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Contributor
BearOSO
Posts: 96
Registered: ‎10-03-2012
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I want to buy my first car but...

[ Edited ]

So I have been looking around but do not know where or how to start. 

 

I was wondering if a bank or lender would offer an auto loan for a used car (not trying to push my luck with a new one) with my 12,000 a year income, a co-signer (mother) and a downpayment from anywhere between 7-12 thousand. 

 

I want to take a loan out but have no "income" on paper except for a VA disability check I receive of 1009 per month. I am a full time student and get paid a sizeable amount for some one like me through the GI Bill but the cost of living in NYC takes its fair share every month. (Not sure if I should post specific figures)

 

I initally had 11000 in savings but Hurricane Sandy easily took ~4000 grand in one shot. 

 

 

In Feb. a CD I have matures and will immediately cash out for a little more than 5000 that will go towards my savings for a car. 

 

Do you think it is feasible? I was thinking of maintaining my savings and just buying a used car cash, but after some number crunching I think I would be better off with a loan and paying it off as quickly as possible. 

 

Any options out there? Or should I join the savings garden?


Starting Score: 656 12/2012
Current Score: FICO (USAA pulled) EXP:678 | myFICO EQ:676 | myFICO TU:685 | App free since 2/1/2013

Valued Contributor
MovingForward_2012
Posts: 3,406
Registered: ‎12-19-2012
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Re: I want to buy my first car but...

You will save money buy buying a car cash (interest free), hands down is the way you should do it if you can. If you can't find a decent car for cash, then put down as much as you can on the car but DO NOT deplete your emergency fund. There have been a few who were able to get financed on a fixed income such as yourself but they will want to make sure you have the disposable income to make payments. How much car can you afford monthly? And what are your scores?
Cards: Orchard Bank ($1100) | Cap1 Cash Rewards ($2500) | Chase Freedom ($1000) | Best Buy ($2500) | Discover It ($1000) | Barclay Rewards ($2500) | Current scores: EX FAKO: 684, CK TU: 649, FICO EQ: 680, FICO TU: 698, FICO EX: 658 Happy Homeowner Since 2/6/13! :smileyhappy: Last App: 4/5/13 Gardening until July 2014
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Revelate
Posts: 9,008
Registered: ‎12-30-2011
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Re: I want to buy my first car but...

[ Edited ]

My personal opinion: I'd take a loan.

 

You're sitting with 7K in the bank; I wouldn't want to spend that all in a shot to buy a used car as that literally would be depleting your emergency reserve.

 

I don't know your credit profile, but money is cheap these days; however, cash reserves are not.  You've stated you're a student currently, so there's a good chance your income will increase when you enter the work force.  As a result, I think from a personal finance perspective savings matters more to you right now, so I'd take a loan that you can afford and keep more of your cash reserve intact.  If you can put down 20% you'll be fine, and 30% you're absolutely golden... and that shouldn't be a problem if you're buying a cheap used car.

 

To say nothing that financing a car is a good thing on one's credit reports anyway... especially when it comes to buying a car somewhere down the road when you have more income and are potentially seeking a larger loan.

 

That all said, what do you need a car for in NYC anyway? :smileyhappy:

Starting Score: EQ 561, TU 567, EX 599* (12/30/11, EX lender pull 12/29/11)
Current Score: EQ 04 673, EQ 8 707, TU 720, EX 702* (09/02/14, EX older)
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Valued Contributor
maiden_girl
Posts: 2,098
Registered: ‎12-29-2011
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Re: I want to buy my first car but...

Double agree! I would not deplete your emergency fund for a car--you may find yourself needing some extra cash and not having any. Check into financing options for fixed incomes. There are some out there. Some banks will work with you. Don't tell them how much money you have b/c they will try to get you to put everything in your savings down.

The truth is out there...
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Valued Contributor
MovingForward_2012
Posts: 3,406
Registered: ‎12-19-2012
0

Re: I want to buy my first car but...

Not sure if 1,000 a month is enough income though. The reason I am against the loan is because the OP said that most of the 1,000 is gone at the end of the month which means he will be using his savings to make the car payments which means it will cost twice as much due to the interest which doesn't make sense. I'm not sure how much his savings is growing given most of his income is taken per month.

I say getting a loan is taking a credit risk. What if an emergency comes up where you have to use your savings and then began to run out of car payment money? Financing a car banking on a job is not a good way to go about it. What if there is an employment delay? What about student loans that will need to be paid in the future?

I'm very conservative when it comes to finances to protect the credit I spent 10 years rebuilding.

The OP's disposable income does not seem sufficient to warrant a loan. I would buy cash with 50% of your savings and be done with it. But as someone else said, you live in NYC so it doesn't make sense to get a car right now. I would wait until after graduation and continue taking public transportation.
Cards: Orchard Bank ($1100) | Cap1 Cash Rewards ($2500) | Chase Freedom ($1000) | Best Buy ($2500) | Discover It ($1000) | Barclay Rewards ($2500) | Current scores: EX FAKO: 684, CK TU: 649, FICO EQ: 680, FICO TU: 698, FICO EX: 658 Happy Homeowner Since 2/6/13! :smileyhappy: Last App: 4/5/13 Gardening until July 2014
Contributor
BearOSO
Posts: 96
Registered: ‎10-03-2012
0

Re: I want to buy my first car but...

Wow! Thank you for the input ladies and gents. I am mostly leaning towards the car out of personal convenience than anything else (my dog is getting bigger!)

 

To make things clear, the savings I am talking about is what I have set aside for a car or some large purchase. I have a separate account for rainy days or broken bones and some CDs from years back when 5% was THE number – few months away from maturity.

 

I easily save over 1000 a month; I know I am fortunate for having this option in this day in age. I don’t know my credit profile yet, I successfully sent a GW letter to Chase for a late payment while I was oversees and I was given a green light and a warm-hearted letter from them so I am waiting a few months to see if this has any affect.

 

I made this post to see if anyone else has had any luck with this type of situation, and I am not talking about the satanic NINJA loans. I like to think myself as conservative but this is one area I am not sure about. I have been told of people getting mortgages with a fixed income like mine at reasonable rates (VA Home loan) and thought maybe there was something like that for Autos. I am not pulling the trigger anytime soon but I am definitely going to do my research and keep crunching numbers. At this point, I think holding onto my cash is best and if I have too, buy a beater – I dress like one, so why not. I am hoping my POS internships will amount to something eventually.  

 

I will shop around and explain my situation to banks and see if I find anything reasonable on paper. 


Starting Score: 656 12/2012
Current Score: FICO (USAA pulled) EXP:678 | myFICO EQ:676 | myFICO TU:685 | App free since 2/1/2013

Valued Contributor
MovingForward_2012
Posts: 3,406
Registered: ‎12-19-2012
0

Re: I want to buy my first car but...

Hi OP. thanks for providing more information and explaining yourself clearer. If you are working an internship, doesn't that provide extra income in addition to the VA benefits you are receiving? Internships often come with guaranteed employment at time of graduation. I know they pay about 1/2 what you'll make starting as a professional but internships are great starts into the professional world.

Given your finances and ability to save and current assets, I think you will be able to find a very nice non-beater.

It seems like you do have the collateral to take the risk so it now seems more feasible to me.

You need to obtain your FICO scores to get a feel for what you can qualify for. Don't walk in the dealership not knowing your scores.

The very best to you. Out family thanks you dearly for your service to our country. Have a Very Merry Christmas!
Cards: Orchard Bank ($1100) | Cap1 Cash Rewards ($2500) | Chase Freedom ($1000) | Best Buy ($2500) | Discover It ($1000) | Barclay Rewards ($2500) | Current scores: EX FAKO: 684, CK TU: 649, FICO EQ: 680, FICO TU: 698, FICO EX: 658 Happy Homeowner Since 2/6/13! :smileyhappy: Last App: 4/5/13 Gardening until July 2014

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