topic Re: Should I Wait or Apply in Auto Loans

Should I Wait or Apply

Anonymous — Wed, 16 Jun 2010 10:16:58 GMT

I just checked my EQ Fico score and its 730, I have four credit cards with 2 credit cards with 9 balance and the 1 with a small balance and the other one 2500/5000 balance.

Our Toyota dealer has a special of 2.9% for per-owned vehicles for tier 1 and tier 1+ customers. I called them and asked what is their credit score range and they said 690 and above for tier 1. I also read somewhere that they pull EQ reports but when I asked him he said that it could be from any three.

What do you guys think. Should I apply for the auto loan through them, will I get approved.

Re: Should I Wait or Apply

Lel — Wed, 16 Jun 2010 17:19:56 GMT

@Anonymous wrote:

I just checked my EQ Fico score and its 730, I have four credit cards with 2 credit cards with 9 balance and the 1 with a small balance and the other one 2500/5000 balance.

Our Toyota dealer has a special of 2.9% for per-owned vehicles for tier 1 and tier 1+ customers. I called them and asked what is their credit score range and they said 690 and above for tier 1. I also read somewhere that they pull EQ reports but when I asked him he said that it could be from any three.

What do you guys think. Should I apply for the auto loan through them, will I get approved.

I think you're saying that two cards are showing balances - one has a small balance and the other is at 50% utilization. What is your overall utilization on all 4 credit cards?

690 seems too low to be Tier 1 financing. When I bought a Toyota last year, one dealership showed me the incentive sheet, and I'm pretty certain that Tier 1 was at 720 or better, and Tier 1+ was >740. This was for a new car purchase, however. I suppose there could be different criteria for used cars, but I'd double-check with them about that.

When I finally purchased a car, the dealer pulled the Experian - Fair Isaac Auto Loan Model V2, which has a scale of 250-900. This is an auto-industry-specific version of FICO, which gives added scoring weight to prior auto purchases.

With the information that you've provided, it's not possible to definitively say whether you'll get approved for loan. There's more to an approval than just your FICO score. But assuming that your income can support the monthly payment, and assuming that you don't have any recent negative credit history that would hinder approval, then yes, with your score you would probably get approved for a loan. But you may not get the best financing rates, because of the question of what the actual Tier 1 cutoff might be.

It would be a good idea to get financing from your bank or credit union before negotiating the price of a car. That way, the dealer can't use the financing package as a tool in the negotiations. Your bank might approve you for an interest rate of 5%. If Toyota comes back with 6.9%, then you'd just go with your bank's financing. If Toyota comes in at the desired 2.9%, then go with that that.

Re: Should I Wait or Apply

Anonymous — Thu, 17 Jun 2010 04:38:46 GMT

@Lel wrote:

@Anonymous wrote:
I just checked my EQ Fico score and its 730, I have four credit cards with 2 credit cards with 9 balance and the 1 with a small balance and the other one 2500/5000 balance.

Our Toyota dealer has a special of 2.9% for per-owned vehicles for tier 1 and tier 1+ customers. I called them and asked what is their credit score range and they said 690 and above for tier 1. I also read somewhere that they pull EQ reports but when I asked him he said that it could be from any three.

What do you guys think. Should I apply for the auto loan through them, will I get approved.

I think you're saying that two cards are showing balances - one has a small balance and the other is at 50% utilization. What is your overall utilization on all 4 credit cards?

690 seems too low to be Tier 1 financing. When I bought a Toyota last year, one dealership showed me the incentive sheet, and I'm pretty certain that Tier 1 was at 720 or better, and Tier 1+ was >740. This was for a new car purchase, however. I suppose there could be different criteria for used cars, but I'd double-check with them about that.

When I finally purchased a car, the dealer pulled the Experian - Fair Isaac Auto Loan Model V2, which has a scale of 250-900. This is an auto-industry-specific version of FICO, which gives added scoring weight to prior auto purchases.

With the information that you've provided, it's not possible to definitively say whether you'll get approved for loan. There's more to an approval than just your FICO score. But assuming that your income can support the monthly payment, and assuming that you don't have any recent negative credit history that would hinder approval, then yes, with your score you would probably get approved for a loan. But you may not get the best financing rates, because of the question of what the actual Tier 1 cutoff might be.

It would be a good idea to get financing from your bank or credit union before negotiating the price of a car. That way, the dealer can't use the financing package as a tool in the negotiations. Your bank might approve you for an interest rate of 5%. If Toyota comes back with 6.9%, then you'd just go with your bank's financing. If Toyota comes in at the desired 2.9%, then go with that that.

+1.

I am fresh from the dealership. You need to put some power in your own hands. Walk in with outside financing. Then, when they ask you about payment and whether you'd like dealer-arranged financing, you can say, I've got my own, but if you've got a better deal, then bring it on.

A $20,000 60 month 5% loan generates $2,645.48 in profit to the lender. They'd like that profit. Or even a piece of it. If you've got the power to take away ALL of that revenue, then they may settle for less to get any at all.

On the other hand, if they know that you either accept the terms they give you or walk, then they have no incentive secure you a better loan, and every incentive to secure you a higher loan.

I took in my $25,000 auto draft, from my CU loan of 5% and told Honda I would love to hear what they could do for me. I also applied online to Honda and was turned down. But get this. I told them that, and told them if they could work some magic with Honda financing, then I would certainly consider going with them.

That didn't happen. But get this, the finance person actually came out into the parking lot as I was 1 minute from driving away and said they pulled some strings and got me approved for 5% for 72 months. I said no and thanked her kindly. But get this. That loan deal was potentially worth $3,898.84 to them. Heck yeah they'll chase you into the street for it.

The point being, having outside backup financing changes everything. It puts you in the driver's seat, for a change.

Re: Should I Wait or Apply

Anonymous — Thu, 17 Jun 2010 10:22:05 GMT

I don't know if toyota has a different tier system for pre-owned, but he said 720 and above for tier1+

sorry about the typo, i meant 2 credit cards with 0 balances. No negative on credit history, credit history only 4 years old though.

income of about $60,000/yr, $2500 only balance on 1 credit card and 200 on another, no previous auto loans, or any other type of loan.

So even with a 730 score I should check with a credit union first?

Re: Should I Wait or Apply

ngerasimatos — Fri, 18 Jun 2010 22:28:03 GMT

You should be fine.

Re: Should I Wait or Apply

Anonymous — Thu, 12 Aug 2010 17:12:23 GMT

How about this... my beater is up on the mechanic's rack as we speak, looking at over $1K of repairs (far more than it's worth). I will have paid off all current credit cards (have been hacking away at them over past few months) AND outstanding bad debt in just 3-4 weeks' time.That's when I was planning to buy --mid-September after the credit report bump -- and was prepared to wait until October in case the baddies didn't drop off right away.

Would I get laughed out of the dealership/bank/CU looking to finance a modest enty-level car (not the lowest base POS Aveo, but maybe a Nissan Versa or similar) with TU approx 631 and EQ 630. 2-3 baddies under $2K total, 51% DTI? Or would I just get screwed with a $500 note at 72 months?

Obviously, it's better to wait--just not sure if the car can.

Thanks...

Re: Should I Wait or Apply

Anonymous — Fri, 13 Aug 2010 18:37:15 GMT

UPDATE: The beater is fixed; the mechanic says it's worth 3-4x what I thought it was worth and that it's a strong car with another 100K miles in it, easily. In other words, the question is moot and I can wait until all the outstanding debts go bye-bye.