Looks like I can not get a car

[Anonymous]

I have tried going through a few dealers and so far only got 1 acceptance.

I am 19 years old and my credit score is 611, and have only 1 cosigner available to me which is my 92 year old grandma with a credit score between 620-650. 

Carmax told me the only company to accept me was Road Loans with a 25% rate!!!

I plan to buy a $17k used VW GTI, I also plan to put $5k down.  So I really only need a $12k loan.

Where else should I try to apply?  I do not feel that 25% is a good idea at all to pay, unless I pay for about 6 months, build some credit and can refinance. 

[GregB]

You could wait until you have $10K down if you really think you need that $17K car.

OR - Try putting $5K down on a $6-8K car. Once it is paid off, your credit will be much better.

Paying 25% is just crazy. If you did that, I think you are likely to be sorry later.

[Anonymous]

Your right that I do not NEED the $17k car.  However it is practically new, and MSRP was $28k, so it is worth quite a bit more, I'm looking at resale value as well.

[GregB]

I own several business, one a car business. Some people might call it a hobby in this economy. I would better describe it as a nightmare since I'm almost up to breaking even this year after losing quite a bit last year.

I'm assuming that you are looking at this car at a dealership. They are in the business of creating the illusion of value. Resale value is one of those illusions. If MSRP was $28K on this car and it is a 2008 with 10K miles on it and it is absolutely immaculate and like new then: $17K is about right for a retail price. You should be able to do better private party. Take that same car to a dealership and they will offer you $10K to buy it.

A customer recently bought a used 2004 VW with 21K miles in virtually new condition for 35% of the sticker that was in the glovebox. The condition was good enough that almost everyone would believe it was 2-3 months old. I have seen a constant stream of people that think they got great deals. It is rarely true. I have also seen people with cash in hand get some incredible deals. A 7 year old $70K new car in perfect condition and 21K miles for $10K, etc. I bought a new Lexus of the following year model for $3,000 less than the best deal I could find on a used/perfect/low mileage on of two years prior vintage.

There are many deals out there. Don't fall for the dealer nonsense.

[Anonymous]

Well actually this is a private party car.  Also when I looked at KBB, the car was valued at 19k for trade in, 21k for private party and 23k for dealer price.

Not sure if those numbers are really accurate.  However I believed it to be a good deal. 

[Anonymous]

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@Anonymous wrote:
Your right that I do not NEED the $17k car.  However it is practically new, and MSRP was $28k, so it is worth quite a bit more, I'm looking at resale value as well.

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Resale value won't be much of a factor unless you are selling it in the next 12 to 18 months.  Cars are depreciating assets....liabilities really.

The car you pay $17k for now will only be worth say $7-8k at most in 3 years and you will owe that much on the loan most likely unless you can get an ultra low rate and pay down.

So, what you actually need to look at is "TOTAL COST OF OWNERSHIP" which means how much you put down, how much you pay over time, then what you sell it for later.

But your best return on a car is to NOT resell, and drive it till it drops (10 years or more). 

If you buy a $7-8k car now, you can mostly pay cash.  Then you can SAVE the equivalent of a car payment every month for say 3 years.  At that time you can pay cash for a car or put a big chunk down and get a good rate.

At 19, don't put a lot of money in a car.  It is not an investment, it is a hole you throw money into.  It depreciates and is nothing but expenses.  True, you need transportation, but don't confuse a car to be an asset....it's a liability through and through.

[GregB]

That does sound much better. I assume then that this is a very new car?

Depending on your area and the current market, the cars are probably selling a bit below the KBB price. If $28K was MSRP and KBB retail is $23K that would indicate either one year depreciation or a high demand model. Don't forget most cars sell for less than MSRP unless it is a very good market. When you are checking prices make sure that the MSRP and KBB prices contain the same equipment and options.

[Anonymous]

I would look at the NADA value I think KBB is always high.

[UpNUp]

Just an idea...

If you have 5K cash in hand and are not looking to impress anyone why not just buy a 5K car? No payments, no interest. You can find a very decent car now days for 5K.

At 19 years of age you have plenty of time to buy the car of your choice.

Message Edited by UpNUp on 07-29-2009 10:03 AM