topic Re: Need Help Understanding Car Buying in Auto Loans

Need Help Understanding Car Buying

hapagrrl — Thu, 18 Aug 2011 05:46:23 GMT

Hello, Everyone --

Please forgive my ignorance and the length of this message, but I want to make sure I don't get and/or feel screwed when I buy a new car.

After being unemployed for nearly a year, I finally got a job! I'll be relocating across country. I don't have a car at all right now (it went up in flames this past Spring) and I'll definitely need one where I'm going. I'll rent a car for the first while so I can get to work, etc. I'm thinking I'll need to collect a paycheck or two to come up with a down.

The apartment I applied for pulled my score and they said it was 622 -- don't know which bureau. This means I've dropped a few point in the last few months (I ran out of my savings and paying bills on unemployment benefits is.. Challenging. I stayed on top of my bills as best as I could and I've got 10 less pounds on me to prove it! ;p). But I may pull my scores again from FICO next week/end of the month and see how it looks...

I'll be bringing home about $4200/month and my rent will be $800/month. I have other obligations (student loans, tax debt) that I'll need to factor in. I haven't had a new car in 15 years (paid on time, no repo, no lates, etc.), so I doubt I have an Auto Enhanced score. Although, I seem to recall Quizzle? or one of those telling me it was 830+, but I took it with a grain of salt.

I'm looking at a Subaru Impreza Sport. It's a bit higher caliber than what I originally wanted (a Mazda 3), but I've never driven in snow/rain storms and I'm scared enough about it as it is; I want something safe and reliable. Oh, and my dog and I are avid hikers, so we'll need a good car for that, too. The price their website says $23, 310.

So, for all you out there who are waaay more knowledgeable about this stuff:

What kind of APR can I *reasonably* expect to be offered?

I'd rather not pay for a car for five years, but I also don't want a $400 or $500 payment -- is this realistic?

I think I can realistically put $2,000 down; if I wait a little longer, maybe $3,000. But that means renting the car for longer, which gets pricey...

Bottom line -- how do I make sure I don't get too upside-down with the financing?

I'm just scared to death of getting in over my head with a new car/financing and really don't want to feel like I'm getting ripped off. At the same time, I'm sick of driving ratty cars that break down -- or set ABLAZE -- at random. ANY advice, suggestions, etc. that you can offer would be so deeply appreciated!!

PS -- I have a credit union account in my current state (CA) and will open a credit union account in the new one (PA). I don't know which, if any, will approve me for an auto loan.

Re: Need Help Understanding Car Buying

Cloudlb — Thu, 18 Aug 2011 15:57:38 GMT

There are plenty of very informative sites out there you can use to help you figure this out. Learn how to run the numbers yourself to see what you can afford at bankrate.com. For understanding the car buying process, I like carbuyingtips.com

My suggestion would be to find a place to live very close to your job, or accessible by public transit, and put off buying a car for a while. More downpayment = less paid overall for the car, and lower monthly payments.

Re: Need Help Understanding Car Buying

hapagrrl — Thu, 18 Aug 2011 21:46:46 GMT

Thanks for the sites! They look very useful - this will help alot!

I hear what you're saying about forgoing buying a car for a while and yes, I do live close enough to work to walk (45mins or so). But I have a dog that needs to be exercised rigourously twice a day -- and we'll have to drive to get to the hiking trails. If I don't want to pay thousands in vet bills and apartment repairs because my dog got bored and ate half the stuff in the house, then I *must* exercise her properly. She's just not a "quick walk around the block" kind of dog. So, if it was just me, I could suffer through it for a while -- that's just not the case here.

Re: Need Help Understanding Car Buying

Anonymous — Fri, 19 Aug 2011 17:23:33 GMT

Congrats on the job!!

1- At risk of sounding mean, you are going to be at a disadvantage from any lender by being unemployed for the last year. Most places want you to have a year under yo belt at your current employer or X years of unbroken employement. This means that if you do get approved, you may not get a best possible rate.

2- You may have better luck attempting service with a company that has loaned to you in the past, a bank/credit union you have an existing relationship with or by going ahead and seeking out more lenient lenders.

3-You need to accept the fact that if you get an interest rate below 10% you are both lucky and standard. Most interest rates in the wild are about 5%+. Banks that offer lower are doing so for best customers. Most places in the wild do not offer rates lower then 2.9% (yes they do exist out there- will you qualify? probably not)

4-The general rule of thumb is, that for every $1000 financed over 5 years your payment will be roughly $20.00 a month, so you have say the cost of the car at $17,000, tax title fees taking you to $20,000 and you are putting $2,000 down you are going to be at $350-$370 a month.

5- Quit pulling your scores from myFICO, most lenders are going to use autoenhanced scores which are not available for purchase from this site so you are throwing money away by purchasing your FICO for purposes of a car loan.

6-If you are worried about negotiating attempt to purchase a car under non negotiable pricing like FORD AXZ plan, or some manufacturers plan, or through sometrhing like COSTCO's auto buyers plan.

@hapagrrl wrote:
Hello, Everyone --

Please forgive my ignorance and the length of this message, but I want to make sure I don't get and/or feel screwed when I buy a new car.

After being unemployed for nearly a year, I finally got a job! I'll be relocating across country. I don't have a car at all right now (it went up in flames this past Spring) and I'll definitely need one where I'm going. I'll rent a car for the first while so I can get to work, etc. I'm thinking I'll need to collect a paycheck or two to come up with a down.

The apartment I applied for pulled my score and they said it was 622 -- don't know which bureau. This means I've dropped a few point in the last few months (I ran out of my savings and paying bills on unemployment benefits is.. Challenging. I stayed on top of my bills as best as I could and I've got 10 less pounds on me to prove it! ;p). But I may pull my scores again from FICO next week/end of the month and see how it looks...

I'll be bringing home about $4200/month and my rent will be $800/month. I have other obligations (student loans, tax debt) that I'll need to factor in. I haven't had a new car in 15 years (paid on time, no repo, no lates, etc.), so I doubt I have an Auto Enhanced score. Although, I seem to recall Quizzle? or one of those telling me it was 830+, but I took it with a grain of salt.

I'm looking at a Subaru Impreza Sport. It's a bit higher caliber than what I originally wanted (a Mazda 3), but I've never driven in snow/rain storms and I'm scared enough about it as it is; I want something safe and reliable. Oh, and my dog and I are avid hikers, so we'll need a good car for that, too. The price their website says $23, 310.

So, for all you out there who are waaay more knowledgeable about this stuff:

What kind of APR can I *reasonably* expect to be offered? 5.9%-12.9% anything lesser is GREAT anything greater may be necessary due to time on job/score.

I'd rather not pay for a car for five years, but I also don't want a $400 or $500 payment -- is this realistic? There are many car payment calculators out there. Plug some numbers in and see.

I think I can realistically put $2,000 down; if I wait a little longer, maybe $3,000. But that means renting the car for longer, which gets pricey...I rented a car for 1 year due to the 1 year at employer rule.

Bottom line -- how do I make sure I don't get too upside-down with the financing? A hefty downpayment along the lines of 30% and taking the loan out for 4 years. ie- a new car depreciates tremendously in the first year so it is very hard to do.

I'm just scared to death of getting in over my head with a new car/financing and really don't want to feel like I'm getting ripped off. At the same time, I'm sick of driving ratty cars that break down -- or set ABLAZE -- at random. ANY advice, suggestions, etc. that you can offer would be so deeply appreciated!!

PS -- I have a credit union account in my current state (CA) and will open a credit union account in the new one (PA). I don't know which, if any, will approve me for an auto loan.

Re: Need Help Understanding Car Buying

hapagrrl — Fri, 19 Aug 2011 19:15:23 GMT

Thank you, USMC!!!!! This is *just* the kind of information I was looking for.

And no, you didn't sound mean -- this is just what my reality is right now, and I appreciate your honest insight. Just so you know, I'm not crazy enough to think I'm gonna get .09% at this juncture - and I do intend on doing a re-fi in a year or two.

Again, thank you very, very much! I'm saving your response for printing later,when I have my printer again.

All the best you!

Re: Need Help Understanding Car Buying

Cloudlb — Fri, 19 Aug 2011 19:59:51 GMT

Mr. Usmc has excellent advice, always.

I tend to disagree with this part a bit:

"5- Quit pulling your scores from myFICO, most lenders are going to use autoenhanced scores which are not available for purchase from this site so you are throwing money away by purchasing your FICO for purposes of a car loan."

Although it's true that lenders may pull auto enhanced scores, and therefore from a pure cost standpoint, he's right, I think pulling your own scores ahead of time reduces the uncertainty, nervousness, and possible shame (speaking from experience) involved in negotiating for a loan. It gives you confidence, and enables you to refute any errors or tricks they may try to pull on the uninformed. Also, when I went through this process earlier this year, I made an appointment with my CU loan officer ahead of time, brought my own credit reports, and gave them to her. She was very impressed. I'm not sure if that made any difference in the long run, but I'm all for impressing people who you are asking to lend you money!

As a final thought .. . have you considered a cat?

Re: Need Help Understanding Car Buying

hapagrrl — Fri, 19 Aug 2011 22:26:06 GMT

Cloud--

LOL!! Actually, yes - I have one of those, too. And no - he's not "high energy" and doesn't need to hike every day, ROFL!

I agree with you *and* with Mr USMC about pulling the scores -- my cash situation is *extremely* tight right now, so not having to spend it on yet one more thing would be nice.

But -- I've closed out a revolving a/c (a secured loan that reported "paying as agreed" every month) and will be bringing the util on my 2 secured, small limit cards down to 0% and I'd like to see how that looks (in comparison to the 622 right now).

And you make a *great* point -- having your act together with folks you want money from is probably a really good thing!

Thank you!! (and I'm still laughing about the cat; yeah -- they're WAY less maintenance than dogs!)

Re: Need Help Understanding Car Buying

Cloudlb — Sat, 20 Aug 2011 02:21:48 GMT

Some further comments: Don't fall in love with one car. More options gives you a better chance to make a good deal. Also, you need to figure in taxes, title, license, and possibly gap coverage, and those option packages can add up. I think there are more vehicles out there which might be cheaper--even reliable ones with good winter handling. If it makes sense to you, look for a good deal on a certified or couple-year old car. Look at Consumer Reports, TrueCar, Edmunds, etc.

In your situation, sometimes you have to take a hit on the interest rate and other terms, and you will be upside down if you don't put 20% down on it. But it you pay this one off, you'll be in a better position for the next one. My goal is to pay all cash for my next one.

Re: Need Help Understanding Car Buying

hapagrrl — Mon, 22 Aug 2011 05:26:20 GMT

Cloud--

On your advice I'm looking at other makes/models; they all seem to hover around $18-23K. If I add in the options that come standard on the Subaru, I get about the same price, basically, so we'll see. In any case, I've started my spreadsheet on it all and it includes slightly older models.

I understand I'll take somewhat of a hit because of being unemloyed, etc., but I'll refi in 18 months or so. In the meanwhile, can we blame me for wanting to go into this armed with good info.?

Thanks so much for the advice!

Re: Need Help Understanding Car Buying

demi — Mon, 29 Aug 2011 20:20:05 GMT

Not sure about Pennsylvania and dog parks, but you might want to check out the possibility of being within walking distance, plenty of exercise opportunities (my two and I go almost every night). If you can wait and come up with a bigger down payment, it might be worth it.

Also, just had to rent a car while mine was in the shop (btw, may be car shopping soon as well, informed need new transmission in the next 6-12 months at the tune of $5,800, which, concidently, is the blue book value of my car) and I had to sign special forms stating I would not have a pet in the car.

Good luck, and congratulations on the new job. Moving can entail a lot of expenses, especially such a major one.

Re: Need Help Understanding Car Buying

Anonymous — Tue, 30 Aug 2011 18:53:02 GMT

a $2,000 down payment probably won't even cover all of your TT&L fees, so your note could very well end up even over 23k by the time all of that is factored in. a 23k loan for 5 years, even at a reasonable APR is certainly going to be exceeding 400/month.

Re: Need Help Understanding Car Buying

Anonymous — Fri, 02 Sep 2011 14:10:17 GMT

I can understand not wanting to drive beaters, I drove a 15 yo Blazer, a 15 yo Ford truck, then a 12 yo Lexus (nice car!), in that order. Then, once I had some money I financed a brand new $14K Hyundai for 6 years, YUCK! I've learned my lesson 100 times over on that one. Here's my question: Even though you don't want the headache and hassle of driving a beater, why not take your $2K and get a reliable, old car. These are everywhere, especially at estate sales and on bulletin boards at retirement homes. Here's my argument:

Lets say your Impreza, which is a very nice car btw, is $23K flat after negotiating, delivery, etc. With your credit and employment history you'd be in good shape if you got an 8% APR. Over 5 years that's $466. Is it really worth 5 years of you slaving away at that payment, and blowing an additional $5K on interest to drive a nice, new car now? The alternative is to buy decent older car, save up some money, then pay cash for a better car. Then save up some more, trade that one in, and pay cash for an even better car. You'll get a phenomenal deal paying cash and won't be a "slave to the lender". Plus, how nice would it be to have almost $500 free cash flow every month? Save that up for one measly year and you can upgrade to an $8,000 car pretty easily. Another year later and you're in a $15,000 car, all without taking out a ridiculous loan.

My apologies if this sounds "preachy" and I know this isn't the right forum to be recommending cash transactions, but hey I thought I'd offer my $0.02. I'd be curious to hear your (and others') thoughts! Good luck and congrats on the job!

Re: Need Help Understanding Car Buying

Austin — Fri, 02 Sep 2011 14:18:18 GMT

I'm delighted for you that you got a new job - congratulations!

I just went thru the car buying process myself, after having worked on my credit scores for about a year, making several strategic moves that improved my FICO scores. I went into the car buying process knowing, from this site, I had a pretty good FICO score- and was delighted when they pulled Experian and my score was ten oints higher!

This posting is a bit long, yet there is a lot of good info in it, so I hope you'll read it and use the info. One of my passions is sharing knowledge about credit with people.

I share this not to discourage you, yet to encourage you - I was able to gain about 100 FICO points in less than a year - about 8-9 months.

Strategy one: get a really great credit repair company to do a credit repair when you're ready to do so - sooner rather than later.

Two: carefully select your new credit union and/or work w/ your old credit union, and find one that will give you a share secured loan - you will be able to build your score by having an "installment" loan in that portion of the FICO pie. Even if it is for only $500.00 - make sure your payments are scheduled for at least one year to truly help your score. I chose my due date to be the 20th and my payment was $50.00 - then I paid on the 15th and I paid $65.00 - all set up to run automatically, so that I was paying EARLY and ON TIME and MORE THAN the minimum payment amount. 2-4 months into this secured loan, my FICO score started improving monthly!

Three: carefully select a secured credit card company, or use an existing credit card, and very carefully and strategically use the card, ALWAYS keeping UNDER ten percent utilization. Sometimes, that means that I'll charge something, go home and pay it off the same day, and charge again and pay again - several times in a month. The main point is to always keep the balance below 10% utilization rate! Use the credit card for things you would pay cash for, then pay it off before it gets to 10% utilizaiton, and this will gain you points right away! Caution: Don't run the card with a credit balance or not use it - you MUST use the card to gain FICO points! My score was increasing every single month, then I started keeping a credit balance and also not using it at all, or very much, and I didn't see continuing increases in my FICO score! Then, (duh, what was I thinkin?) .......when I started using the card again, started gaining points immediately!

The above is to generally BUILD credit - always keep in mind the FICO pie - part mortgage, part installment, part credit card - you can have balance at least in the installment and credit card portions because you can get secured cards, even with no or really bad credit - then BUILD it correctly~!

Car shopping: Choose 1-3 makes and models you really like that you think will do the job, then really shop hard!

I strongly suggest buying something that is 1-4 years old, with 25-60 thousand miles on it. This way, you'll be paying about HALF the price of a new car.

I just got a 2008 Ford Edge - brand new, similiarly equipped is $45,000 - I got mine for $20,900 - 3 years old and 47,200 miles - HALF price!

If you are really worried about it holding up, do more research, figure out which cars hold up the longest, then select one of those or buy an extended warranty.

Keep in mind, most extended warranties stop at 100,000 miles, which is usually right where you actually need the warranty help! My credit union ooffered me one that went to a total of 120,000 miles for $1400, instead of only 100K miles and $2100 the dealer offered me.

The gap insurance from my credit union was $299.00; from the dealer it was $500.00 - Shopping pays off!

Each component of the process can and should be shopped for separately!!

Shop your financing and have it in place BEFORE you ever set foot at the dealer's location - know what your purchasing power is.

Shop your gap insurance -

Shop your extended warranty

Then, shop for your vehicle.

Knowing what was available at my credit union gave me tremendous buying power, eliminated having the play all the games w/ the finance guy at the dealership, and gave me the confidence to KNOW that I could buy what I wanted, and drive a hard bargain, because I was a strong buyer.

Knowing that I had 2.59% interest for 60 months available from my credit union, I didn't even let the dealers run my credit. I NEVER EVER let anyone run my credit for anything, unless I am finished shopping and am signing a contract!

Turns out, the dealer where I eventually bought my Ford Edge used a credit union that would offer me 2.34% and 66 months, which I then leveraged with my own credit union, and I got 2.34% from my credit union AND 66 months - they were happy to match what the dealer offered, partly to retain a good customer - the same credit union that I had done the share secured loan with!

I share this to inspire and motivate, not to brag.

I have gone thru BK, foreclosure, eviction, medical, financial, and personal havoc, and have recovered from all of the above. It takes knowledge, and working at it, and making the right strategic moves.

I'm after that 850 FICO score!

As a dog lover, I get it that your vehicle needs to accomodate both you and your dog. My suggestion, for the sake of your car, is to put a heavy quilt, like a moving/packing blanket, over the vehicle BEORE you load the dog, train the dog to wait, then, once the blanket is in place to protect your vehicle, allow the dog to jump into the car.

One of the Edge's I looked at had dog hair all over it (they just got it in and hadn't had time to clean it yet) and had many scratches in the rear bumper, and top area from the dog's toenails scratching the car as the dog was getting in and out of the car. Protect your car means longer life, and more value when refinancing and/or trading it in.

Best of luck in your new home and job - try meetup.com, and you'll probably find groups that like to hike with their dogs! There are many interest groups in many areas, so you can find new friends and activities to do with or without your dog along.

Re: Need Help Understanding Car Buying

Anonymous — Fri, 02 Sep 2011 17:35:23 GMT

My husband and I both just purchased a new car the end of July. My Experian Score was 620 and his was 637. The dealerships we went to used the auto enhanced score (both of ours was 580). My husband got a loan from Car Max for 18,000 @ 12% interest for a 2011 used Toyota Camry. I got a new 2011 Chevy Malibu for 19,995 @ 6% interest. Why the difference? I spent the afternoon with the finance manager, and I didn't have a specific car in mind; only the best deal I could get. The manufacturer has all kinds of financing specials for different car models every month. (He showed me pages of different interest rates, etc.) The malibu was the special financing deal for July so I worked out the numbers, and then drove the car and bought it. Look for a deal first, and then look for the car. P.S. I was just discharaged from a Chapter 13 in October of 2010, so I was really worried about getting a loan.

Re: Need Help Understanding Car Buying

Anonymous — Fri, 02 Sep 2011 17:55:03 GMT

Yikes! Personally, I can't understand assuming that much debt for a piece of metal with 4 wheels. If you can't afford to pay cash I suppose it's a balance between how badly you want a new car and how much you think it'll take to keep an older used car running. In Irene's example, assuming 5 year loans on both, they'll pay just under $10,000 in interest alone. That's more than we paid (cash!) for my wife's 8 year old Mercedes ML-320 that will likely run clean for another 5+ years. Additionally, you've zapped almost $800 out of your monthly cash flow. Sounds crazy to me, but then again, I think most people would call me crazy!

Re: Need Help Understanding Car Buying

hapagrrl — Sat, 03 Sep 2011 23:11:26 GMT

Hi, Everyone!

THANK YOU so very much for chiming in!!! And for your well wishes on my new job: I really appreciate you sharing your experience and advice!!! This is going to be immensely helpful!

Austin -- Oh, yes - the credit re-building stuff you've mentioned, I've been doing -- secured loan and all. I do have the secured cards, too - but, due to the cross-country move, am currently *not* at 10% util. I'll get that sorted once I get paid. And absolutely, yes - I know all about covering up the back seat (I even shipped the dog-car blanket with me!), doing the wait, etc. My pup loads up perfectly fine, in just one hop - no scratches!

I will seriously consider what folks here have advised regarding old er, used cars,looking at a year or two old-models etc. I really need to sit down and crunch some numbers!

Irice -- great tip about not being set on any one model and looking for the deal first. In fact, I think a few of you have advised that, so I will definitely be keeping that in mind!!! A friend also said to get what's in the lot -- none of the custom order craziness...

In any case, I'm going to try and get financing first, I think -- will try with my CU (in Calif.) and maybe the Capital One blank check thing.. we'll see what happens!

Re: Need Help Understanding Car Buying

hapagrrl — Tue, 06 Sep 2011 00:57:19 GMT

Okay, Good People --

I've been taking in everything everyone's been saying, especially the part about looking at a slightly older model. So, I'm doing that now (for a different model - an Impreza sedan), and according to TrueCar, they're selling for lower than what I see CPOs (2009s) listed for -- huh? Can that be right?

If so, that brings me back to the "I may as well get a 2011" idea... doesn't it?

Re: Need Help Understanding Car Buying

Anonymous — Thu, 08 Sep 2011 16:59:29 GMT

It might be worthwhile to look at a 2012 Impreza if you're going to buy a new one. The new design is rated at 27/36 MPG vs. the 2011 model's rating at up to 20/27 MPG. If you drive a fair amount, that can add up to quite a bit of money saved at the end of the year. Even at 10,000 miles per year and $3.50/gal. that's around $500/yr. just by waiting for next year's model to be available.

2012: http://www.subaru.com/impreza/2012/article.html?uri=/impreza-2012/posts/05092011_0001/&tq=posts/impreza-2012

2011: http://www.subaru.com/vehicles/impreza/index.html

Re: Need Help Understanding Car Buying

hapagrrl — Thu, 08 Sep 2011 21:17:16 GMT

Babybirdhome -- yes! I saw that just last night! The only question is - how long before they're in the lots? I've been *strongly advised* by a friend not to pre-order or custom order *anything,* and I tend to agree...

Re: Need Help Understanding Car Buying

Anonymous — Fri, 09 Sep 2011 16:32:26 GMT

@hapagrrl wrote:
Babybirdhome -- yes! I saw that just last night! The only question is - how long before they're in the lots? I've been *strongly advised* by a friend not to pre-order or custom order *anything,* and I tend to agree...

Umm why?

What was the rationale?