I'm in the market for a new car. I work part-time, but the majority of the shifts are overnight which at least allows me to bring in $2000-$2200 a month in gross pay. I've been working there for three years. I also have a second job, but have just barely started so the job history on that won't be very substantial. My expenses are very low--very, very low now that I've moved back in with family some months ago and they are gracious enough that I don't have to pay rent. I only pay for food and internet.
Now, my credit score is 752. However, I suspect that is inflated considering I've only had credit history for 1 year and 3 months. I'm 24, but was never really encouraged to start building credit, hence the short history. On top of that, I only have one open line of credit, a discover card. The credit limit is only $1,450, also not very substantial, and my minimum payment, were I to only pay that, would be $20.00. If loans were given out based on someone's word, I could easily prove I'm a responsible person. But since this won't be based on a persuasive essay, I'm quite nervous about my chances. I figure someone, somewhere can throw me a bone and approve some kind of loan (the rhyming there was not intentional) but I'm concerned that it will be for a low amount or with an insanely high interest rate, or both combined. I'm willing to put down $5,000-$6,000 as I have my eye on a few new cars. Someone is helping me with the selling process once I get pre-approved, so I'm certain I won't be paying sticker price, but regardless, I have to get a loan pre-approved under the assumption that I will, plus tax and registration fees.
What are my chances? Will they only be willing to hand out, say, $10,000? I'm not looking to buy a $30,000 car, but I'm not trying to buy a 2007 Nissan with 100,000 miles on it either. I've had my fair share of crap cars and I'm over it. Used cars are a last resort for me, and the person assissting me agrees. I'm planning on going into my local credit union very soon, within the next week, and seeing what I can get, but I'd also like to get a sense of how ridiculous I'm going to look, if at all. They say they help people who are first time buyers, but who knows what that really means. Any insight is appreciated. Thanks.
Been in the car business for about 20 years, most of that in finance positions, so I will offer my 2 cents.....
* As far as employment and income, most lenders will want your payment to be about 15% of your gross income, sometimes as much as 20%, so you should be looking for something in the $300-400 payment range.....which you won't know until you get the terms of course.
* For your second job and employment time, sometimes, just sometimes.....putting your new job as your primary with the short time, and then your main job at $2200 with the 3 years as your second job works better. Reason being, for part time/2nd jobs, lenders will only count that income if you have been there 6 months or longer. So putting the short time job 1st can get it counted, and your 3 year job shows consistency of employment.
* Your credit score is good - anything above 740 is top tier for an auto loan, but they do of course look at depth as well depending on the bank. Capital One can sometimes be a good option for thin files, and you should be able to apply online for that.
* Yes to the credit union option. CUs will get some people done that "traditional lenders" at a dealership will not do.
* As odd as it sounds, new cars are usually much easier to get financed for first time buyers. Something with a good rebate, which combined with your down payment, will get you in a deep equity position and make it attractive to the lender. Also, the vehicle is under warranty, which further improves the risk profile.
* And you have nothing to get laughed out about anywhere - you have a good score, steady job. I could share many many stories of the exact opposite, and still see them drive off in a new vehicle.
Hope it helps, and let me know if there is anything else I can help with.
Great info Storm. OP, yes you can get approved. As a first time buyer I would suggest getting a preapproval from Capital One and a Credit Union to make sure the dealer does not jack up the interest. Buying new will be easier as stated above. One advantage of buying new is you have warranty and lemon law protection. Because you have limited resources those are important factors. The dealer will try to load up your deal with protection packages because that is where they have to make their money these days because margins are thin on new cars. I am not a fan of any of these products nor are consumer reports etc so I reccomend avoiding them. You can get an extended warranty when your factory warranty is ready to expire from many sources including the dealers.
Another suggestion is Costco, AAA, USAA etc have services that help you buy a car and allow you to buy at pre negotiated pricing. Costco is probably the best of these. The advantage is you don't have to go through the ridiculous negotiations. I am in my 50's and negotiations are part of my profession but even I hate the car buying process so these services are a real asset to those who want to make sure they get a hassle free and fair market deal.
Let us know what you decide to do and the results, that is how we all learn here.
Great advice there as well. Just one thing I would note on the car buying services you mentioned.....there are some good ones out there (Costco and USAA are a couple), but many others, sometimes through credit unions, retailers and associations, don't do anything but blast your vehicle purchase request out to every dealer for that brand in a 50 mile radius. You will get a dozen phone calls from every dealer it hits, and everyone will just be trying to get you in to work a deal. That is good in a way for an experienced buyer if you can get their offers over the phone and get them to compete, but can be overwhelming for a first time buyer.
Last recommendation I would make is if you can, try to find a family owned dealership. They are rare these days, but I have been fortunate to work for several, and they "usually" are a much better environment to buy from. Because they may only own a store or two, their reputation and perception in the community is vitaly important to them and try to do things better than the 300-400 store mega corps that don't care about you or a single car deal. Usually have to get out of the city to smaller towns or communities for those, but well worth it in my opinion.
OP, I would also be interested in your results when you can share.
And workingfor850....I hate the car buying process as well!
I would definitely go on Capital One's Auto Navigator site and see if you pre-qualify. My scores were something like 594 or a little higher. I not only was accepted but my interest rate was in the sixes for the car I was looking at. New it was in the high fives. That was with my low FICO score. I could never have qualified with that interest rate anywhere else with my scores.
Cap Once has lots of participating dealerships on their site. You go through and can click on a car and right there build your loan. It shows you what your interest will be on each car you click on depending on if it's new or how used, the down payment, the length of the loan, tax and title, etc. You can save as many as you want as you continue your car search online. I picked out the model car I wanted and a few other cars as backups. I made a list of the cars I was going to look at in order of the top picks first. I printed out my estimate sheets with the Cap One info number on my loan. I chose the car that fit my needs and price first. I called the first dealership and discussed any dealer fees they had and asked a few questions about the car. I was told it was a no-haggle price before I went there, but I already had checked it out online and knew it was a good deal. One-car owner, no accidents. They had it ready for me when I got there, and I knew that was the car. Black was the color I wanted and it was pristine. I did a test drive and told him I wanted it halfway during the test drive. I told them I already had a loan and gave them the info. No pushback. They ran the Cap One loan there, and I was in and out so fast that I felt like I was at the spa for a few hours it was so stress free. I turned down all extras except for the required gap insurance. And no one there tried to push anything on me. The Toyota Camry SE was a 2016 and had been traded in at a Mazda dealership for an SUV. I rate my car-buying experience at Mazda as an A+. They were fantastic. I had heard that from a friend once also about Mazda dealerships.
Even if you let them try to beat that loan offer, you have a good rate already locked in, and if they beat it, great. If not, you don't end up walking out with an interest rate you didn't plan on. As others have said, since you are looking to buy a new car, you should have decent rates offered to you. Your best option is to buy one of their loaner cars (I think that's what they're called), new but with a few miles on it, so you get a better deal, less depreciation walking out the door.
Thank you everyone who has so far responded. This has given me hope! This website has brilliant people. I'd been procrastinating for a few days in fear of out-right rejection. I will update with news when I go in to my CU in the next couple days. Fingers crossed!
Here's an update. Finally had time to go to my local credit union. They are willing to loan me a full 20,000 but the interest rate is B.s, it's 8.2 percent, 7.9 or something if I enroll in auto-pay were I to actually finance with them. That's while in their "first time buyer" program. I figured this would be the case, and while I could still afford the payments at this rate, it just sucks. Is this what I should expect from another credit union or bank as well, if I am to go ask for a pre-qualification from the only other credit union in my town? And if so, it sounds like financing at that rate, waiting a year, building out of a thin credit history, and then refinancing would be my best option. Is that a reasonable assumption? I'm looking to purchase a car that is about 23k. Add in taxes to that, and I'm looking at 5000-6000 down were I to pay the full price for the car. It's do-able, but is it practical? Should I suck it up and try to search for something cheaper? Thanks.