The car I'm looking at will require me to finanace about $25,000 after my downpayment and trade in. Doing the math with fees and tax, I'm coming up with:

63 months - $466/month, total interest $1865.

72 months - $415/month, total interest $2397.

The interest only goes up by $500, but that extra $50/month really helps. Is it bad to do the 72 months? 84 months is way too much interest (approaching $4000 to get the payment down to $370, which isn't worth it IMO), but 63 months is just a tad more than I want - my budget is $500 for car + insurance. My insurance quote was $80/month.

[p-]

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@BlueHusky wrote:

Thanks - do you know if PenFed goes to 72 months, and if so what the interest rate is? Also, do you know what FICO you need to qualify for the lowest rate?

I just resigned from my old job, offered a new job that I have yet to take, making about $40,000 per year. I'm young, single, and have no other expenses (my parents pay my rent and utilities) except for student loans. I planned on bringing in my contract to show my local CU as soon as I accept my new job (they said that was okay) - will Penfed allow that or will they require the paystubs?

The car I'm looking at will require me to finanace about $25,000 after my downpayment and trade in. Doing the math with fees and tax, I'm coming up with:

63 months - $466/month, total interest $1865.

72 months - $415/month, total interest $2397.

The interest only goes up by $500, but that extra $50/month really helps. Is it bad to do the 72 months? 84 months is way too much interest (approaching $4000 to get the payment down to $370, which isn't worth it IMO), but 63 months is just a tad more than I want - my budget is $500 for car + insurance. My insurance quote was $80/month.

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Penfed requires down payment for anything over 60 months, but you should check out their website anyway.  www.penfed.org

25k at 1.49% for 60 mo is only 433 a month; not much different than your 72 mo offer.  If your equifax fico is well into the 700's, then you should have no problem with penfed.  They gave me instant approval, no verification.  Your only sticking point might be debt vs income.

In my opinion 25 grand is way too much car debt for a 40k income.  I know you probably don't want to hear it, but there are a lot of better things you could be doing with that money right now.  Is there something particular about your life or career that requires a car that expensive?  Are you funding a Roth?  Do you have savings?  Are you looking at your first home purchase in the next 5 years?

I recommend you stay conservative on the amount and term.  Think about how old you will be in 6-7 years, and what changes your life will undergo between now and then.  Will you be able to make that payment the whole time?  Will that still be the right car for you that far down the road?  Will it still be reliable?  What if something changes?  Do you plan not to move out of your parents house for that whole term? 

[dabrian]

25k for a car is way to much on just a 40k a year salary in my opinion.

[dabrian]

Not to mention the money your putting down and the tradein.  Goodluck in whatever you choose.

[BlueHusky]

What amount should someone with a 40K salary finance for a car, in everyones opinion?

[dabrian]

If you can't pay it off in less than three years at the absolute max you can't afford the car.   

[BlueHusky]

^ Ok so doing the math...40K income, take home is about 2,200 a month after taxes, insurance, etc. Rule of thumb is car payment should be 20% gross income max, so that's $440. For a 36 month loan at 2% interest with 7.5% sales tax then that maximum amount I could finance is less than $14,000....and my monthly payment would be HIGHER than 25K for 72 months at 2.8% interest ($416 a month).

I appreciate the advice, but limiting my car choices to $14K or less would mean I would either have to get something I absolutely hate (I've done a ton of research, there is nothing that is nice, stylish, and safe with good features in that price range) or a fairly old used car.

Do people really advocate the rule of 36 months or don't get it?

[Jutz]

IMO if you need to go past 60 months to afford it you're stretching.  I stretched on a car when I was 23ish and it nearly destroyed me, thank god I was able to get rid of it before it was repoed.  What you should really be thinking about is where you'll be even half way through a 72 month loan.  Will you be making significanlty more?  Will your parents continue paying for your expenses?  What about insurance costs?

15k can buy a lot of car when you look 2010ish.  It's your money, your life, so no one should judge, but 40k just isn't that much money to be paying mid 20's for a car.