Tesla - Do you think I can get a loan?

[Anonymous]

Looking for feedback from the community and experts.  I am looking to buy a Tesla Model X.  Spec'd price is $110k.

Gross monthly income: $19k ($11.5k base earnings, $7,5k commissions).  I am not sure how banks handle commissions since the math can be fuzzy.  Some months I bring home an additional $2k from commissions, others I bring home an extra $20k.  My target is $230k annually, but in the 5 years that I have been in this job, I have netted around $10k - $30 over every year.  I should note that I am married, and this is my monthly income.  My wife does not work but is considering getting a job.  She will not be on this loan for reasons that I explain later.

Monthly expenses:

Mortgage: $2200

Car Loan 1: $500

Car Loan 2: $500

Vacation Mortgage: $500

Personal Loan: $500

Total $4200 (Monthly DTI = 22%)

The personal loan is going away in 3 months, so that will help.  One of the cars is a lease, the other is financed.  I am estimating that the Tesla will add around $1500/month, bringing my total up to around $5200, or 27% monthly DTI.

I have around $28k in credit card debt, and I am aggressively paying it down, so extra money every month goes towards that.  My wife also has close to the same amount ($30k), so most (if not all) of our extra money every month goes to paying down that debt.  Due to that, we haven't really saved much money, as we have been more focused on getting rid of the high-interest debt.  Bad spending habits when we were younger have caught up with us.  Fortunately, we have the means to eliminate this debt, but not fast enough.

My credit score is hovering at 630 (FICO 8), or 640 for the big 3.  I am hoping to have it up to around 660 in around 6-8 months.  My wifes' score is lower than mine by around 20 points, and I am hoping to have her debt free in 9-14 months.  The issue is I want to get the Tesla as a surprise anniversary gift for my wife, and that is around 4 months from now.  For this reason, she will not be a co-signer on the loan.

Lastly, down payment.  I would love to get through this with as low as a down payment as possible.  I am thinking $5k - $10k.  Any money I devote to the down payment is money taken away from paying off debt, and that means it will be harder to get that credit score up by my target deadline.

I haven't given much thought to purchasing vs lease.  I have never purchased a car this expensive before, so I really don't know enough to formulate a good opinion.  Logic seems to dictate that if I am spending that much per month ($1500) then I should purchase it and at least have something to show for the money.  The other side of me knows that cars depreciate so fast, it might not matter.  There is also the idea that a lease might be easier to get for someone with my credit score, but I don't know if that is a true statement or not.

So what do you experts think?  Thanks in advance.

[whocares]

You will probably get similiar responses as denoted in this recent post:

http://ficoforums.myfico.com/t5/Auto-Loans/Need-Approval-Assessment-Chance-Please/td-p/5186163

[Anonymous]

Thanks whocares. It looks like you and I are in the same boat, with slightly different situations. I appreciate you sharing your story, and I am interested in hearing any more feedback that you might have as it becomes available.

[Anonymous]

I got approved recently with scores in the 740s for the Model X. However, it was not as easy a journey as many in the Tesla forums say it is. Normally a person buying a Tesla has decades of credit history with a bunch of auto loans. My situation was different. I make 11K base per month before taxes and have 1 auto loan (30K) that I'd paid off 2 months before applying for the Tesla.

These were the rates I got:

Info: Income: 11K/month(135K/year), DTI: 19%, scores: 740s, credit history: 5 years, auto loans: 1 (paid off)

PenFed: 100K@3.24, 72 months. Their lowest rate. 2 year tax return, final MVPA from Tesla.

TechCU: 99K@2.49, 72 months. Their lowest rate. Paystubs, final MVPA from Tesla.

Logix CU: 90K@2.99, 72 months. Counter offer citing lack of loan experience, required bank statements.

Star one CU: 60K@2.24, 72 months. Lack of credit experience, asked for co-applicant.

PatelCo CU: 55K@2.49, 72 months. Lack of credit experience.

Through Tesla lending:
Wells Fargo: Max 50K@1.49

TD Bank: Max 50K@4.74

US Bank: Denied

Most of the banks looked at three primary facets of credit in the case of the Tesla:

1. Credit score

2. Income

3. Loan experience with large amounts

I'll explain what I did to ensure I got my scores to acceptable levels. Like you, 2 months prior to applying for financing on the Tesla, my scores were in the 620s and I was 22K in credit card debt and paying it down. I decided to get a personal loan for 20K and pay it off in one go. The key was to zero-out three of my four CCs with balances on them. As a result, in the two months that followed, my score went from 630 -> 680 -> 740 (add or subtract a few based on which Bureau). I don't know how it all works but it worked for me.

Looking at your info: Scores in the 630s but with 230K in income means you'll probably get financed if you put a large (20-30%) downpayment on the car for less than ideal APRs. There might be a few CUs out there that don't look at your credit score if you can give a solid proof of income. Also, if you placed an order for the X today, you most likely will not be getting delivery until June. They ask you to apply for financing 2 weeks prior to delivery. PLenty of time to get your affairs in order to get an approval. 

My suggested list of CUs for you:
Digital federal credit union (Financed 30K@7.99 on my first car when I had 4 months credit history and a score of 589)

Unify financial credit union (Known for financing full MSRP on the car)

Logix CU (Income was their biggest roadblock, might not be an issue for you)

Let me know how it goes. 

[Anonymous]

Puritan, this is amazing feedback, thank you! Ever since I posted this, I have been debating the idea of getting a personal loan to just pay down my credit card debt. I talked to a few banks and the best I could get was $22k, which puts me a solid $6k-$8k short of paying off everything. Still, hearing that is what you did makes me think that is my best option. I was concerned that adding a $20k loan would reflect poorly on my credit, even though I am removing the recurring credit card debt from my report. It sounds like this wasn’t an issue for you?

Do you have any suggestions for credit unions or banks for the personal loan? I have tried a lot of the online ones (LendingClub, etc.) but no one will go over $22k. I don’t know that it matters, as it gets me close enough, but I would like to get more if I could.

Also, who did you end up picking for financing from the list, and can you share the rate and how much you put down? Our situations are very similar, so it is a good gauge for me. Thanks!

[Anonymous]

I went with Upgrade. (Upgrade.com) for my personal loan. Online application, one phone call to verify identity and income and the money was in my bank account in 2 days. The rate was a steep 15% but since my sole goal was to up my credit scores, I took the hit. (The CC interest rates were anyway ~18%). 

The credit score algorithms are pretty straightforward. Revolving credit = bad, installment credit = good. When the personal loan reflected on my credit report, I received a 5 point boost but when my previous auto loan dropped off my report after paying it off, I saw a 20 pt drop across the 3Bs. When my credit utilization on 3 CCs went from ~90% to 0%, I got the biggest boost. I still had a 10% util on my 4th CC. 

Another thing I did was to pull the 3B report from myFico.com and simulate the scores. The simulations were pretty bang on to what happened in reality. The scores were also the same as the ones pulled by the lenders.

The Model X 100D out the door was 114K. The MSRP is $103,750 and the remaining are taxes and fees. I went with the 99K@2.49 offered by Tech CU. CUs don't like it when you ask for 6-digit loans, hence the 99K. I also spoke with atleast 15x loan officers at a lot of CUs, explained my situation in detail to them and got their feedback before I started spraying my applications everywhere. All applications were submitted online immediately followed my calling the CU for the decision. I did not wait for response emails. Time from my first application to the last was just 72 hours, but the groundwork and research that preceded it was 2 months.

[dabrian]

Why not just pay off your cc debt first including the wife's? With your income it would be a piece of cake to knockout in a year not to mention you would qualify for the best rates on the Tesla with your greatly improved credit score and lower DTI.

[Anonymous]

@Dabrian, good question, and that is the smart and responsible thing to do.  In my case, I want to get my wife this car as an anniversary present, so I am just trying to work around the timing of that.

Trust me, if I didn't have the salary I have, there is no way I would try something like this.  But the reality is, I can afford it, and if paying a little more now means that I can get the car on my timetable, then I am willing to do that.  Hope that doesn't come off as cocky, I am not trying to be.

[Anonymous]

Just an update, for everyone's benefit.  I reached out to Tesla, just to see what they had to say.  I was denied for financing, which wasn't a big surprise (I kind of expected it), but I was approved for a lease.  

The details are 15k miles/year @ $1407/month, with %10 down ($10,800).  The only thing I am trying to negotiate is a 24-month term, as opposed to 36.

As I mentioned in my original post, I have not done enough homework on finance vs lease for a car that costs this much.  My other two vehicles are both under $50k, and one is a lease the other a purchase.  We tend to cycle through vehicles every few years, and I imagine it will take 4 years to get into positive equity on this car (I don't have any hard math to back that up).  So given that, and the fact that I was approved for a lease, I am strongly considering that option.  The alternative option is adulting like dabrian said, and just pay off my debt either over the next 12 months, or more likely, with a personal loan.

[Anonymous]

So almost $60 in cc debt and you want to lease a not needed item. Just laughable