Need some advice on auto loan application

[ChadLee]

Hi all,

I just came to this forum today which I find really helpful. So I wish to get some really helpful advice here from this post.

I am planninig on purchasing a new car through auto loan. My situation is that I started building credit a month ago, and my credit score is so far so good, around 690. Here comes my question. Since I have short credit history, should I apply for an auto loan first, or should I negoiate with dealers to get a better price first? Due to my short credit history, I guess multiply auto loan application could probably have an impact on my credit. If I negotiate the price with a dealer first, what I am afraid of is that I probably won't even get a car loan with good APR. What should I do first? 

Thanks in advance for any advise. 

Chad,

[aj1901]

How short is your credit history? I would always negotiate a price first. Just tell the dealer there is no point in running your credit if you cant get the car you want to a price of your own liking, because realistically if he cant do that there really is no point for the inquiry on your credit. And dont budge when he says "well lets just see what you qualify for first." I would try a bank or credit union for a loan on the car first though. You cant trust a dealer to give you the most accurate information regarding what type of rate you can qualify for. If you go in to the dealer before hand knowing what you qualify for, you can always give the dealer an opportunity to beat your current rate which he will want to because they will make more money if you finance through them. Also remember dealers used a "auto enhanced" score which can differ quite a bit from your FICO score.

[ChadLee]

Hi Aj,

So you would recommend me at least try to negotiate the price of my own liking first? I am really skeptical about finance through dealers based on my research so far. So although a dealer can offer a really competitive APR, I would still go for a bank or CU loan. I almost lose my faith in dealers.

By the way, my credit history is only 1 month.

Thanks,

Chad

[DaniBananiie]

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@ChadLee wrote:

Hi Aj,

So you would recommend me at least try to negotiate the price of my own liking first? I am really skeptical about finance through dealers based on my research so far. So although a dealer can offer a really competitive APR, I would still go for a bank or CU loan. I almost lose my faith in dealers.

By the way, my credit history is only 1 month.

Thanks,

Chad

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Chad,

  I'd get pre-approved first so you know what you can and cannot afford first. Once you're approved you can haggle them down to a price that you're comfortable with, and what's in your budget.

[ChadLee]

Morninig Dani,

Thank you for your response. I am new to auto loan,so I am not familiar with how the auto loan application works. Getting pre-approved first means getting a quote from a bank or CU about the amount of loan that you are eligible for, does it?

Chad

[HoldingOntoHope]

If your credit history id only 1 month then you are probably not going to be able to secure an auto loan on your own unfortunately. It takes a minimum of six months of at least one account reporting to even be able to generate a FICO score. Without a score the bank or CU has nothing to evaluate your risk level. If you seriously need an auto loan right now you are most likely going to have to get a co-signer with established credit. You can always refinance the loan into just your name once you have established some history for a lender to judge you on.

[ChadLee]

Hi, HoldingontoHope

Are you sure that 1 month of credit history wont secure an auto loan? By auto loan here, do you mean  a loan at FICO specifically or loans in general? Now, I am really worried that I can't even get a car loan. I dont have a co-signer available at present. What should I do then?

[HoldingOntoHope]

Lenders rely on FICO scores and reports to determine if someone is a good candidate for a loan. FICO can not generate a report or score until you have at least one account with at least six months of reported history. Unless you have older accounts in your credit files that you neglected to mention then you essentially "Do not exist" as far as credit scoring is concerned at this point.

The best thing to do would be to keep paying on your credit card monthly. And it would be in your best interest if you could find a bank or credit union that would offer you either a secured credit card as a second account or even better if your bank or CU was willing to make a secured personal loan against your savings. This would report as an installment loan and aid in your credit building. I assume you have money in the bank that you were intending to use as a down payment on any vehicle purchase.