Approval Chances?

[Anonymous]

What do you think are my chances of being approved for an auto loan for a used 2017 $55k (with tax, title, etc) Mercedes E300 coupe?

Down Payment - $22k (so $33k loan)

Credit Score - 752

Monthly Payment - $800

Loan Term - 48-mo

Salary ~ $65k

Length of employment - 1 yr

Previous loan experience: none

AAoA - 4yrs

Lines of credit - 4 credit cards, $25k avail credit, 1 late payment from 4 years ago from a card I didn't even know I was authorized on

DTI ~ 31%

I have good credit and am putting down a pretty hefty down payment, but am concerned that I have a pretty short credit history and they will see $800 as a high monthly payment so $33k might be asking too much, or I will get a horrible rate. I was hoping for a good rate around 4% because my credit is pretty good, but maybe I was being too optimistic. I plan to apply at a few places, and definitely Consumer Credit Union; they seem to have the lowest and flexible rate.

[Anonymous]

Does your short credit history mean that you are young, maybe 1 year out of college given length of employment?

Chances are you can get approved but should you?

I really like that you have a large down payment that tells me you can afford the monthly payment.  Normally I would say put that $800 payment in the bankf or 3-6 months if you can do that without touching it you can afford the payment but unless that $22K is from a scratch off lottery ticket it sounds like you know what you can afford.

As an asside if the late payment is on an account you were an authorized user on you can get the account and it's history removed from your report just carefully consider the age of the account utilization.... will it help or hurt you to get the entire history removed?

Anytime someone wonders if they will get approved at a decent rate I wonder if they should do it.  Earning 65K do you need a $55K car?  Have you considered a certified pre-owned?  I have a CPO Audi and I have a better warranty than new.  I am guessing you could get a 1 year old one with <15K miles on it with better warraty for at least $13K off sticker probably more.  Then you would be financing a lot less and have almost exactly the same car.

What are your goals, do you want to own a house soon, will your living arrangements be changing if so could having a $33K loan hurt your chances of getting approved for an apartment, for a mortgage, do you care about any of that in the next 5 years?

Also what's next for you?  Maybe my assumptions are wrong, but if you are a couple years out of college with nominal housing expenses this may be the only time you can afford to spend 5/6ths of your gross income on a car.  If you get married, have a kid, get a mortgage it won't be easy to have a $55K car on a 65K salary.

Sorry for being on my soapbox it's just purchasing car after car was my biggest mistake I had 3 new cars by the time I was 19 and thought I would always be able to step up to a nicer one.

Good luck, keep us posted and think things over.  Cars are exciting and it's easy to get caught up in the excitement but just really think things over.  For that $22K downpayment you would probably be within $5-7K total of a 1 year old CPO C class and have a negligible loan, or (and I know it's not what you want to here) but there are plenty of nice new and CPO cars you could buy for less than $22K and not need a loan at all.

[Anonymous]

Worst case scenario, maybe see about taking out a longer term loan to lower the payment. 

I have a 2018 Infiniti I leased new and have a 623 payment on what was at the time a 57k income. I live with family though so housing doesn't really affect my DTI.

[Anonymous]

I appreciate hearing your experience.

Sorry, my employment at my current job is 1 year, but I have been employed for 6 years. Not sure which one is more important to the lender.

Should I get a 55k car on a 65k salary? Probably not, but I expect to be making a lot more within the next year and the next three/four years after that. I'm thinking long term - I will probably keep this car for 5 years on and don't plan to keep buying new cars. So I'm okay with taking out a larger loan right now and I expect to make extra payments toward principal so I will pay it off earlier than the loan term. With my salary right now, I have on average $1700/mo extra cash after all my expenses are paid that I just put towards my MFs/savings and don't touch at all. With that, I could cut my 4 year loan term in half. Not really concerned about buying a house anytime soon, especially living in LA, and already have my own apartment, but I do plan to move into a more expensive apartment this year, so that's where the $800/mo comes in to be on the safe side for when I want to move.

And as far as taking out a loan, I do want a loan (just not a huge amount/crazy long loan term). I've done a lot of research about this helping boost my credit. My credit has been stagnant only varying 5 or 6 points at least for the past year. Everytime I've had my credit checked, one of the reasons listed that my credit is "low" is always that I have never had an installment loan before.

So I guess my question really is will I get approved with a decent interest rate, $800/mo and $33k loan?

[Remember0]

You will have no issues getting approved. I'd recommend getting a preapproval from either Capital One (won't even cost you a hard) or a local bank / CU (PenFed/DCU could be a good option if you don't have a pre-existing relationship and don't want to go the Capital One route).

My guess is that a dealer will likely be able to beat the Capital One / PenFed / DCU rate if you don't mind the additional inquiries a dealer would run.

On the employment, some lenders dislike <1 year however looks like you have 1 year. That won't be an issue, just put at least 1 year on the application if asked.

Edited to add: I agree with poster above. Dispute / work on getting rid of that authorized user account from your reports. IMO if you have 4 other accounts in good standing you don't need that one.

[stw715]

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@Anonymous wrote:

What do you think are my chances of being approved for an auto loan for a used 2017 $55k (with tax, title, etc) Mercedes E300 coupe?

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I think you have zero chance.

No, not because your credit/financial profile, but rather there is no 2017 E 300 coupe. 

[Remember0]

Actually on stw715's note, $55k seems like a lot for a 2017 E-Class coupe. The new 2019 ones are like 60k and KBB values a 2017 E550 Coupe at ~$38-40k wholesale, $43k suggested retail, $45k CPO.

I'm not sure I would pay $55k for a used one when I could buy new for $5 - 10k more!

And per what I could find, it can't be that this is an AMG. I don't think there were E-Class AMG Coupes in 2017.

[Anonymous]

Haha good catch guys. I actually meant to type 2018 E400 Coupe. Those go for $50k here in LA and I just accounted $5k for tax, title, etc.

Pretty close in price to the new E450, but I think I’ll just avoid the depreciation and doesn’t seem there is much change from the 400 to 450 except for updated engine, and I’m a female who isn’t very much invested in all the latest and greatest in mechanical stuff, so I’ll probably just save that $10k.

[KLEXH25]

I agree with @Remember0 - try Capital One Auto Navigator and see what it tells you. I don’t really see any issue with an approval *except* maybe your current income, but the huge down payment probably outweighs that. Once I was prequalified through Cap1, I applied with DCU and the dealer (but the dealer got me the best rate).