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Valued Contributor
MovingForward_2012
Posts: 3,406
Registered: ‎12-19-2012
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Re: looking to finance a vehicle.

The same thing goes for an auto finance. He can get in way above his head there. I do see the secondary effect of a high lease. With that being, if OP can't get approved for the mortgage with the higher DTI because OP got into a high lease and the DTI blows away any option in purchase price, OP would have to find someone to take over his lease.

I could say there is a similar more definitive scenario with financing as he would have a higher monthly payment than a lease, which would affect his DTI more and push him to have to sell the car for the mortgage.

Granted, both scenarios cost money even though leasing requires two steps to get out. The lower monthly payment to start out with in a lease would probably get him by for longer and perhaps long enough to get an increase in salary that would help his DTI. But I think we do both agree that it is likely OP will crash and burn but a lease gives OP more time to save himself. There is a risk of not being able to find another leaser as with luxury dealerships, they are real picky about subletting the lease and some won't let you do it at all.
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Valued Contributor
MovingForward_2012
Posts: 3,406
Registered: ‎12-19-2012
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Re: looking to finance a vehicle.

And yes, you are correct that if he can't sublet the lease, he would have to buy it out, which would be very costly.
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Valued Contributor
MovingForward_2012
Posts: 3,406
Registered: ‎12-19-2012
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Re: looking to finance a vehicle.

That is why I think OP needs a longer payment history around his belt for an amount equal to or close to the lease payment he wants to assume so that he is comfortable he can make the payments for the full lease term and also to OP needs to make sure his job is stable too.
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Revelate
Posts: 9,657
Registered: ‎12-30-2011
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Re: looking to finance a vehicle.

[ Edited ]

The mortgage is several years out.  The OP has enough cash on hand (or possibly more) to put down a 50% downpayment on the car... which in the vast majority of cases means the OP doesn't have a cash flow issue.  Any downpayment over 30% is completely superfluous to the point of assuring auto-loanage assuming there's any rational expectation the payments can be made.  If two paystubs can be produced, the approval currently is just not a problem, and there's more than enough time to make things pretty pre-mortgage either through refinancing it or throwing money at it.

 

We're seriously overthinking this :smileyhappy:.

 

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Valued Contributor
MovingForward_2012
Posts: 3,406
Registered: ‎12-19-2012
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Re: looking to finance a vehicle.

Well if the mortgage is two years out, she could get a 24 month lease. That way if the monthly payment is too much for the mortgage, she has the option of not releasing but most lenders assume you will continue to lease.

I have never heard of anyone putting 50% down on a lease.
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Revelate
Posts: 9,657
Registered: ‎12-30-2011
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Re: looking to finance a vehicle.


MovingForward_2012 wrote:
Well if the mortgage is two years out, she could get a 24 month lease. That way if the monthly payment is too much for the mortgage, she has the option of not releasing but most lenders assume you will continue to lease.

I have never heard of anyone putting 50% down on a lease.

The lease conversation has been between you and SO10 :smileyhappy:.  I'm not certain this was ever in the OP's plans.  

Starting Score: EQ 561, TU 567, EX 599* (12/30/11, EX lender pull 12/29/11)
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StartingOver10
Posts: 4,422
Registered: ‎03-06-2010
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Re: looking to finance a vehicle.


Revelate wrote:


The lease conversation has been between you and SO10 :smileyhappy:.  I'm not certain this was ever in the OP's plans.  


True!

Valued Contributor
MovingForward_2012
Posts: 3,406
Registered: ‎12-19-2012
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Re: looking to finance a vehicle.

I know SO10 brought up the statement that a lease would be worse...not sure why if OP wasn't looking to lease. So I just happened to respond to a side comment.
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New Contributor
alessandrom
Posts: 72
Registered: ‎12-20-2012
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Re: looking to finance a vehicle.

Thank you all for the input. I'm a small business owner and make little over 250k a year. I was looking to finance a car because I thought perfect payment history would look great upon purchasing a home two years from now when I improve my scores. I can certainly buy a car cash like I did with my current vehicle, but I doubt that will do anything towards my credit scores. Should I lease? Or finance any other opinions? You guys have been very helpful thank you



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Revelate
Posts: 9,657
Registered: ‎12-30-2011
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Re: looking to finance a vehicle.

[ Edited ]

alessandrom wrote:
Thank you all for the input. I'm a small business owner and make little over 250k a year. I was looking to finance a car because I thought perfect payment history would look great upon purchasing a home two years from now when I improve my scores. I can certainly buy a car cash like I did with my current vehicle, but I doubt that will do anything towards my credit scores. Should I lease? Or finance any other opinions? You guys have been very helpful thank you

I'm of the opinion auto loans do look good in general; SO's comment was that open auto loans will be factored into your DTI calculation which could hamper your ability to get a house when they calculate the ratios.  Your rationale is almost entirely the reason I financed my car, would've been easy for me to pay cash for a reasonable car but I needed improvement in my scores.  I don't have an income problem (except I can't pay cash for a 700K house around here, stupid CA prices) I have a credit problem.  Sounds like your situation is analogous though perhaps not quite as bad as mine was.

 

I was looking your situation from the perspective that you could pay cash now, the interest probably isn't that big of a deal compared to the mortgage later if you can move up a tier, and you can always pre-pay the loan down below the minimum amount that it'll be factored into DTI calculation anyway. SO is admittedly much, much more savvy than I am when it comes to mortgage lending, but I think you have the available resources to play silly FICO games to try to setup your credit profile for later goodness. 

 

I certainly wish I'd financed a vehicle much earlier in my own life, I paid cash for everything till age 36.  I was once labelled as the dumbest smart kid ever when I was 14, not sure about the smart part anymore, but dumb is probably an appropriate label looking at that situation.  Leasing meh, unless you want to flip your car every couple years it doesn't make sense.

 

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)
Goal Score: 700 on EQ '04 (01/01/15)


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