Help - Questions about auto loan process

[Anonymous]

Hi everyone,
I applied for an auto loan through Wells Fargo yesterday. I’m looking to buy my first car! (Used). But i’m not sure how all of this works. I asked for an auto loan of $15,000. Say they approve me.. What do I after that? If I choose a car that’s $12,000, what happens to the remaining 3k in my loan? And also, would a down payment be required?

[DaveInAZ]

What you applied for is a pre-approval for a car loan up to $15,000. If you buy a car for $12,000 then they just loan you that amount instead of your full pre-approval. Different lenders have different policies if a down payment is required. Some lenders will require at least a 10% down payment, othesr will loan you 100% or even up to 110% of the car's value - and they determine the car's "value" based on something like Kelly Blue Book's (kbb.com) valuation, not what you pay.

Do you bank with Wells Fargo? Becuase WF is about the last place I'd app for a car loan, credit unions give better rates with less red tape.

[Anonymous]

Yes I bank with Wells Fargo. I’m planning on switching to a credit union though. I’ve heard many good things them! WF called earlier and told me I wasn’t approved for the auto loan. Idk if it was because of my credit score (698) or my DTI. Do credit unions only give auto loans to members?

[DaveInAZ]

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@Anonymous wrote:
Yes I bank with Wells Fargo. I’m planning on switching to a credit union though. I’ve heard many good things them! WF called earlier and told me I wasn’t approved for the auto loan. Idk if it was because of my credit score (698) or my DTI. Do credit unions only give auto loans to members?

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A 698 credit score is more than good enough for a car loan. Lenders don't like a DTI of more than 40% for a car loan, and Wells Fargo is known for being a very conservative lender. I recently got a 2.99% 65 month car loan from Digital Credit Union with an Equifax Fico 9 score of 699, give them a try - dcu.org. You can apply for a car loan without being a member, but if approved you need to be a member to get the loan. For DCU a $10 donation for schools gets you membership and you can fund the required minimum $5 in a savings account with a credit card. DCU pulls Equifax for your credit score.

[bigpoppa09]

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@DaveInAZ wrote:

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@Anonymous wrote:
Yes I bank with Wells Fargo. I’m planning on switching to a credit union though. I’ve heard many good things them! WF called earlier and told me I wasn’t approved for the auto loan. Idk if it was because of my credit score (698) or my DTI. Do credit unions only give auto loans to members?

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A 698 credit score is more than good enough for a car loan. Lenders don't like a DTI of more than 40% for a car loan, and Wells Fargo is known for being a very conservative lender. I recently got a 2.99% 65 month car loan from Digital Credit Union with an Equifax Fico 9 score of 699, give them a try - dcu.org. You can apply for a car loan without being a member, but if approved you need to be a member to get the loan. For DCU a $10 donation for schools gets you membership and you can fund the required minimum $5 in a savings account with a credit card. DCU pulls Equifax for your credit score.

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+1 I wouldn't use Wells for a auto loan i would go Credit Union route as Dave pointed out or a Captive lender.

[Anonymous]

Just to piggyback here

1) Yes WF as bank can be conservative, like many of the big banks...no doubt

But there should be a distinction made between a WF auto loan and what is called WF Dealer Services,

which is their 2nd tier 'bottom feeder' (IMO) division...many dealers use the Dealer Services division, it is a BIG player

in the auto market and ppl se the words WF attached and assume WF auto loans suck, when in general a regular WF loan through normal channels is about the same as to be expected from any of the large conservative slow moving not going risk too much banks.

Dealer Services = high risk, which = @%# up terms alongthe lines of other '2nd tier' lending opps ( just to be fair to WF, again not an endorsement, just a clarification)

2) Otherwise the info inthe thread is pretty solid..

Also banks/cu will typically lend up to 120-125% of the book value of a vehicle (because of 'packing' tax, tags and possibly an 'extra' like a warranty etc. into the loan...be careful, here though because, this coupled with low down payments and high % is how folks wind up SO upside down value-wise vs debt owed on a car...think of it they allow you to borrow more than it's worth to begin with at THAT moment and we know the value drops way quicker than your loan pays it down = of course you're upside down...

To minimize the damage, buy 'well' meaning get a great deal and keep cost conservative as to what you can very comfortably pay DOWN quickly....

3) Also remember relationships and 'which' collateral can play a part in a 'tweener' situation in securing that 1st auto approval...meaning that the CU dealer/relationship might pay dividends vs just cold apping for a 'cold money' approval at an unconnected lender....