topic Re: Son just starting 1st job, needs car - lease vs. buy? Cosigner required? in Auto Loans

Son just starting 1st job, needs car - lease vs. buy? Cosigner required?

Anonymous — Wed, 16 May 2012 13:05:17 GMT

My son is just starting his 1st job. He has had a $1,000 limit CC for several years, but that's really his only credit history. What is he facing regarding financing of a new car? Is there any difference for lease vs. buy regarding approval of financing without a co-signer? I really don't want to co-sign a car loan for him.

Re: Son just starting 1st job, needs car - lease vs. buy? Cosigner required?

Anonymous — Wed, 16 May 2012 13:19:50 GMT

How old is he?

Re: Son just starting 1st job, needs car - lease vs. buy? Cosigner required?

Anonymous — Wed, 16 May 2012 13:47:47 GMT

He is 23; will be 24 in July.

Re: Son just starting 1st job, needs car - lease vs. buy? Cosigner required?

Anonymous — Wed, 16 May 2012 13:50:26 GMT

Does he absolutely NEED a new car?

I ask his age, because of insurance.

With a NEW car, just one tradeline, no previous auto history and being under the age of 25, getting him a new car is already going to cost him a TON.

Between the insurance and what will most likely be an average APR, he's probably better off getting a beater car first while he starts off this job.

That or a used car as well.

Are these options you've considered as well?

What do you have to work with as a downpayment for this car? Or is he walking in with nothing?

Re: Son just starting 1st job, needs car - lease vs. buy? Cosigner required?

Anonymous — Wed, 16 May 2012 13:58:22 GMT

He definitely needs a car. I understand new vs. used, insurance, etc. I am asking about what he faces regarding financing, and the need for a co-signer.

Re: Son just starting 1st job, needs car - lease vs. buy? Cosigner required?

Revelate — Wed, 16 May 2012 14:09:18 GMT

@Anonymous wrote:
He definitely needs a car. I understand new vs. used, insurance, etc. I am asking about what he faces regarding financing, and the need for a co-signer.

Hrm, this is a tricky one. Does he have any money saved up?

This gets easier once he has two paystubs in hand to document income, right now he almost certainly will be looking at a cosigner or a pretty substantial downpayment requirement to negate that.

I can fully understand the desire not to co-sign on the car; however, if you want to help him out and he doesn't have a ~20% downpayment, you *could* provide him a family loan to cover the downpayment. The amount required wound fall well below the gift strata as defined by the IRS, but I'd still write up the paperwork anyway at the IRS-mandated APR (some laughably trivial amount you can find on their website) and payment terms. Paperwork is better in this case, but the amount limits your exposure as compared to co-signing a depreciating asset.

Beyond that, have him just go and buy a beater hoping to get six months to a year out of it at most for whatever you can get for ~$2000, and then have him go finance a car on his own at that point.

I don't know of any ideal solution in this case, I think you're going to have to compromise between his not having a car at all, and your co-signing for the loan. Unfortunately I can only give you the middle options I'd consider in your situation; hopefully someone will have better ones.

Re: Son just starting 1st job, needs car - lease vs. buy? Cosigner required?

Anonymous — Wed, 16 May 2012 14:09:02 GMT

It's a Catch-22.

He needs the car for the job, but to sign alone, he most likely would need the job for his car.

My suggestions would ring similar to Revelate's, unfortunately.

Re: Son just starting 1st job, needs car - lease vs. buy? Cosigner required?

Anonymous — Wed, 16 May 2012 14:15:02 GMT

OK, so he needs 2 pay stubs for income verification. Is this assuming bi-monthly paychecks? What is the requirement - 30 days (1 month)?

20% downpayment negates the requirement for a co-signer? Is this at all dependant on the amount financed?

He has access to a vehicle for a fairly short time. I'm trying to come up with a plan for him to buy a car without my help (co-sign).

Re: Son just starting 1st job, needs car - lease vs. buy? Cosigner required?

Anonymous — Wed, 16 May 2012 14:45:55 GMT

Use the 20% down for a beater car, problem solved.

Re: Son just starting 1st job, needs car - lease vs. buy? Cosigner required?

Anonymous — Wed, 16 May 2012 15:21:52 GMT

I understand that option. This forum is related to credit, so I'm trying to get some information on his options involving credit.

Re: Son just starting 1st job, needs car - lease vs. buy? Cosigner required?

Anonymous — Wed, 16 May 2012 15:26:22 GMT

20% will definitely put him in a positive light and usually will make dealers very lenient.

Has he ever pulled his credit reports/score?

Re: Son just starting 1st job, needs car - lease vs. buy? Cosigner required?

Anonymous — Wed, 16 May 2012 15:51:18 GMT

Golfnut,

I didn't mean to offend you on my post, I was just trying to make it somewhat humorous. I know these decisions can drive you crazy sometimes! I hope you get an answer to your solution soon!

Re: Son just starting 1st job, needs car - lease vs. buy? Cosigner required?

Anonymous — Wed, 16 May 2012 15:51:37 GMT

But this is not up to the dealer, correct? The banks set the criteria for approval of financing right? Just wondering if anyone knows the criteria.

Re: Son just starting 1st job, needs car - lease vs. buy? Cosigner required?

Anonymous — Wed, 16 May 2012 15:54:34 GMT

dpechal, not offended at all. Just trying to clarify my question and hopefully get some answers so we can consider all options. Not looking for advise, just answers/facts.

Re: Son just starting 1st job, needs car - lease vs. buy? Cosigner required?

Revelate — Thu, 17 May 2012 01:57:05 GMT

@Anonymous wrote:
OK, so he needs 2 pay stubs for income verification. Is this assuming bi-monthly paychecks? What is the requirement - 30 days (1 month)?

20% downpayment negates the requirement for a co-signer? Is this at all dependant on the amount financed?

He has access to a vehicle for a fairly short time. I'm trying to come up with a plan for him to buy a car without my help (co-sign).

Two paystubs: could be as little as two weeks even. There's no fixed time-limit on it, though some may ask for additional details. Hand over the offer letter from his employment if they want more as bank statements probably aren't useful for him.

The amount financed is *always* a factor. There's a lot more exposure on a 30K loan than a 10K loan from a lender's perspective. In my case I had plenty of lenders that were willing to finance 16K, but very few which would do the ~20K I was asking for.

You're right that the underwriting requirements for approval are set by the lender; however, most dealerships deal with enough customers to have a pretty good idea as to what the lender will accept vs. not. This actually plays in your favor when trying to get approved, dealers sometimes (perhaps often) won't get an instant approval, instead they'll pick a ballbark number that they think they sell the loan to the lender for basically (sell is the wrong word since the dealer isn't a loan originator, give, hand, something like that).

It's almost always easier to get financed through a dealer: they actively want to sell the car, and usually the lenders are looking to put money in the field... they have the relationship with the loan officers / underwriters at the banks, and they will absolutely attempt to get your son into a car and financing. We're disregarding APR at this point, your son can refinance later.

You're going to need to come up with something though that the dealer can use to help sell the case; downpayments are always a factor (limit the bank's exposure vs. the resale value of the car if your son flakes) and 20% is a pretty good industry number on it. Two paystubs and any other supporting documentation is another good thing. Heck, even having your son gush enthuiasically about his job, this new car, etc. may play a role; however, might be easier to play the "I need a car because I can't get to work without it and I'd like to keep my income" strategy too. Something that gives the impression that he's going to be responsible with the loan.

Anyway my point is this: your son has issues trying to finance a car on his own. Not his fault, all of us have been there at some point; however, when you're asking for a favor (and he is), I suggest putting lipstick on the pig. The downpayment, the story, and other things are just that, giving the dealer more negotiating leverage to get any financing at all from the lenders. It doesn't necessarily negate the requirement for a co-signer (just have your son state he doesn't have one... note, you HAVE to let him negotiate this on his own, if they see you standing there, that carries zero credibility) but it can go a long way towards getting him approved without your needing to sign on the dotted line.

That's the goal here, like any other thing credit-related, it's strictly YMMV. I kid you not, there's a non-zero chance it'll come down to how much the dealer wants to sell the car even. They're going to be doing a favor for your son, the more your son can stack the deck on things the better off he is. With lipstick applied, have him approach it buying a car off the lot, right now, and not be too choosy on options beyond color and make . Even those are problematic if you want something like blue on an Acura in my case, bleh. You get bonus points if buying a car that's been on the lot a while... if you actually manage to find a dealer with a new 2011 version still hanging around, that's a prime target for your son as an example. If looking at used cars, look at the car fax listings most branded dealers publish, see when they bought the car and target anything older than six months or so.

Your son wants a car, the dealer wants to sell him a car, just have to give him things to demonstrate he's serious enough for the dealer to go to bat for him to get financing.

My apologies for rambling.

Re: Son just starting 1st job, needs car - lease vs. buy? Cosigner required?

Anonymous — Thu, 17 May 2012 12:29:49 GMT

I don't blame you for not co-signing, and say good for you for sticking to that. I have two sons and it's not going to ever happen, sorry, and I'm trying to teach them to never do it for anyone else, either.

If your son is hell-bent on financing a new car, and I'd still have to agree w the others this wouldn't be my go-to advice-to finance, I'd say have your son pull his credit reports and scores first. It will give him a general idea where he stands credit-wise, which is critical.

He needs a good down payment and he should research first-time buyer programs.

Also, does he belong to any credit unions or local banks? Do you? Sometimes you can get great deals from them that you can't elsewhere, so he might want to talk to somewhere there if you do.

Good luck.

Re: Son just starting 1st job, needs car - lease vs. buy? Cosigner required?

Anonymous — Thu, 17 May 2012 15:07:18 GMT

I'll have to chime in here.

First of all I was in this situation once. Although I was younger than your son. When I was a junior in high school I got my first job, cleaning golf carts, clubs, stocking the pro shop, picking the driving range, just a simple part time minimum wage job that was good for some extra money at the time.

Obviously no way I would have been able to finance a new car, but I needed one. My parents bought me a beater with 110,000 miles on it not at a dealer even, but one of those corner used car lots. Paid 4k cash for it, and I ended up driving it for 10 years, and would still be driving it today except my mom bought a brand new car a few years back and gave me her old car. In the 10 years I had my first car I took it to the shop about 4 times for the occasional repair. No way either me or my parents would have been able to afford a brand new car, or even a certified pre owned car.

My best advice, go with something similar. Find a cheap used car with high mileage or is several years old, get it looked at by a mechanic of course to make sure it is decent, even if you have to make a few repairs no biggie. Drive that car until your son has built up a good credit history, and been on the job for awhile and has built up some savings. As far as I know when getting an auto loan time on the job is a good factor as it shows stability, you said your son currently has a credit card, the extra account age will help greatly, plus putting away some money into savings will then give him enough for a good down payment.

If you are patient like that your son can be set up for a brand new and great car in a few years.

If you are looking at financing a car right now, well definitely do not buy new. The price isn't worth it. Instead go for certified pre owned. Never co sign of course, and since your son has had a credit card with presumably good history he should be able to get at least a halfway decent rate, if not you can always refinance. The biggest factor of course whether he gets approved or not is how much of a down payment he can put down. Never co sign for anyone, but if you can by all means help him out with a down payment. That is way better than co signing. You get to help your son secure a car, and you are not on the hook for the debt.

Best of luck.

Re: Son just starting 1st job, needs car - lease vs. buy? Cosigner required?

castlefox — Thu, 17 May 2012 17:04:04 GMT

IMO, I would avoid leasing because of cost and you you have to give the car back with nothing to show for it after the lease is up.

I would highly suggest you call a local credit union, when I called they were really easy to work with and I saved close to 2% in APR. They could also talk to you about what they require for a loan before actually doing a hard pull on your son.

If all else fails buy an older motorcycle for like 1,000 ?

Re: Son just starting 1st job, needs car - lease vs. buy? Cosigner required?

kimmiller112 — Sat, 19 May 2012 20:33:23 GMT

Don't assume that just because 20% is put down that that will relieve you of the possibility of having to co-sign. Last year, someone I know with bad credit applied for a car loan and was told that he either needed a cosigner with some money down or 50% down on an $18,000 car. When considering cosigning, consider the fact that your son could get laid off or become unemployed. A coworker cosigned on cars for both of his nephews and one got laid off. He can't afford the payment now so the uncle is paying it to avoid having lates on his CR. Since he is under 25 and insurance is going to be expensive, it really is better to get either a beater or a used car where he can finance a smaller amount. The APR is going to be high on a car loan for him, new or used, with very little credit history and it being a first car.

Re: Son just starting 1st job, needs car - lease vs. buy? Cosigner required?

Anonymous — Sun, 20 May 2012 17:18:30 GMT

@Anonymous wrote:
My son is just starting his 1st job. He has had a $1,000 limit CC for several years, but that's really his only credit history. What is he facing regarding financing of a new car? Is there any difference for lease vs. buy regarding approval of financing without a co-signer? I really don't want to co-sign a car loan for him.

Nissan should giving him probably a tier 1 rate with their first time buyer program on a Versa or a Sentra. Its inexpensive and insurance will be cheap even at his age, hoping that he has no tickets or accidents