First time car buying - daughter

[lord_kinbote]

Afternoon.  Need some help in regards to a few questions I have about daughter purchasing her first vehicle.  The last time I bought a vehicile was in 2015 and I handed them a check, so I am not sure about the entire credit process / income verification.

She is 19 and works for a movie theater company and her income is probably less than 10k a year - weekends only (school M-F).  Her FICO credit scores are 750 ish across the board.  I put her on as an AU when she was 15 and then obtained a Discover, Citi and Amex under her own name when she turned 18.  She is interested in the Nissan Rogue, and currently they have 0% financing up to 72 months.  

If required, she can put down 10k and I could always co-sign.  I assume the factor that may require me having to co-sign and or her putting down 10k is due to her low income.  I read over the forum a bit and I saw a few posts saying with solid scores, there should be no need for them to have income verification?  Any information on this topic, would be most helpful.  

My last question is in regards to the financng.  Since we are interested in financing directly from Nissan to take advantage of the 0%, should I be concerned with dealership shotgunning her reports?  Thanks in advance for the help.

[Sandman771]

I work at a car dealership. I'll take this one.

As to the 0% it is only available with NMAC, so they should NOT shotgun her credit everywhere. Not saying they won't, but they shouldn't. I know I wouldn't. Money down, with that score the only reason for money down would be to reduce monthly payment and to possibly show that she is serious about buying a car. I'd try to get it around $2500 or $5000 and put the rest somewhere getting a return since she is borrowing free money. 

With that income you will probably have to sign with her because of DTI. 

I hope this helps and if you want feel free to PM me and we can discuss it more. 

[JGGM]

Scores may be solid, but if she's never financed anything big, it could still be a little challenging with her income. Obviously the down payment helps, and with that DP I'm sure she can get approved, it's the 0% I am unsure about. Nissan Motor Acceptance is relatively lenient in my opinion, so if she puts the $10k down I think there's a good chance that she'd be ok on her own....but if not certainly adding your good credit to the equation would get her to the 0%. Of course if it's 0% I have a hard time reasoning with putting almost half down in cash. It's free money, I'd put as little down and grow the $10k in some sort of investments. 

[lord_kinbote]

Thanks much for the response - very helpful. What does DTI stand for?

[Sandman771]

Debt to income. You said she makes about $10K per year, so that monthly isn't a lot and a car payment being in the $300-500/ month range really throws that out of whack. So with your income then you get that DTI back under control. 

[lord_kinbote]

Thanks for the replies, I believe now I have good information on where we stand.

[Appleman]

DTI is calculated by taking Gross monthly pay divided by current expenses (basically things showing up on a credit report) They will add in rent I believe if there is no mortgage.

$10,000 / 12 months = $833 is monthly gross income. Ideally stay below 40% (.4) for all payments = $333.33 for all credit type payments (student loan, car payment, rent, credit card).

$15,000 car at 5% interest for 5 years = $283.07 a month

$15,000 car at 0% interest for 5 years = $250 a month

As others have indicated you will likely have to co-sign 

Good luck and let us know how it works out for her.

[Anonymous]

Don't forget about insurance.  Plan on another 120 bucks a month or more, that combined with the payment will chew up most of her income.  I just went through this with my daughter, ended up buying her a 2014 Mazda 3 touring, CPO for 15k OTD.  Could not get past the idea of putting a kid in a brand new car and have her take on that level of debt and depreciation.  

[lord_kinbote]

Yes I understand. My wife and I will be paying the insurance while she is in school. The car will be her only expense.

[Anonymous]

I'm sure she can get approved for an auto loan but the problem will obviously be her income. I'm not sure she would get approved for 0% as that is with approved credit, although her scores are good she has had no previous auto installment loan history. Her only credit from what you have provided is credit card's and her high credit is probably low on her individual card's. When a dealer submit's a customer to a lender they still have to input her income which she would not qualify for ANY financing with her real income as most lender's have a 1500-2000 individual gross monthly minimum income requirment. So the dealer would have to lie to the lender's about her income and hope to not get income verification.

If I were you I would go ahead and co-sign for her on the auto loan to assure she gets  the best possible term's. Maybe she will get a higher paying job in the near future and with the credit she will have built with the joint auto loan she could perhap's refinance it just in her name to get you off of the loan.