First post- I've been following these forums for a while but have never registered.--
I am interested in getting a loan for a new sports car, but I have a few issues.
To give a little bit of background and details
- I am a 19 year old college student
- I am self-employed, have grossed slightly over six-figures so far this year
- I have one secured card with a $1,000 CL that I've had for about 8 months, put $75-$100 each month and paid off once statement received.
- So far I beleive I still have a "thin file."
- I have no co-signer available (coming from family with credit problems/issues)
So I have a few questions-
We'll say the car is $80,000 MSRP, what if I were to put down half in cash --$40,000, or even more.
I understand I have essentially no creidt history, but that is what the huge down payment is for.
Will I get denied all together even with large amount down? My biggest issue is with me being self-employed, how can I prove my income?
FICO says that after six months of an account that you should start getting a credit score, that's not nearly enough for a good history, but will it atleast get me in the door?
Should I even bother? I don't want to hurt my credit with a bunch of auto loan inquiries.
Hello and welcome honestly 19 college student with 6 figures in income that is questionable. You really do need a fico score and more history. Thats wonderful that you make that kind of money but always remember if you are self employed lenders are going to want to see if you file taxes. In this case you need more credit extended to you and right now you don't have that.
Thank you, I should add I have tax returns from last year of income in the mid 60's.
Would I be approved for anything? I figured a big down payment would ease concerns.
Have you pulled your fico scores if not please do. I believe you do have a shot but, you need to pull your report to make sure everything looks good meaning no negative anything. The dealership will ask for income verification which you will show your tax returns your score plays a major role along with your hefty down payment.
First step in finding out if you will be granted any credit, is to find out your scores. Paying on that one card for 8 months is probably enough information to generate a credit score, which is a good thing. As long as you have no charge offs, collections, etc. then you look to be in very good shape to get a car. Being self-employed does throw a wrench into the process as you will have to prove to them many times over that you are collecting a steady paycheck, i.e. they will probably request your tax returns and at least 3 months worth of paystubs, and information about your business.
Being so young and a first-time car buyer they will try to hit you with a huge APR, however you can offset a huge amount of risk that you bring by putting so much money down, and possibly be granted a larger amount of credit that you would have otherwise, and/or a better APR.
IMO you should not be buying a 80k car at age 19, that is downright stupid. Even if it well with your means you do realize any car purchased for that amount depreciates faster than any other asset you could be buying right now. Until you are maxing out roth contributions, building at least a years worth of income in a nest egg, and investing 15% of overall income, you should not be throwing money away.
I am all for getting yourself something nice, but with half of what you are talking about putting into a car you could buy yourself a GT500, 5-series, new A6 or a hell of a lot of cars that would satisify any 19 year old.
Not only is your file thin but even if you have a six figure income your self-employed and that never looks good to a bank unless you can show several years of tax returns where you netted a profit. Believe it or not when you have a thin file your score can be irrelevant. I have seen banks turn don a 20 year old with a 720 beacon score simply because they only had 2 credit cards. On a car deal a bank will always review what is in your file more than just your score. There are some programs called first time buyers programs that are through manufacturers I believe Ford & Mitsubishi have them but they still have qualifications and I think your self-employed status will disqualify you. But if you have a huge amount to put down it may help simply because the banks risk becomes less and less. For example:
New car value= $20,000
Money you put down = $10,000
in 6 months the bank repos the car and sells it at auction for $17,000 but they only loaned you $10,000 the bank will recoup all there money + fees so in other words there risk is less. That being said banks dont like having to repo cars. The only way to know is go to a dealer and find out.