@StartingOver10 wrote:
This may sound harsh but OP, I see three issues: 1) your current income 2) your credit and 3) your down payment. If you gross income is less than $1500/month you are going to have an especially hard time getting any auto loan. Take a look at the stickies above and IIRC the minimum monthly income lenders want to see is $2000 (at a dealership).
I think you would be better off going to a credit union rather than using the dealership. The dealership will hit you hard on the rate because they think you don't know any better AND because the dealer gets a larger commission on the back end by hitting you hard on the rate. You can certainly find out from the cu what their minimum requirements are for an auto loan (income and credit) before you have them pull your credit record.
From your posts you say the dealer 'ought' to accept $1500 - but you aren't taking into account your credit and mitigating the lender's risk. The dealer has to sell the deal to the lender. The best way to do that is to have a larger down payment. That's why I say you would be better off going to a credit union. They will let you know how much risk they are willing to take on with your deal. I suspect you will need to put down 25%+ or more to get any decent rate and the loan itself would have to be less than $10k. In fact, if your actual gross monthly income is $1500/month or less, you would be better off not having a loan at all as it very likely will create a hardship for you.
It might be best overall for you to get on your feet first by working on your credit first. Get a beater for a year or so until you get the credit straightened out and a decent down payment. In the meantime put away a solid 'car payment' into savings each and every month so by the time you are ready you can show you have the ability to pay plus you have a good sized down payment. JMO.
You are right! My last car loan, FICO was 615 (Experian) in late 2006. I got 13.5% interest, put down $1,500 and the car was $11,500. My income was $1,500 and I had to show proof of income.
It wasn't an undo hardship that did me in, just a series of decisions that caused the lender to panic and take the car back from where it was being repaired. I had continued to make payments until they wanted back to back payment in order for me to get the car back and THAT is undo hardship.
That said if I had discovered Dave Ramsey earlier, I would had that emergency $1,000 savings and could have easily dealt with a series of problems that were money related but not because I had a car I couldn't afford, just not much margin for error.
So I am with you, I would encourage the OP to take a deep breath and find the cheapest source of transportation possible. I would build a $1,000 emergency fund (Baby Step #1). From there based on your hourly wage it looks like your gross income is $1360. My hours were cut around the Financial Crisis so I was making $1200 NET and was still able to make my payment with plenty of room to spare.
$1360 x 12 = $16,320
Most banks will assume even if you live at home, you pay $400 a month for rent; I am not even talking about other expenses. That leaves $11.520 or less than a $1,000 a month in real terms.
That means you need a cheap car and a low interest rate. If all you can come up with is $1,000; as I said before I suggest you wait, you'll need 20-25% downpayment to even get a realistic payment.
Based on what's left, you need a payment about $150, because your expenses for just the car will run at least $200. My old job was 19 miles one way; I spent $170 in fuel which was premium, prices are similar today. My insurance was $110 a month and I never set aside money for maintenance. It wasn't a big deal as long as I watched brake lining because replacing pads is cheap, but replacing pads and rotors is expensive...
The amount you need to borrow is $10,000; maybe a bit more. They will allow a bit more if you get a new car because they will stretch the payments out.
Buying a used car only ensures you get a car with a bunch of miles on it, no warranty just to say you didn't buy a Chevy Spark or Kia Rio? Also doesn't your employer offer discount pricing on cars?
I was lucky, the car I wanted was only 3 years old, just out of bumper to bumper warranty but still had the majority of the drivetrain warranty. It was also a performance car (SRT-4) so I didn't mind getting one used.
Getting something like that used IMHO fine, getting Toyota Corolla used?? NO WAY.
