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I Got My First Auto Loan!

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Anonymous
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I Got My First Auto Loan!

I'm so happy that I actually got approved yesterday for the truck I wanted, but it was a LONG process that started last weekend and involved many denials. 

 

The first truck I looked at was from a dealer who, as I later found out, is notorious for sending a credit app to 20+ banks. So, my near perfect credit record now has 26 inquiries from the 3 dealers I went to (the other two dealers only sent to 2-3 each) Smiley Sad

 

- I'm 18 and self-employed.

- I just got my first FICO score on the 17th of this month.

- Since I was handing in my past two years' tax returns (and 2015 was my first year of being self-employed) the income I reported was about $10k lower than what I'm making now.

-The only things on my credit history are three credit cards, which I use responsibly and regularly. My credit limit of the three cards combined is $2500 (two are secured, one is unsecured at $300). My first FICO score was a 706 according to my last Discover statement. 

 


After the first dealership denied me for the truck I applied for, they said the bank approved me at $20k. So, that's the price range I shopped in when I looked locally. But, turns out the local dealers go to credit unions (yes, I finally signed up for one after this fiasco), and they would only approve me at $10k to $15k.

 

The Happy Ending

The guys at the local dealership made multiple phone calls and eventually got a larger bank to approve me for the truck I really wanted at $25k with a $5k downpayment (4-year warranty included). My rate is 17%, which I know is incredibly high. They advised me to make 12 to 18 payments and then re-finance it locally. 

 

It was a pain, but I'm so glad it worked out Smiley Happy

Message 1 of 5
4 REPLIES 4
Anonymous
Not applicable

Re: I Got My First Auto Loan!


@tothephonebooth wrote:

I'm so happy that I actually got approved yesterday for the truck I wanted, but it was a LONG process that started last weekend and involved many denials. 

 

The first truck I looked at was from a dealer who, as I later found out, is notorious for sending a credit app to 20+ banks. So, my near perfect credit record now has 30 inquiries from all the dealers I went to Smiley Sad

 

- I'm 18 and self-employed.

- I just got my first FICO score on the 17th of this month.

- Since I was handing in my past two years' tax returns (and 2015 was my first year of being self-employed) the income I reported was about $10k lower than what I'm making now.

-The only things on my credit history are three credit cards, which I use responsibly and regularly. My credit limit of the three cards combined is $2500 (two are secured, one is unsecured at $300). My first FICO score was a 706 according to my last Discover statement. 

 


After the first dealership denied me for the truck I applied for, they said the bank approved me at $20k. So, that's the price range I shopped in when I looked locally. But, turns out the local dealers go to credit unions (yes, I finally signed up for one after this fiasco), and they would only approve me at $10k to $15k.

 

The Happy Ending

The guys at the local dealership made multiple phone calls and eventually got a larger bank to approve me for the truck I really wanted at $25k with a $5k downpayment (4-year warranty included). My rate is 17%, which I know is incredibly high. They advised me to make 12 to 18 payments and then re-finance it locally. 

 

It was a pain, but I'm so glad it worked out Smiley Happy


You will have to do more than make 12-18 payments. You'll need to add a few hundred bucks to each one to get the loan value to an amount that lenders will refinance.

 

If you have 24 hours or something to take it back and reverse the deal, I would do it.

 

You started building positive credit. You could buy this in 6 months for a decent rate. Why the rush?

Message 2 of 5
Anonymous
Not applicable

Re: I Got My First Auto Loan!

First,

 

congratulations on the new truck!

 

I think you should be in fine shape to refinance in a year, maybe even sooner... with the down payment you made coupled with the fact that truck's hold their value better than most vehicles, I think you will be fine to refinance once your credit is more established. Start building a relationship with a few credit union's now so that you will have established relationships when it comes to refinancing.

 

I do agree that if you waited a little bit you probably could have recieved a better rate and a better deal, but it is what it is! Congrats!

 

Most dealer's dont have a "return policy" as you have signed contracts with banks and chances are the loan may be funded already.

Message 3 of 5
Anonymous
Not applicable

Re: I Got My First Auto Loan!

At that interest rate and balance financed, you will be paying tons of interest so you will really need to pay an extra $200 a month in principal if you hope to refinance.  I would put even more towards it and get that balance down quickly.

 

Congrats on the truck -- now work extra self employment hours to pay it off in 24 months!

Message 4 of 5
Appleman
Valued Contributor

Re: I Got My First Auto Loan!

Congrats on the new truck. Unfortuantely, there is no buyer's remorse period.

 

I hope you enjoy the truck but want you to take a look at your paperwork on the warranty (service contract). This is often a HIGH profit area for a car dealership.

 

First, is it from the manufacturer of the truck (A Ford warranty on a Ford truck)? My guess is that this is an after market warranty. If you did not negotiate on the price of the Service Contract unfortunately you paid too much.

 

Also, look up the warranty company on-line and see what customers who have tried to use the warranty have said.

 

There are other extended warranty companies out there and you may be able to find a better deal, some even at 0% interest.

 

The problem is you are financing the extended service contract until  the end of your loan period. See my rough example below....

 

$25,000 loan at 17% over 5 years is a total of $37,279 with payments of about $621.

 

If you went and got a refund today on your extended service contract (usually free to do in first 30 days, and refund goes to loan company not you. This means payment stays the same) of say $2,000....

You now have a $23,000 loan at 17% over 5 years with a payment of $621 but now you are only paying $32,658 and are paid off 10 months early.

 

So the extended service contract when financed with the car over the 5 years really costs you $4,621. If you paid more for the warranty or havea longer term it will cost you even more.

 

 

Message 5 of 5
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