Auto Shopping is scaring me

kahmyah · ‎04-23-2008

hello and thank you for your time..first let me outline everything..i have the following FICO scores Equifax 655, Experian 637, and Transunion 626. I had a few delinquencies on my report that I PAID off several years ago (about 5 or so). I have two collection items one of which is PAID off this month and theother will be paid off next month. I have two credit cards that are open that I have paid on time and have 0 balances on them. ok with that said, i am doing my research on auto loans due to the fact that I am need of a new car at the earliest yesterday and at the lates no longer that within the next two months. I have no credit car history since the last time I had a car loan was 15 years ago and its currently not on my credit report. So with all this information, I began my research and found out through this site about a separate credit score strictly for cars or automobile purchases. If i was scaredor panicked before I am really nervous now. With these scores is there a chance do you think I can get a loan if ever within reason (anything below 14-15%). Ok can you say when pigs fly given all the information I just gave. But I can hope, be optimistic, light a lot of candels, and PRAY a lot can't I. But seriously, my score went down (Experian due to a balance increase) to the current amount. But that was before I made my payment ON TIME/AHEAD OF THE DUE DATE I might add, befor ei twas reported. So I would think that along with the paid off collection item would raise my score a little and make me look favorably in the banks eyes. Is that wishful thinking or my part or what would any one suggest. I have become fico obsessed over this. I check my scores practically everyday even with score watch. thank you..

Takunda1 · ‎04-23-2008

kahmyah wrote:
hello and thank you for your time..first let me outline everything..i have the following FICO scores Equifax 655, Experian 637, and Transunion 626. I had a few delinquencies on my report that I PAID off several years ago (about 5 or so). I have two collection items one of which is PAID off this month and theother will be paid off next month. I have two credit cards that are open that I have paid on time and have 0 balances on them. ok with that said, i am doing my research on auto loans due to the fact that I am need of a new car at the earliest yesterday and at the lates no longer that within the next two months. I have no credit car history since the last time I had a car loan was 15 years ago and its currently not on my credit report. So with all this information, I began my research and found out through this site about a separate credit score strictly for cars or automobile purchases. If i was scaredor panicked before I am really nervous now. With these scores is there a chance do you think I can get a loan if ever within reason (anything below 14-15%). Ok can you say when pigs fly given all the information I just gave. But I can hope, be optimistic, light a lot of candels, and PRAY a lot can't I. But seriously, my score went down (Experian due to a balance increase) to the current amount. But that was before I made my payment ON TIME/AHEAD OF THE DUE DATE I might add, befor ei twas reported. So I would think that along with the paid off collection item would raise my score a little and make me look favorably in the banks eyes. Is that wishful thinking or my part or what would any one suggest. I have become fico obsessed over this. I check my scores practically everyday even with score watch. thank you..

If you are looking for a new car you may qualify for low rates with a 60 month term. If you are looking for a used car the rates may be much higher. New car sales are slow so dealerships are willing to negotiate if everything else is in order.

kahmyah · ‎04-23-2008

ok, thank you. but is there a big difference between FICO scores vs the one the auto dealers use? since as you say the dealers use a FICO score based strictly for automobile purchase and consumers don't have access to this data, how can you know which or what they will use. can you estimate it or best guess?

Takunda1 · ‎04-23-2008

kahmyah wrote:
ok, thank you. but is there a big difference between FICO scores vs the one the auto dealers use? since as you say the dealers use a FICO score based strictly for automobile purchase and consumers don't have access to this data, how can you know which or what they will use. can you estimate it or best guess?

Dealerships use an auto enhanced score. Since you've never had an auto loan, they'll consider the otehr aspects of your credit. ie. Total revolving debt, how many lates you have, how long you've been employed etc. Using that information a loan can still be given. Everyone had to have their first car loan and they went through the same thing. When I got my first car in 04' I had only had my job for about 2 yrs but my credit cards were all paid ontime & I was approved. Some dealeships will ask for tax returns too. All in all your scores would qualify you for a loan.

Anonymous · ‎04-23-2008

Auto dealers have access to excellent credit options for you. However, they do not need to tell you this. Remember there are 3 pieces to an auto transaction:

1. The car purchase

2. A trade in

3. Financing

These are three seperate transactions that the dealer will try to combine into one. You are coming from a weak position when you go into the dealership. They are not there to help you, they are there to make a profit. The higher the profit for the dealership, the higher the commision for the salesperson.

Before you buy the car, pay off any open collections. These will hurt your rate much worse than paid/closed collections.

The best rate you will be offered will be from a credit union. Join one and examine your options with them. You will be a VERY STRONG BUYER if you have already been pre-approved by your credit union. This puts you in control of the financial piece. A car dealer may be able to get you a rate of 9.9 percent. Guess what, he doesnt have to give you that rate. He, sensing your desperation about your credit will come to you and say, I'm sorry but the best I can offer you is 13.9 percent. Why would he do that? Because of what we call RSP. It is a rebate paid to the car dealer for every tenth of a percent he can get you to agree to over what ou qualify for. Is it legal? yes. If he can get you 9.9, senses you are afraid of your bad credit and expect worse he will deliver worse. That 13 percent he quotes you, 4 percent over the offered rate, can earn him an extra $1000.00 at your expense.

Now, if you want a new car, do your best to keep it 10 years. If you buy used, go about 3 years old and keep it 4-5 years. Over time this limits your total expense and allows you to keep more bank "ala Clark Howard".

New car MSRP price allows for a 9-11 percent profit for the dealer. Often you can buy below dealer cost, as he gets other incentives and can charge off some expense in advertising. I wont go into details here, but you can successfully buy a vehicle 25 percent below MSRP depending on dealership advertising budget and time of year of purchase.

There is so much to know that i would wear myself out trying to type with the two fingers I use, but most of all, good luck and keep reading!

kahmyah · ‎04-25-2008

i was always informed that when negotiating for a new car, focus on the INVOICE price and not so much the MSRP. Is that still correct? Also, based on what you typed in here and I am EXTREMELY grateful I might add, whatever they offer in terms of interest rate I should assume its set more for in their favor and try to get them to come down a few percentage points. If so, and if that is true, how would you suggest I go about doing that. I thought about going to either Capital One since I bank with them now and take advantage of their auto purchase program. However, I think based on what I said previously, that my credit would limit me in terms of getting a good rate. As I mentioned, I have no outstanding credit card balances. All my previous balances have been SETTLED although they still appear on my credit report but they are paid. I had two collection items one of which is paid off paid in full now and the other will be paid next month. I think I will try and hold off hopefully until the end of next month depending if my current vehicle last that long and I will be in much better shape I hope from a credit stand point. Do you think this is a good or sound strategy. Control or take care of the things I can and hope for the best for the outcome..What is an auto enhanced score and how do i increase it in my favor. I don't have a car payment or car listed at all on my credit report considering the car I currently own was last purchased in or around 1994. So now what..

Anonymous · ‎04-25-2008

What ever they offer in terms of Interest rate you can probably knock down several % points. In 2004 I purchased my 1st car (so no car payment history), the one score I saw was 653. They offered me 8.99% and I got them down to 5.99%.

Dealerships make their money on the Financing, not the car purchase price. Once you find the car you want ask to see the Invoice for that exact car and negotiate to purchse for their cost. If you fight long enough they will sell it to you for Invoice.

kahmyah · ‎04-25-2008

They will give that to you? Really? Wow..Ok, as you can see I am real novice at this..What if they don't give it to you? Do you go by the Kelly Blue book value then to use as a starting point. Once I get that settled what or how would you suggest for getting them to come down on the interest rate if any? what tactic or strategy or sales speak to use. I want to be armed and ready for when the fight begins over this. Grant it I guess I may not have a lot of leverage on my side but every little bit or thing counts I suppose..Thank you all again for all your insight, help, and words of wisdom. I truly do appreciate it..You have no idea how much I do.

Anonymous · ‎04-25-2008

Back when I got that interest rate the only thing I kept saying was that I couldn't afford 8.99%. They tried the "if you pay that interest rate for 1 year then come back and re-finance with us" bull for about an hour, but they eventally gave in.

If you go to any dealership and they won't show you the Invoice go somewhere else. I have never had a dealer refuse to show it to me. (3 cars in 4 years!)

kahmyah · ‎04-27-2008

when a company pulls your credit report, in this case since i am going for an auto loan, wouldn't that count against me and lower my scores. i don't need that right now. so how do i get around it if any...the more inquires the worst it is for you i thought..so if i apply on line to lets say to cap one or a roadrate.com, some places like that, wouldn't that count against me with both of those inquires showing up on my report and lowering my scores..thank you..