Looking to get an auto loan

[Anonymous]

I'm a 20 year old college student looking to get my first auto loan. I have just under a year of credit history with a credit score in the high 600s. I'd like to get a newer used car in the $15k-$20k range. Before I go any further, I knows car of this price may be absurd for someone my age, but I am just testing the waters for right now. I have absolutely zero expenses as far as rent, school and insurance go. I have 3 credit cards that I pay off quick, and the balances remain below 30% utiliziation. I bring home between 400-500/week. I'm just curious what any of you may think my chances are at receiving the loan. And I forgot to mention above, I plane on putting atleast $7k down on the car. Thanks.

[Anonymous]

I think your chances are very good. $20-26K in yearly salary with a $8-13K loan and no other expenses should be good. Your accounts are on the small side, but I think you've got a good chance. If anything though, I'd look for a cheaper car. You don't need a $20K car right now. 

[Anonymous]

Thanks for your input. I know a 20k car may be a little excessive for someone of my age, but if I'm making enough in one week to make the monthly payment with no other expenses, why not get something that's nice and reliable. I've also been reading that banks and cu would be silly not to give when someone is putting almost 50% down. I'll be graduating in 2 years and with a degree in accounting so my income will increase significantly. Not 100% on any certain car, just browsing and trying to get a feel for a size of loan I'd be able to get.

[Anonymous]

Not trying to be parental here but I should mention that when I was 16-28, all of my friends were spending crazy money on cars while I was putting money away to buy my first condo for cash.

20ish years later, I am basically retired in my 40s and my first condo I bought for cash is a long term rental now that has paid me probably over $120,000 over that time -- if not more.

If you're young, consider buying the least car you need versus the most you can afford -- and sock cash away towards never having a mortgage.

A nice car is a nice car, but it's still an anchor cost that can hold you back from earlier success than others will experience -- or that they may never experience because every salary increase just means buying more "nice" things.

[K-in-Boston]

If you're putting that much down, you should really not have a problem getting good financing.  You loan-to-value ratio will be very low and it's a secured loan.  I don't think a used car in the $15-20k range is that extravagant and over time could cost less than buying a lower cost car after you factor in repairs and the maintenance that comes at higher mileage.  PenFed is a great place to start (anyone can join by making a charitable donation if you don't otherwise qualify) and their rates start as low as 2.49%

[Anonymous]

Thank you, I was thinking the same. I'd rather pay more for something I know won't run into problems it then near future.

[Anonymous]

You can get a really nice car for $7k and skip the car payments and interest.

Mind you I say this having been car poor for essentially all of my 20s. I truly believe cars (and I LOVE cars) are the biggest thing people waste money on.

Additionally with your age, you will get hammered on insurance. I often had monthly insurance payments that exceeded my car payment before I turned 25. Be sure to take that into account.

[Anonymous]

You are not guaranteed that a new car is without problems. I had a brand new 35,000 car that was lemon. We settled with the manufacturer but it was not enough to clear the loan. As a accountant you should know that cars are a rapidly depreciating asset and paid off is always better than payments, the exception being zero interest loans as cash in the bank can earn more interest than what is being paid on the zero interest loan. Think 5 year plan and not 2 year.