Trying to figure some things out....

[Anonymous]

Hello

A newbie here trying to figure out some things.

I am looking to buy a new car around October 2012. I am in the process of cleaning up and improving my credit scores (the average between the 3 is around 615). My current debt is 2 small cc and my car payment to drivetime. I also have a deferred student loan. All of the "bad" accounts (repo and bankruptcy discharged in 2004) are either paid or old and still showing on my reports.

I am looking to borrow about $20,000 for a car and will have a down payment of $5000. I am worried about the debt to income ratio and if my student loan balance will be a factor. I currently make $49k/yr and know that I can afford a $500/mo payment. But if a payment for student loans is factored in my DTI ma be over 50%. Considering my scores are still low I don't know if I would get favorable financing. I hope this all makes sense and appreciate any responses.

[xiownthisplacex]

Depending in what state you live in, you can expect an APR anywhere from 10.29% to 16.78%.

With $5,000, you should be fine to get a new vehicle with an MSRP of $22,000. But in my opinion, you should get something that is less, because of the high APR that you will get and trade it in a couple of years. As long as you pay on time and keep everything else in good standing, you should qualify for a much lower APR then.

[Anonymous]

Thanks. I live in TX and the rate can be as high as 18%. My rate with Drivetime was 15% so I am hoping the new rate will be much lower.

[pizzadude]

Will any of your old negative accounts from 2004 ( like your repo ) still be reporting in October ? If they drop it is possible that your auto enhanced FICO® score will be better than your classic FICO® score. Also if you can shop around at local CUs or banks you might be able to qualify for a better rate than the dealer will offer.

[Anonymous]

With deferred loans many banks will do 1% of current balance and they do that if your loan payment start is less than the term of your loan. For example, if you owe a total of 19k and your payments will start in 2 years, they would see your payment as $190 and it would be counted because your loan term is 10 yrs and you only have 2 yrs until your deferment is up.

[FrugalRican]

I think the fact that you are willing to put down 25% is going to help out tremendously on you getting one in the first place.

[Revelate]

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@FrugalRican wrote:

I think the fact that you are willing to put down 25% is going to help out tremendously on you getting one in the first place.

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+1 You're going to be absolutely fine.

FWIW, DTI isn't calculated as you have intimated in your post: it's your total monthly payments, divided by your total monthly income (post tax presumably).

[Anonymous]

A follow up to my previous post. I was approved through Capital One for a loan up to $32k at 6.9% I thought that was pretty good since my credit score was 613 when I applied. I decided on a Hyundai Tucson. The dealership was able to get me approved through Hyundai Motor Finance with a 4% interest rate! My next goal is to continue to work to  get my scores back in the 700's!