I don't get it, can someone explain?

[Anonymous]

My situation was very similar to yours.    In a nutshell..   Right at 2 years ago I tried to buy a used car..  The ONLY thing on my credit file was a bunch of medical charge offs and collections.    I had no credit cards.. No repos. Nothing I was making payments towards.  I tried to have my step dad co sign  (790 score)  and was still turned down..   I knew then I had to do something.

I got a capital one secured card..  Payed it every month on time for a year.   Then Merrick bank gave me my first unsecured card.. I paid it every month on time for about 4 months.    I pre qualified on through capital one for 23k  with an interest rate between 3-12%        Found the car I wanted, (2014 Hyundai Veloster turbo with 14k miles)  at the price I wanted (15k) and went to the dealership..  Cap one did indeed approve me, but at 12%..  I decided that I wasn't willing to pay that much of an interest rate.   The dealer explained to me that it had more to do with my small credit file/history than it did to do with my charge offs and score.    My score was 644..  

The dealer I went too is like the #1 Hyundai dealer in my state.. He explained to me that he had a lot of pull with Hyundai financial and said he would beat Cap ones 12%.    He delievered on his promise and got me 8%.    He said he was even surprised I got that low of a rate considering my credit file size.    I was turned down by my own bank (wells fargo)  and one other bank.      I also put 2k down.

My advice to you would be to save some more money to put down, and also try to get another credit card, unsecured and pay on it for a few months..  And also, look into the bigger dealerships.    If you are looking for the brand of car they sell, then they do in fact sometimes have more pull in getting you a better rate. Especially if they sell tons of cars..     

Dealer told me that since he was a Hyundai top tier dealer and since I was looking at a Hyundai, it made all the difference.. Had it been another brand of car, probably wouldn't have happened.. I would imagine the same is true for big time ford, chevy, toyota, etc  dealers.     That is just my experience..  Try to keep your chin up.. It can be demoralizing when you get turned down or offered a high rate.  Just be patient.  

Matt

[pipeguy]

In addition to the good advice already posted in this tread by others, I'd suggest you talk to your bank and Credit Unions and see if they'll offer you a loan - the reason being that "dealers" mark up loans and profit from them so they tend to be more expensive as far as rates.

That's not to say that a good dealer won't be able to get you a loan when others say no, because some will, just understand its a revenue stream for them especially when the are quoting subprime rates. Note that Carmax is now doing in-house subprime lending in addition to all their other financing sources, because its profitable. 

[jim44]

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@pipeguy wrote:

In addition to the good advice already posted in this tread by others, I'd suggest you talk to your bank and Credit Unions and see if they'll offer you a loan - the reason being that "dealers" mark up loans and profit from them so they tend to be more expensive as far as rates.

That's not to say that a good dealer won't be able to get you a loan when others say no, because some will, just understand its a revenue stream for them especially when the are quoting subprime rates. Note that Carmax is now doing in-house subprime lending in addition to all their other financing sources, because its profitable. 

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What you are stating is true and good advice.  However some banks and other lenders are changing their policies as far as points the dealer can make off a loan. Some lenders pay a set fee now instead of points.  Others, especially subprime charge the dealer acquistion fees... I've seen some as high as $1500 for high credit risk buyers that a dealer is prohibited by law to charge this fee back to the customer. Some major lenders also will keep customer and buy aprs the same with no available points.... it all depends on the customer's credit file and the car they are buying.  Times are changing.

[Anonymous]

It isn't just the subprime lenders..  Capital one was charging the dealership an aquisition fee on me had I went with them.   The dealer can't charge you back, but they strongly encourage you to get the "extended warranty"  to kind of offset the fee.   That is what they wanted to do with me..  Luckily they got me financed through Hyundai without a fee.  I still got the warranty, but still financed the car with the warranty at book value, so im not upside down.

[pipeguy]

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@Anonymous wrote:

It isn't just the subprime lenders..  Capital one was charging the dealership an aquisition fee on me had I went with them.   The dealer can't charge you back, but they strongly encourage you to get the "extended warranty"  to kind of offset the fee.   That is what they wanted to do with me..  Luckily they got me financed through Hyundai without a fee.  I still got the warranty, but still financed the car with the warranty at book value, so im not upside down.

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Did the Hyundai dealer tell you that? I'm pretty sure that a bank offering a loan to you to buy a car does not result in the dealer paying the bank $1500 and getting an extended warranty tossed in....

[Anonymous]

I had a dealer try and slip a $1000 application fee for Chase loan in on me one time. AND, the really interesting part was he wasn't getting it financed with Chase. Said Chase wouldn't approve the loan, but I still had to pay the app fee. I can't repeat the things I called him or threatened him with here on the forum. I have a very low level of trust with car salesman. 

[jpope1294]

Have you tried cap one auto.  They have prequalify with no affect on score.  I was able to start with them with scores way lower than yours.  Rate was 12% but got in my BMW.  Also, went to CarMax with the check from cap one and process was painless.  They didn't try to shop me around for better rates because I knew my credit and did not want to get with a million inquires.  I am a cap one fan for credit cards and auto loans because they took a chance when other gave me the runaround.

Here is cap one auto site:  https://ane.capitalone.com/landing

Good luck

[Anonymous]

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@pipeguy wrote:

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@Anonymous wrote:

It isn't just the subprime lenders..  Capital one was charging the dealership an aquisition fee on me had I went with them.   The dealer can't charge you back, but they strongly encourage you to get the "extended warranty"  to kind of offset the fee.   That is what they wanted to do with me..  Luckily they got me financed through Hyundai without a fee.  I still got the warranty, but still financed the car with the warranty at book value, so im not upside down.

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Did the Hyundai dealer tell you that? I'm pretty sure that a bank offering a loan to you to buy a car does not result in the dealer paying the bank $1500 and getting an extended warranty tossed in....

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Slightly confused by your question.   What happened was once they ran the app through cap one, it came back approved, as I had a pre approval.  I was looking over the terms and saw the amount that was being financed, and it was significantly more than the sticker price of the car.   I asked why, and he showed me the paper work that was printed out from cap one showing that yes they would finance me but wanted the lot to pay a fee due to me having limited credit and being high risk.    The other money was the dealerships mastertech warranty, which I was told I did not have to purchase.   But I ralized that it was the dealerships way of offsetting the fee they were going to have to pay.  Along with the 12% interest.  It was all very confusing..  But at the end of the day, I did much better going through Hyundai financing.  Im sure the dealership stretched the truth..   But I did see the paper work showing that the lot had to pay 1500 or 2000 (cant remember which)  to cap one.  It was legt paper work..

Matt 

[Anonymous]

Easy. Buy the car with the warranty if you need to buy it to make the deal happen. Then cancel the warranty

[jim44]

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@pipeguy wrote:

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@Anonymous wrote:

It isn't just the subprime lenders..  Capital one was charging the dealership an aquisition fee on me had I went with them.   The dealer can't charge you back, but they strongly encourage you to get the "extended warranty"  to kind of offset the fee.   That is what they wanted to do with me..  Luckily they got me financed through Hyundai without a fee.  I still got the warranty, but still financed the car with the warranty at book value, so im not upside down.

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Did the Hyundai dealer tell you that? I'm pretty sure that a bank offering a loan to you to buy a car does not result in the dealer paying the bank $1500 and getting an extended warranty tossed in....

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Pipeguy,  What Matt said is true.  For high risk loans the dealer is charged an acquision fee.  The fee amount varies from customer to customer as FICO scores, make and age of a car as well as mileage can have an influence on the amount of the acquision fee.  I've seen them as high as $2k. It is illegal for a dealer to pass this fee onto a customer and believe me the lenders make sure they don't.  In Matt's case I don't think it was good business for the dealer to show and/or tell the customer of the acquision fee or the amount. Matt also stated that the dealer can't require a customer to by an extended warranty in order to complete the sale.