Please Help! I need an Auto Loan (First Time Buyer)

[Anonymous]

Hello Guys! I would like to thank each and everyone for posting your credit situations and how you guys went about trying to resolve the issues. I have never posted anything on here, but I have read a lot of topics to help me improve my credit with a great deal of success.

My credit used to be in the 400s just a year ago.

My current Situation:

Equifax: 614

Transunion: 606

Experian: 605

Credit Rating: Fair

Baddies: (Only 1 collection account)

Capital One Charged Off Secured Card collected by Portfolio Recovery ($283)

No Public Records No credit Inquiries Last 12 Months

Positive:

I have a secured american express card with USAA with $600 limit no balance

I have a secured visa card with Wells Fargo with 500 Limit No balance

Income:

I work for Verizon and I get paid 60K per year (worked there for 3 years)

I have never financed a car ever in my life. So no eviction or repo on my report

What I am asking you guys is if you can help me with solid advice that would help me get my first autoloan.

I really don't want to have my credit dinged just because I went to the wrong place. I want to be very smart about it.

Do I have a chance at getting approved anywhere? I am looking at a 2017 Dodge Durango ($25,000) 

If yes, please tell me the best way to do it. If not, please let me know what I need to work on.

As usual, thank you for the plethora of help that you guys give to people like us. Much appreciated.

[Anonymous]

You could find a large dealership.
They usually work with more lenders than small dealership.
They should be able to find a lender love to approve.
I think the first priority for you is to get approval rather than bargaining the rate.

[Anonymous]

Do you belong to a credit union? If not, join one. If so, seek a preapproval through them. If you go anywhere without a preapproval you’ll be raked over the coals by a ridiculously high APR. Don’t focus so much on the vehicle you “want,” rather get the vehicle you “need” and can get a preapproval for. That way you walk in with a specific amount to spend and won’t get multiple hard pulls on your credit because the dealer is shopping you around to various lenders who’ll assess a ridiculously high APR.

[Anonymous]

Thanks for the suggestion. Which dealership did you use? I live in Miami and I know dealerships are different in each state.

[Anonymous]

I do not belong to a a credit union. I have been banking with USAA for years. I don't think you can get preapproved with them. I could be wrong. I like the idea of joining a credit union. And yes, I will focus more on what I can get preapproved for rather than the vehicle that I want. Thanks for the suggestion.

[Anonymous]

OP - Try and find a local credit union so you can sit down with them. Face-to-face always seems best. Good luck and please keep us updated!

[Anonymous]

So, I have an update for you guys or anyone else in similar situation.

I liked the idea of opening up an account with a credit union and I also liked the idea of going to a big dealership. An hour ago, I decided to give USAA a call and explain my situation with them. I told them I have been a member of USAA for over 5 years and I have a good relationship with them. I wanted to keep all my accounts with USAA. They encouraged me to apply for a loan. They do not a traditional preapproval process that doesn't affect your credit. It's a hard pull from experian. They asked me how much I wanted and I said 20,000. After a few minutes they came back with an approval for a loan and even extended it to $30,000.

My question is, based on my credit profile, should I shop around or keep what they gave me and hope to refinance later?

The details on the preapproval letter are:

$30,000 Max at $16.99 or $651 per month

These terms also include a 0.25% APR discount for setting up an automatic payment plan. You can opt out of this when you setup your payment options.

They also said something about them paying up to 80% of the value of the car. 

Any advice?

[pipeguy]

The details on the preapproval letter are:

 $30,000 Max at $16.99 or $651 per month

 These terms also include a 0.25% APR discount for setting up an automatic payment plan. You can opt out of this when you setup your payment options.

Although my math comes out a bit different, that is a 72-month loan (I used $30k @ 16.74% using the .25% discount) and get $663 that is still very expensive as far as length of the loan, the monthly payment and the total interest you will pay at a very high 17% apr. Using the payment you supplied ($651) you will pay $16,872 just in interest ($46,872) and the vehicle will be under water (worth less than the loan balance) for at least the first 4 years.

I would strongly advise against signing a 17% apr loan, or even a 10% one - they are NOT doing you any favors and you'll have to live with it for a long time because even to refinance at a lower rate in say a year or two, you'll be so underwater it will be hard to find a new lender.  

[Anonymous]

Thanks for the response. I also got preapproved through Capital One Autonavigator for a max of 35K. It seems as though I am getting rates between 4 and 9 APR with/without downpayment. I believe it is based on the car itself and not on how much I put down. I am just not sure if the preapproval is a real preapproval.

[pipeguy]

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@Anonymous wrote:
Thanks for the response. I also got preapproved through Capital One Autonavigator for a max of 35K. It seems as though I am getting rates between 4 and 9 APR with/without downpayment. I believe it is based on the car itself and not on how much I put down. I am just not sure if the preapproval is a real preapproval.

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I'm not a big fan of Cap-1, but from what I understand pre-approvals from Cap-1 are usually solid. While 9%is not that good, it's a lot better than 17%. I'm also not a fan of 72+ month loans for the reasons I listed in my previous comments, but here are some basic figures:

$25k Loan at 9%

48 months = $623 a month - interest = $4928

60 months = $520 a month - interest = $6201

72 months = $451 a month - interest = $7472 

And to give you an idea of what a prime top tier loan would be through a credit union such as DCU or NFCU for 60 months at 2.95%

payments $450 a month total interest = $1994