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Revelate
Posts: 8,891
Registered: ‎12-30-2011
Re: looking to finance a vehicle.
[ Edited ]

alessandrom wrote:
Thank you so much for the opinions I will definitely explore my options and make a decision based on it really do need a vehicle though and some cc lenders have turned me down for not having any other loans other than ccs so what I might do is finance giving about 50 percent down payment is this a good idea? By the way your words are so helpful you guys should be getting paid for all this!!

Well, if it were me, I'd put down the minimum downpayment required, and then if it were a higher interest rate than I was willing to tolerate, start kicking extra cash to it above your regular payment.

 

Alternatively if I got a great rate, I'd likely do something else with the cash.  Being cash flush is never, ever a bad situation to be in.  

 

There's a few reasons for the first approach: some lenders will push your payment date way out into the future if you pay extra and so you can maximize your tradeline length with minimal interest paid... also if you put down 20%, then kick in 30%, it dramatically changes your amortization curve and quite often larger loans have smaller (may not be significant) APR's associated with them if you look at the various auto lender financing tiers.  

 

I could pay off my current auto loan immediately but it's not hurting me much financially, so I'd personally rather have the increased length on the tradeline from a FICO perspective; that said, for when it comes to getting pretty pre-mortgage, I will absolutely be paying it down to under the 10 month remaining mark to get it excluded from a DTI calc, or maybe pay it off completely depending how much free cash I have.  Free cash is a good thing when it comes to mortgage underwriting.

 

Edit: if this is your first auto loan, you're going to want to look at re-financing it most likely in the future anyway; not a big deal, just be aware that the initial interest rate isn't likely what you're going to get later... in my case even with my shoddy credit report I went from 19.35% -> 5.99% on a refinance, so it can be done moderately easily.  You may qualify for a sweetheart dealer financing deal anyway depending on your scores which I suspect are better than mine now, and almost assuredly better than what mine were initially.  Oddly, from a pure FICO perspective with the way WFDS does their payment date, I would've kept the 19.35% APR had I known I was going to stumble into additional cash for a few months... if I had cash to just buy the car outright, personally I'd play stupid FICO tricks in terms of tradeline farming :smileyhappy:.

Starting Score: EQ 561, TU 567, EX 599* (12/30/11, EX lender pull 12/29/11)
Current Score: EQ 04 679, EQ 8 708, TU 711, EX 702* (07/14/14, EX older)
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