topic Re: Auto Loan Advice and Suggestions, Please in Auto Loans

Auto Loan Advice and Suggestions, Please

Jazket — Wed, 10 Dec 2008 17:01:55 GMT

Hi Dear ones

It is my first time posting here, though I usually come around to learn from your experiences.

I'm shopping for a new car and need some advices.

Here is my situation:

I'm currently employed, married, 22 years old and attending school. I can pretty much afford the car I'm shopping for but whether I can get a loan it's something else. My credit score is 630 due to a bad term of maxed out cards which I just got myself out of. Besides that, I have NEVER missed a payment and have always paid more than the minimun, and lately just paid off most of my credit card debt. I have 4 credit cards with a total revolving credit of $3,800.00 out of which I only ow about 20%. That's pumped up my score for about 40 points in the last 3-4 months. It was bad, like 595 bad.

I only have 14 months of credit history, since I got my first card on september 2007.That's a one year and 2 monthish old credit history; I sort of understand that's not a good history lenght.

I got a 2008 Mitsubishi Lancer ES back in January (08) with a APR of 11.60 and 72 months. I know, it's bad but at that time I had about 1-2 months of credit so I'm glad I even got it.

Again I've always paid my car on time, even before time! so I'm good all around. Although, I still owe about 92% of the loan which is $20,000. My lender is Capital One; I've got credit cards with them also.

I recently got a student loan for about $4,500 but owe it all cause I am entitle to pay it after I finish school (6 months from now).

So in resume, I've got to installement loans and 4 credit cards with low or no balance. My score is at 630 (EQ) and I want to apply for a loan on a Mitsubishi Lancer Evolution X MR. The car's price is around $38,000 with all extra dealer fees (around 36,000 excluding them). I've got zero down payment so I'm aiming at a $38,000 loan.

I haven't applied anywhere cause of the whole credit crunch and economy turmoil thing, I don't want to get turned down and have a bunch of new inquiries to mess up my credit. I already have 20 inquiries hurting my score all over a one-year period, and that's because I was looking for a refinance on my current car.

Here is the good part (asuming I'm doing real bad) me and my wife together can afford payments of up to $1,100 but I don't want to pay more than $650 a month cause I also have to count insurance (about 180 extra on my StateFarm acount); My wife's got a credit score of 715 and ZERO loans and the same credit history lenght (1.2 years; she's good barely any inquiries so she's doing real good on that side also; credit card debt ratio is of %30 and will most likely be down to 5% by next month. She only makes about 40% the salary that I make. I wanted to take advantage of some offers on the car's price cause the Lancer Evolution MR is MSRP'd at $41,000 but I can get it for $36,000 like I said + tax/title/dealer fees/delivery. Me and my wife are filling jointly and most likely with CapitalONE again.They got rates of 6.80 on a 60-72 month loan.

Based on all this information, what do you guys think is my best bet, what advice can you give me? shoud I go for the same lender, should I start shopping around for the best offer? should I wait? do you think a 1.2 year credit history won't help me get a good rate? do you think most lenders won't give out $38k looking at how the economy is right now?

Please give me any advice you can I'll really appreciate it!

Thanks in advance!

God Bless.

PS: Is it also possible if I print my most recent credit score & report from Equifax (I can get an updated report whenever I want) I can have the dealer/lender work with those numbers and not run an inquiry on my/my wife's credit?

Thanks again!

Edit: I'd also like to point out that on TU, my credit score is about 25 points higher, and they, unlike Experian & Equifax, are counting a contract I had with Bally Fitness since 2005, which is roughly about 4 years of credit history and I also finished paying and never was late.

Message Edited by Jazket on 12-10-2008 09:01 AM

Re: Auto Loan Advice and Suggestions, Please

Anonymous — Wed, 10 Dec 2008 18:03:15 GMT

What is your combined income?

Will this become a third vehicle? or are you trading one in?

Just because you can afford $1100 in debts doesn't mean you should go out and spend that.......The economy is going to hell in a handbasket...If one of you lost your job tomorrow would you still have 8 months reserves to pay all car payments, credit card payments, rent etc? I believe your answer is No, since you don't have a down payment

In my opinion, do not do this. Why do you need a $40,000 car when you have a brand new '08 in the driveway and another car in the driveway that neither of them are paid for?

You are young.........again in my opinion you will regret this...what happens when you are ready to buy a house? You won't be able to afford one with all of these debts you are accumulating.

Also, Mitsubishi's values CRASH. This $40K car will be worth $20K in a year.

Good Luck!

Message Edited by 1111mel on 12-10-2008 12:03 PM

Re: Auto Loan Advice and Suggestions, Please

Jazket — Wed, 10 Dec 2008 18:23:36 GMT

Our combined Income is $4,000. In reality we get to keep $1,500 a month after all the bills and expenses; But that just started happening recently which is why I don't have a down pmnt saved. The reason why I said I can afford 1,100 in debts its cause I want to make sure the other $400 I get to keep on a savings account.

I have a second car which I use as a daily driver, a 2002 Kia; I can private sell it or trade. I bought that car cash about 2 years ago, while my wife gets to keep the '08 cause she works a block away from home.

I was also considering buying a house rather than the new car. It's a much better investment IMO. I get your advice and I've been towards the "no-go" on the new Lancer, just needed a couple more advices; sometimes young people don't make the best decision of their lives you know.

Thanks for the advice!

Message Edited by Jazket on 12-10-2008 10:23 AM

Re: Auto Loan Advice and Suggestions, Please

Anonymous — Wed, 10 Dec 2008 19:29:25 GMT

I understand wanting the car....I HAD a Mitsubishi Eclipse that was $631 per month on a $3,200 a month after taxes income.....I couldn't afford it and I have $0 in Credit Card debt.

I got rid of it to save for a house. The house is a much better choice. If you still want the car after you buy the house and can still afford it, then maybe go for it.

There you go, I made the mistake for you. Good Luck!

Re: Auto Loan Advice and Suggestions, Please

Anonymous — Wed, 10 Dec 2008 20:11:31 GMT

I am kind of in the boat as you. I am 20 yo and I just got my first auto loan but you are aiming at a 40k car. Evo is going to run you that much more in insurance rates, besides that think of all the money you are going to dump into the car if you get it. Not only will you be stuck w/ a high monthly payment but the car does require a lot more maintenance and (more then likely) aftermarket parts. Look into last gen subaru legacy gt or maybe even a 3000gt vr4. You can get a low miles for under 20k. If you go with the new evo, I would estimate your payment around $800 plus MUCH higher insurance rate. I would say buy a house before you get performance car.

Re: Auto Loan Advice and Suggestions, Please

Anonymous — Wed, 10 Dec 2008 20:18:41 GMT

Forgot to mention. Based on your short term history, the only place that would finance you for that much car is probably directly through Mitsubishi Credit, even that might be a stretch. I strongly suggest to look into a cheaper low mileage car.

Re: Auto Loan Advice and Suggestions, Please

Jazket — Wed, 10 Dec 2008 21:10:48 GMT

I was considering the '09 Ralliart which is a bit close to the Evo performance and tech-wise and I could get one for about $24K. But it was the fact of owning the higher-end trim plus a bunch other things we all male know of (leather, badassness, track racing, gullibility, insanity and love for power, etc...).

I know the aftermarket stuff was also a consideration but I kind of wasn't thinking of voiding the warranty on a 40K car u know what I mean. dvroberts, now that you mention the MMC (Mitsubishi Motors Credit) when I first got the Lancer back in January, Mitsu Credit didn't want business with me due to my credit history, that's why I went with CapitalOne Auto Financing.

And I've got crazy offers on good houses also down here in the miami/homestead area (built on 2006) that I really should consider!

Oh and 1111mel, thanks for making the mistake for me

Message Edited by Jazket on 12-10-2008 01:10 PM

Re: Auto Loan Advice and Suggestions, Please

Anonymous — Wed, 10 Dec 2008 23:49:10 GMT

Hello Jaz,

Your 1st priority needs to be improving your credit scores and refinancing that car loan, 20K @11.5% for 72 months means you're paying a ton of interest.

With as much free cash as you have, cram down that CapOne loan, Crap-One may have given you a loan tp get you started, but they are not competitive, I made the mistake of app'ingwith them to see what they'd offer this past summer to buy a new vehicle, they offered 9%, even BofA beat that with 6.4, FMC gave me 4.99

If you improve your credit scores over the next three to four months you should be able to cut that apr in half and since you've already paid over2K in interest (started payments in January ?) you need to refi for no more than 48-mo, prefereably 36, to cut down on the interest you pay.

A 15K refi loan @6.5% for 48-mo gives you the same payment you currently have at 11.5% but saves you 4+K on the interest.

New cars will not hold their value, real estate will (well, eventually One of my co-workers just bought a 4200sq ft new construction home outside Hampton Ga that's been sittng empty for the the past 18-months, the builder listed it initially at 399K, he closed on it for 215K,

Good luck,

Re: Auto Loan Advice and Suggestions, Please

Anonymous — Thu, 11 Dec 2008 07:57:17 GMT

I'm trying to be nicer online....

Ignore most of the advice you have gotten so far. A house is far more work and stress than a young couple needs right now. On top of that, if you heard the TARP hearings this morning you know we are no where near the "end" of this and prices of homes will continue to drop.

I might suggest a cheaper car but not because somebody was thinking cheaper (ie used). I'm thinking cheaper as in "90% of the performance for $10,000 less"

That would be -

It MSRP's for $27,000 or about $10,000 off what an EVO cost and according to many reviews its about 90% of the performance level of an EVO X. Its Turbocharged and AWD, just like an EVO X. No electronic diffs, Yaw Control, "Flappy Paddle Gear Box" and heavier Steel Suspension parts instead of lighter and more expensive aluminum is where the savings came from. Also a slightly more restrictive intake system.

Should be easier to get a loan for as well.

Good Luck...

Re: Auto Loan Advice and Suggestions, Please

Anonymous — Thu, 11 Dec 2008 08:14:30 GMT

Who ever told you cars were an investment? Most lose 30% of its value the minute you drive it off the lot.

I look at cars more like an expensive "pet". Unless you breed pets (or build cars), that's not an investment.

Houses require much work in upkeep (lawn care, etc), nevermind property taxes that have to be paid twice a year, home owners insurance, fire insurance and depending where you live natural disaster insurance. Home Ownership is not for everybody or every one, its an American Social Myth much like Marriage is becoming. I have family friends that have rented all their lives as adults and others have struggled with ownership.

I hope people stop suggesting Home Ownership as the best way to secure your long term financial success

Next people will suggest marriage to spread your tax burden and kids to get tax credits...

If you can afford it and banks will lend you the money to buy it, BUY IT, you only live once.

Re: Auto Loan Advice and Suggestions, Please

Anonymous — Thu, 11 Dec 2008 15:46:50 GMT

DJ,

I am not sure how you ever took my post to mean buying a car IS an investment or a pet, a new car purchase is a MONEY PIT, a total waste of money, used vehicles are possibly even worse. However as much as a drain one is on a persons finances, most people in the US need one as we live in a spread out society, I'd suggest functionality over styling everytime, Seriously, who needs or even wants an Escalade or a Hummer??

I don't know anything about that Evo, but 6K off a car with a 40K MSRP, doesn't sound like a good deal, Like you posted, a 2008 model has a current NADA trade-in value of 32K. 1st rule of car buying, LOWBALL.

This is OT, but since the OP said he was thinking of buying a home, I'll agree with you, home ownership is NOT a sure fire way to fnancial freedom or success, As you've undoubtably read on these forums, It can be a sure fire way to go BK if you do it wrong. Some people are happy renting, that way they aren't tied down and can packup and move as soon as their lease runs out or they become unemployed. Hopefully that doesn't happen to you, I or the OP.

I don't live in S. Fla. so I do not know that real estate market except through what I see on the TV news, so before you or anyone else buys a home in whatever part of the country you chose, I hope you study and understand the market you're moving into or staying in. Personally, I would not live in a known huricane,tornado, snow, severe drought or earthquake zone for some of the reasons you've noted, but people do, that's their choice. Like buying a little rally car,

My advice to the OP remains, clean up his credit and refi that car loan as soon as possible,

Later,

Re: Auto Loan Advice and Suggestions, Please

Anonymous — Fri, 12 Dec 2008 14:16:10 GMT

I want a Hummer or an Escalade...... Can I have both?

Re: Auto Loan Advice and Suggestions, Please

Anonymous — Thu, 18 Dec 2008 15:45:04 GMT

Original Poster:

Your probelm lies within the fact that your WANTING to pursue a 25%+ PTI (payment to income). A good reason most domestic lenders i.e. FMCC, GMAC are turning down good loans for good people, is because they lost the farm issuing big PTI loans for high score/thin file customers like yourself.

I've been in this business a long time, and being a car guy, I TOTALLY understand the difference between Lancer vs. Evo. Those types of vehicles along with trucks/highlines have hit a lull recently, and you can procure a low mile 2006-2007 for $12-15k less than you would a new one.

Your other problem lies within the fact that you'll have to unload your trade, which no offense, you're screwed on. It isn't a Civic/Corolla and at least in my region is worth approx. $13-14k. DON'T make the mistake of rolling alot of negative equity into another loan if you don't have to. Even though your wife may have the ability to procure an attactive loan rate/terms, you will never make any headway in life rolling negative equity into your first vehicle.

I would modify/custom to make it your own, and as long as you don't go crazy with it, see what the market for those cars is like in 18-24 months. You will have paid down a good part of your loan, and financially may be able to afford a nicer car. Generally speaking, try to stay at 10% or less PTI to not only secure great loan terms, but keep yourself out of the poorhouse while doing it.

TU: 12/1/08 687, 23 yrs. old.

Pre-Owned 2006 Audi A4 Turbo, 36 mo. @ 5.05%. $440 payment with $8,500 income.

Message Edited by AutoLender on 12-18-2008 07:41 AM

Message Edited by AutoLender on 12-18-2008 07:45 AM

Re: Auto Loan Advice and Suggestions, Please

Mzpatient — Thu, 18 Dec 2008 17:40:49 GMT

First of all I disagree but respectfully disagree with the last response about home ownership.

I am 28 and I invested in my first home at 25 and I own three now. Even in this depressed market I brought my first "brand" new car this year only after I had about 10,000$ to put down on it and ensured that my payments would be no more than 350 a month. Think smart.

Home investment is better. A little yard work never hurted anyone. Do you hear complain about yard work and maintanence..no. they complain about not saving, not ensuring they had the correct interest rate, they complain about bad neighborhood choices. So think smartly. New cars come and go. A good strong and young marriage is important and having a home to start that type of foundation is even better. I don't regret my decisions and I had approximately $20,000 worth of bad debt from 1999-2005 and I paid it off and have been saving ever since. Don't invest in another car until all your other goals are met. I am not saying stay in a old clunkier but consider a used car with low miles until you get everything else you desire.

Side note if you have a car loan that is more than 30% of your income your interest rate for a mortgage is going to be killer. Just consider it.

I make this recommendation after getting my master's degree, owning three homes, a car that is paid for and owning my first new car. I don't have kids or a husband but dang it about thinking smart because if I did I would sell the houses and would not have considered a new car until I got a home for my family. Think smart...Happy Holidays.

Re: Auto Loan Advice and Suggestions, Please

Anonymous — Sun, 28 Dec 2008 22:38:57 GMT

Hey,

Not exactly sure why you're in the market for a car since you already have two cars for two people but..why not consider a pre-owned car where some other chump has taken the depreciation? My family has always done this even though we can afford to pay cash for a $40,000+ car. Most of the pre-owned cars have lasted 8-10 years before we ran into expensive problems that caused us to seek out a 'new' pre-owned. This was also a huge savings on car insurance!

Good luck!

-Kathy

Re: Auto Loan Advice and Suggestions, Please

Anonymous — Sun, 15 Feb 2009 16:45:16 GMT

Hello-

I am 28 years old and I just bought my first house at 27 years of age. I also do not have a husband or kids. I just bought an Hyunda Santa Fe, which is my first brand new vehicle. My advice for the couple is to think smart. If you know you are going to stay where you are for a few years then buying a house might not be a bad option. Things can change quickly!!! Don't overburden yourself.

My question for you Mspatient is, I am thinking about moving home and renting out my condo and maybe thinking about purchasing another home after a year or two of saving some more money. My credit is excellent(780+ range). What do you think about that? How are you maintaining the other two properties?

Re: Auto Loan Advice and Suggestions, Please

MattH — Sun, 15 Feb 2009 18:28:21 GMT

@Anonymous wrote:
Hey,
Not exactly sure why you're in the market for a car since you already have two cars for two people but..why not consider a pre-owned car where some other chump has taken the depreciation? My family has always done this even though we can afford to pay cash for a $40,000+ car. Most of the pre-owned cars have lasted 8-10 years before we ran into expensive problems that caused us to seek out a 'new' pre-owned. This was also a huge savings on car insurance!

Good luck!
-Kathy

I agree, I'm still driving a 2000 Camry that I bought in 2004 and since it still runs great I feel no urgency about replacing it. Perhaps in 2010 I'll get a 2006 or 2007 model. I could buy a very nice new car tomorrow without borrowing a penny, but in the current economy my wife and I strongly prefer to keep at least six months of emergency reserves just in case.