topic Re: Recommendations after auto-loan rejection in Auto Loans

Recommendations after auto-loan rejection

Anonymous — Tue, 27 Jan 2015 16:10:32 GMT

Hi There,

Hoping someone can help my out here. First time financing a car and I think my local bank contact may have steered me in the wrong direction so just need some feedback. My info is below and I'll try to keep the backstory quick.

Walked into my local bank last week to see the rate I could get, was told best route was a check-ready loan up to $50k. I told the bank I didn't need $50k but was curious if I financed more than planned what my rate/payment might be. They told me go ahead and apply assuming the max and then could always end up financing less, applied, got all my income verification info together, and then got an email over the weekend saying I was denied and I'd receive a letter in the mail this week explaining why.

My assumption is it is becuase the 50k was way too much, and I never should've listened to the bank associate who recommended I apply for the full amount...But now I'm a bit worried -- what if I can't get the 35-40k I really would like to be at? And can I just go back to my bank and apply for a lower amount? Or should I shop around given the rejection?

Credit Score: 695-727

AAoA: Not sure average but oldest is 9+ years

# of positive trade lines: 10 Open accounts? not sure what this means.

# of negative trade lines: No deliquencies/derogatory reports

Income: 77k

Lenght of Employment: 4+ years

Previous Loan Experience: None for Auto (mortgage/Student Loan/revolving credit)

Debt-to-Income (DTI): 26%

Year of Car: 2015

Miles: 0

Purchase/Refinance: $65k

Requested loan term (XX Months): 72m

Down payment amount: $25-30k

Co-borrower/Co-Signer:

Other:

Re: Recommendations after auto-loan rejection

SamsungHDTV — Tue, 27 Jan 2015 20:34:43 GMT

I think you should wait until you receive the denial letter. Or you can call the banker or their auto finance department and see if they are willing to let you know verbally. Reassure them you just want to know why you were not approved and that you're not upset. Reason why I say this is because lots of bankers hesitate to deliver the denial message because some customers don't take it well.

I'm thinking its because you don't have any auto loan history. Some banks don't approve you for over a certain amount no matter how good your credit is if you have never had an auto loan there before. Some banks say you have to have borrowed at least half of the amount you are applying for now. So for example, you applied for $50K, bank A might say we want to see you've borrowed at least $25K. Now this is only a guess at your denial reason, from the information you have provided me everything else looks good. But we will be able to tell more when you get that letter or call to find out.

You can try other lenders, but it would be helpful to know the bank was unable to approve you.

Hope this helps.

Re: Recommendations after auto-loan rejection

Anonymous — Fri, 30 Jan 2015 14:49:53 GMT

Thank for the thoughts and all makes sense. Still haven't received the notice from my bank so will give them a call and see if they area willing to explain via phone. Thanks!

Re: Recommendations after auto-loan rejection

SamsungHDTV — Fri, 30 Jan 2015 15:20:58 GMT

You're welcome. Let me know what you find out when you call.

Re: Recommendations after auto-loan rejection

Anonymous — Fri, 30 Jan 2015 15:43:51 GMT

Ok...just got off the phone with the bank and they confirmed I was denied because of no previous car loan history or any recurring payments (or something to that effect). Guess you were right!

So does my mortgage not count, or it's considered a different type of loan I guess?

I have a call later today with a relative of a friend who is an underwriter for a regional bank, terms aren't as good as what I applied for with the big national bank that rejected me (66mths vs. 72; and 4.4% vs. 2.3), but any other thoughts? At least figure I can talk to her and see if they'd ever approve me.

Haven't applied at the dealership as I was hoping to have an approval before going to them to negotiate, but maybe that's my best bet at this point?

Re: Recommendations after auto-loan rejection

SamsungHDTV — Fri, 30 Jan 2015 18:40:11 GMT

@Anonymous wrote:
Ok...just got off the phone with the bank and they confirmed I was denied because of no previous car loan history or any recurring payments (or something to that effect). Guess you were right!

So does my mortgage not count, or it's considered a different type of loan I guess?

I have a call later today with a relative of a friend who is an underwriter for a regional bank, terms aren't as good as what I applied for with the big national bank that rejected me (66mths vs. 72; and 4.4% vs. 2.3), but any other thoughts? At least figure I can talk to her and see if they'd ever approve me.
Haven't applied at the dealership as I was hoping to have an approval before going to them to negotiate, but maybe that's my best bet at this point?

Yeah, that's what I figured it might be. To answer your question, yes its considered a different type of loan, no your mortgage doesn't count (at least to that lender, and probably most with this credit guideline). Silly though because mortgages are way higher amounts.

Other thoughts: You could find out what the maximum amount is that the bank will approve you for without previous experience, but its usually very low $15-20K so it might not be worth finding out unless you're willing to down that much money. You can reach out to other lenders and find out their credit guidelines regarding first time auto loan applicants.

Your best bet is likely with the dealership. As they are 'indirect' financing and have more lenient guidelines. To clarify, when you applied with the major bank, you applied through their 'direct' auto finance department (with more stringent guidelines). Its very possible that you apply at the dealership, they submit your application through the same bank, but it goes to their 'indirect' auto finance department and approve you for the original requested amount.

If you go to the dealership without financing, just bluff. "I have secured financing at a great rate that I will not disclose, but will give you an opportunity to give me your best rate". They will see your high credit scores, and hopefully wont try to add a margin on the rate. I think you'll be okay.

Re: Recommendations after auto-loan rejection

Creditaddict — Mon, 02 Feb 2015 00:26:48 GMT

I would think you could get much better rate and terms DIRECT at the dealership since you are looking to buy brand new... they specialize with the amount because they sell the car!

What are you looking to buy?

Re: Recommendations after auto-loan rejection

bigblue7722 — Wed, 04 Feb 2015 01:37:26 GMT

@Creditaddict wrote:
I would think you could get much better rate and terms DIRECT at the dealership since you are looking to buy brand new... they specialize with the amount because they sell the car!

What are you looking to buy?

im wondering the same thing. Thats a heck of a DP the OP has but thats still a heck of a loan amount with only 77k income.

Re: Recommendations after auto-loan rejection

disdreamin — Wed, 04 Feb 2015 02:04:22 GMT

@bigblue7722 wrote:
im wondering the same thing. Thats a heck of a DP the OP has but thats still a heck of a loan amount with only 77k income.

+2 on that. OP, your downpayment amount is great, obviously, but I always shake my head at people who are spending nearly their annual gross salary on a car. I just don't see the logic in it, to be honest. I love cars, and I love driving, but I don't see a $65K vehicle as a necessity or enough of a priority to put that much spend towards one. Obviously opinions differ widely n that, though.

A couple questions - first, if you can actually afford the vehicle, why drag your loan out over *72* months? An obvious arguement against that is that interest rates tend to be higher for the longer term loans, plus you barely make any headway with principal doing it that way.

Second, is the bank aware of the fact that you would be putting down a substantial amount? To me, this is something that applying after you have the car and amount determined could potentially help with. When a lender looks at an outlay of $50k, they may be thinking 100% finance (or close to it). Having them aware of the fact that you plan to put down ~40% or so may help with your application. This may be something the dealership has better luck with, as others have said - the banks they work with will be seeing the selling price and also downpayment.

Re: Recommendations after auto-loan rejection

EddieK — Wed, 04 Feb 2015 02:39:42 GMT

@bigblue7722 wrote:
@Creditaddict wrote:
I would think you could get much better rate and terms DIRECT at the dealership since you are looking to buy brand new... they specialize with the amount because they sell the car!

What are you looking to buy?
im wondering the same thing. Thats a heck of a DP the OP has but thats still a heck of a loan amount with only 77k income.

While I'd agree if he/she were looking to finance the entire 65K, OP states that they're planning to put down 25-30K, which makes the loan amount 35-40K. Very reasonable in that aspect.

Re: Recommendations after auto-loan rejection

bigblue7722 — Thu, 05 Feb 2015 00:27:31 GMT

@EddieK wrote:
@bigblue7722 wrote:
@Creditaddict wrote:
I would think you could get much better rate and terms DIRECT at the dealership since you are looking to buy brand new... they specialize with the amount because they sell the car!

What are you looking to buy?
im wondering the same thing. Thats a heck of a DP the OP has but thats still a heck of a loan amount with only 77k income.
While I'd agree if he/she were looking to finance the entire 65K, OP states that they're planning to put down 25-30K, which makes the loan amount 35-40K. Very reasonable in that aspect.

Even at 40k thats more than half of the OP's income. A Good rule is around 35% so i would not call that very reasonable. Also, when you are buying a 65k whichever one it might be repiars and general mantince tend to be much higher as well as your insurance, and state taxes if you live in a great state like CT. Idk if it was me i would buy a 40k car put 20k down take out a loan for 20k and pay it off in like 3 years. Having the title in your hand is a great feeling.

Re: Recommendations after auto-loan rejection

EddieK — Thu, 05 Feb 2015 03:07:15 GMT

@bigblue7722 wrote:
@EddieK wrote:
@bigblue7722 wrote:
@Creditaddict wrote:
I would think you could get much better rate and terms DIRECT at the dealership since you are looking to buy brand new... they specialize with the amount because they sell the car!

What are you looking to buy?
im wondering the same thing. Thats a heck of a DP the OP has but thats still a heck of a loan amount with only 77k income.
While I'd agree if he/she were looking to finance the entire 65K, OP states that they're planning to put down 25-30K, which makes the loan amount 35-40K. Very reasonable in that aspect.
Even at 40k thats more than half of the OP's income. A Good rule is around 35% so i would not call that very reasonable. Also, when you are buying a 65k whichever one it might be repiars and general mantince tend to be much higher as well as your insurance, and state taxes if you live in a great state like CT. Idk if it was me i would buy a 40k car put 20k down take out a loan for 20k and pay it off in like 3 years. Having the title in your hand is a great feeling.

I can see your point, but you should be using overall DTI...he's at 26% right now, with a $600 payment, he's at 35% overall DTI. Completely reasonable, imo.

Re: Recommendations after auto-loan rejection

TRC_WA — Thu, 05 Feb 2015 15:19:20 GMT

@SamsungHDTV wrote:
I think you should wait until you receive the denial letter. Or you can call the banker or their auto finance department and see if they are willing to let you know verbally. Reassure them you just want to know why you were not approved and that you're not upset. Reason why I say this is because lots of bankers hesitate to deliver the denial message because some customers don't take it well.

I'm thinking its because you don't have any auto loan history. Some banks don't approve you for over a certain amount no matter how good your credit is if you have never had an auto loan there before. Some banks say you have to have borrowed at least half of the amount you are applying for now. So for example, you applied for $50K, bank A might say we want to see you've borrowed at least $25K. Now this is only a guess at your denial reason, from the information you have provided me everything else looks good. But we will be able to tell more when you get that letter or call to find out.

You can try other lenders, but it would be helpful to know the bank was unable to approve you.

Hope this helps.

I would think this has a lot to do with it...

My previous auto loan was $22k... I just got approved for a $44k loan with $0 down. I received a handful of denial letters stating insufficient experience at this amount of loan blah blah... and was also denied a few times for insufficient down payment.

The dealer let me drive it off the lot at 9pm when everything was closed... the finance rep said "If I wasn't confident I'd get you approved you wouldn't be driving it off the lot."

I got the car at a decent rate considering this loan is twice what I have ever financed and I still have a BK13 reporting for another year. My plan is to refi next year when my reports are clean.

What's funny is the first dealership told me they had to have $7k down to get the loan approved... the second dealership obviously was more interested in actually selling a car because I got it for $0 down... my dream car.

Re: Recommendations after auto-loan rejection

Anonymous — Fri, 06 Feb 2015 16:51:01 GMT

Appreciate all the concern and worrying over my financial situation but I am well aware of the financial decision I'm making, and in no way am I viewing this as an investment. Purely about having some fun -- first ever brand new car! My last purchase was a $1,300 honda civic that I paid for in cash, and she is still running great. But do appreciate those of you thinking about things from that perspective and giving some advise.

Just for anyone else looking at a similar situation -- want to clarify... The $65k was an estimate and included taxes and everything else (so my purchase price isn't quite that high). I have the ability to put more down, but based on the relatively low interest rates I was being quoted it didn't make sense to tie all that cash up when I can invest it elsewhere. That's why I targetted $25-30k down and a $35-40k loan.

Anyway, to Samnsung & TRC_WA's points -- I think it was completely about never having a car loan before, and that I went to a large national bank first. The regional bank I tried next got me approved for a $35k loan at 4% over 66months, and now the dealer was able to get me a $40k loan and a sub 3.5% rate, just waiting to actually get the final numbers... Wew. I didn't ask for this -- but the dealership actually offered me the option to go as low as $10k down, not sure if I would've been approved for that -- but they offered it up once I submitted my info.

Probably should have gone with the dealer first, in hindsight? I think someone mentioned it but the dealer is obviously incentivized to get things done, so dumb rookie mistake not to just start there and then see if I could get a better rate once approved.

Appreciate all the insight and feedback, and I'll post once everything is official. Thanks again!