0.9% APR on '20 model: can I roll over?

Anonymous · ‎03-18-2020

I recently posted about the predicament concerning my vehicle I currently find myself in. After reading the replies to that post, I thought I'd take a look at a nearby dealership. Not only did I find the vehicle I'd like to finance but I also found a pretty sweet manufacturer's offer on said car.

To recap:

02/19 Filed Ch. 7 BK

04/19 Financed '14 Subaru Outback at the dealership w/terms $454.36/mo x 72 mos @ 14.99%

06/19 Ch. 7 BK DC (mortgage loan included, no reaffirmation agreement filed)

03/20 Applied for VA home improvement loan, denied due to BK <2 yrs on record

03/20 Credit Bureaus reporting FICO scores between 655-670

Because my mortgage was DC, it is not reported on my CR. So, technically, my DTI is 10% (only debt is auto loan). I've consistently paid more than minimum payment every month. The rate reduction plan with the lender has been lowered to 14% and that's the lowest they'll set it. The lender does not allow me to make extra payments. Instead, the lender rolls over that money to the next month and applies all of it to interest. Also, I am approx. $7k underwater. Payoff is currently <$19k and TIV is <$12k.

I've talked to my CU and bank to refi loan but it has not been two years since my BK was DC. Also, they don't want to lend money to someone who is that underwater. I don't know how to get out of it unless I wait until 06/21 to attempt a refi when the car is worth even less, and hope they approve the app.

So, back to the dealership... The manufacturer's offer is 0.9% APR on all '20 Subaru Outback models with no down payment required. My income is guaranteed and I don't pay taxes (100% service-connected disabled veteran). There are no other derogatory marks on my CR. I can afford a higher payment on a shorter term.

Is it worth attempting to finance a new vehicle through that dealership and roll over the negative equity from this trade-in? I don't want to move forward and have a HP on my CR unless I'm pretty sure the odds are in my favor.

sccredit · ‎03-18-2020

TBH I'm not sure you would qualify for the promo rate with Chase at 13 months post DC. Scores would be borderline at best and the BK will hurt you pretty bad with them. I may be wrong but that is my gut reaction.

Anonymous · ‎03-20-2020

UPDATE: I sent the pertinent questions (found on this board) to the dealership on Mar 18 and received a reply today from the finance director. This is what I was told:

1. What credit reporting agency does your lender, Chase, use?

Transunion, Equifax if there are more accounts registered.

What is the meaning of the latter part of that sentence?

2. Does your lender use FICO Auto Industry Option (auto enhanced) scores or regular FICO credit scores?

Regular FICO scores.

3. Whats the minimum score that I need to get approved through your captive lender?

600

4. Whats the minimum score that I need to get approved at the best rate by your captive lender?

720

5. How does a discharged bankruptcy affect your loan decision?

Does not affect if it has been reestablished.

6. What factors other than my scores go into your decision-making process?

DTI and LTV

My current DTI is 10%.

7. Can you dictate which score or which credit reporting agency Chase uses to make a loan decision?

No.

I also asked about the terms for the 0.9% APR on a new 2020 Subaru Outback, and no, I would not meet them. That being said, I believe I would qualify for a better APR on a loan with Chase than I currently have with my current lender. Should I move forward on a new loan? To add, given the current economic health and that my income is non-taxable by VA and SSDI, it's not likely my income will change. Would it be wise to take on a higher car payment at a lower APR at this time?

Revelate · ‎03-21-2020

@Anonymous wrote:
UPDATE: I sent the pertinent questions (found on this board) to the dealership on Mar 18 and received a reply today from the finance director. This is what I was told:

1. What credit reporting agency does your lender, Chase, use?

Transunion, Equifax if there are more accounts registered.

What is the meaning of the latter part of that sentence?

2. Does your lender use FICO Auto Industry Option (auto enhanced) scores or regular FICO credit scores?

Regular FICO scores.

3. Whats the minimum score that I need to get approved through your captive lender?

600

4. Whats the minimum score that I need to get approved at the best rate by your captive lender?

720

5. How does a discharged bankruptcy affect your loan decision?

Does not affect if it has been reestablished.

6. What factors other than my scores go into your decision-making process?

DTI and LTV

My current DTI is 10%.

7. Can you dictate which score or which credit reporting agency Chase uses to make a loan decision?

No.

I also asked about the terms for the 0.9% APR on a new 2020 Subaru Outback, and no, I would not meet them. That being said, I believe I would qualify for a better APR on a loan with Chase than I currently have with my current lender. Should I move forward on a new loan? To add, given the current economic health and that my income is non-taxable by VA and SSDI, it's not likely my income will change. Would it be wise to take on a higher car payment at a lower APR at this time?

I don't think I'd do anything to upset cash flow at this point. You could simply apply that extra cash to the loan anyway to try to reduce the amount you're under water, car depreciation isn't linear you will catch up eventually and you can accelerate that if you have extra cash. If these were normal times that might well be your highest APR debt and at 14% guarunteed return, keep throwing money at it.

I think the 2 years post BK might be a limit for a lot of lenders honestly, there are some like DCU (I'm sure there are others I'm just most familiar with them out of all CU's) who will refinance at 120% LTV but I don't know what their qualifications are as that'll be lender by lender.

I'd be shopping around to refinance the current car rather than buying a new one but that's me, and trying to catch up as much as possible in the mean time.