The Auto Loan Dance

[djdutch]

Hello, My wife and I are beginning the process of new car shopping before our current car @ 103,500 miles turns into a total money pit. We have a Chapter 13 bankruptcy that had every creditor paid in full and will reach the 7 year drop off point in October. We were going to wait until then but our current car disagrees. My current Fico scores are TU 733 and EQ 721...I will coapply with my wife (her scores are both at or slightly above 700). We will give $5000 down payment and whatever trade in value we can get for our old car towards a new car with an MSRP of between $23000 - $25000. We are looking at a 60 month loan term. Our combined annual gross income is around $175,000.

A couple of questions- 1.) How bad will the public record bankruptcy hurt us? Will the fact that it'll age off in October help? 2.) We included the loan on our current car in the bankruptcy and paid it off in full. Will this hurt, help or be a wash? 3.) Will be be approved for a loan? Will we stand a chance at a decent rate or should we expect to get soaked? Finally, any suggestions as to any lenders that might be good. We would prefer to get per-approved before going to a dealer to reduce the struggle there.We had our previous included-in-bankruptcy loan through Capital One. Would it be worth going back to them or would that merely insure a higher than necessary interest rate or denial? Our thought is to try to get the approved financing, get a guaranteed deal quote through AAA or Costco, and only then go to a dealer to actually test drive and get a car.

Thanks for any suggestions, advice, personal experiences, or other information that might reduce the abject fear of a couple who need a car pdq and who are finance skittish as well as deathly afraid of those evil entities known as car dealers.

[CribDuchess]

Actually, a bankruptcy will normally stay on your credit reports for 10 years rather than just 7 years. 

You should try posting this in the thread started by UpNComing - I think the title of it is something like "I can help, I manage a car dealership."  He is extremely knowledgeable and very responsive to posts made in that thread.

Good luck!!!

[Middleswarth]

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@CribDuchess wrote:

Actually, a bankruptcy will normally stay on your credit reports for 10 years rather than just 7 years. 

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Chapter 13 is 7 years. Chapter 7 will stay on for 10.

[djdutch]

Thanks. It is my understanding that Chapter 13 bankruptcies are dropped 7 years after filing while Chapter 7 bankruptcies remain for 10. Several of my credit reports confirm 7 years by showing a drop off date in several months.

[CribDuchess]

Sorry, and thanks for providing the updated information.  I have no personal experience with bankruptcy.....I only know of what I have read here at MyFICO and the 10-year thing just sticks in my mind.  Seems kind of unfair that a chapter 13 bankruptcy will only stay on a credit report for the same length of time as a 30-day late payment will.

[Middleswarth]

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@CribDuchess wrote:

Sorry, and thanks for providing the updated information.  I have no personal experience with bankruptcy.....I only know of what I have read here at MyFICO and the 10-year thing just sticks in my mind.  Seems kind of unfair that a chapter 13 bankruptcy will only stay on a credit report for the same length of time as a 30-day late payment will.

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What is unfair about it?  Chapter 13 means you paid your creditors.  All it really does is stops collections and interest.  It seems more fair that having a charged off account that you never paid drop off after 7 years.

To the OP, IMO you would be able to get an auto loan now without a problem.  You interest rate may be a bit high, but not outrageous.

[djdutch]

Thanks. Unfair is, of course, in the eye of the beholder. The creditors were originally going to get 33% of what they were owed but ended up with 100% payout...so I suppose it worked better for them than a bunch of charge-offs.

[webhopper]

Ford motor credit and Volvo financial both approved me with a repo from 2006 on report that turned into a judgement in 07. I got the volvo in 2009 and the ford truck in 2011. Both were used when purchased. By the way the volvo has 106k miles and never has had any issues. I bought it with 14k miles. I plan for us to keep driving it another 3-5 yrs and then turn it over to my kiddo. Are you sure you aren't just tired of an older car? A $200 detail and some preventative maintenance at this point may get you to the point where BK falls off and you'll get the best rates.

[webhopper]

Kudos to you guys for the courage and strength to go through ch 13 and get everyone paid off

[djdutch]

Thanks for the info. Wish it were just a question of wanting that new car smell. However, our current car is looking at what we anticipate is about $800 in transmission work...and it'll need timing belt replacement in about 1500 miles or so. We already spent $600 recently on tires and alignment so we are going to be well past our break even point on repair cost vs. vehicle usefulness, so we have had to move up our car replacement date. I'm hoping we'll be able to refinance the loan perhaps by next year. In the meanwhile, we are disputing the way our last car loan is reported to the services as we reaffirmed it, paid it separately from the Chapter 13 trustee disbursements, and paid it off without problem...we figure it couldn't hurt. At any rate we hope the rate'll be better than our last 16% through Capital One.