Question on available credit.

[Anonymous]

Just two cards as of now, I have the Chase Sapphire Preferred at 10,000 and American Express Blue Cash at 6,000. Started with a Capital One Platinum and then a Capital One Quiksilver but those accounts are now closed. I've never had any store cards or the like, always just did mainstay credit cards that send me mail offers. The first one I had to cold apply for. Chase was hammering me with pre approval mail offers for the Sapphire the last 6 months so I finally caved when I saw it went up to 80,000 bonus points.

[Life_take2]

First, congrats on your credit journey thus far. You appear to be off to a great start! Now, assuming positive intent and giving your family friend the benefit of the doubt, we will just say he is mistaken in his understanding of how auto loans are qualified. From the unanimous response in the forum, you probably know that by now.

The bigger question then becomes, now that you know you will likely get approved for auto financing, which is better; a new car or a new engine for the existing truck. In the end, that decision will be more of a personal one based on your own circumstances, goals, and timeframe, but here are a few points to consider in buying new (or new to you):

• Per KBB the National average for a new vehicle is around $46,085 (give or take -that was in Feb '22)
• Now, assuming a 2.54% over say 60 months (PenFed % as of today) a 45,000 loan is about $799/Mo ($0 down)
• Used car prices have risen about 35%-40% over last year (USA Today 2/13/22)  and despite a 27% drop in demand in March, used pricing remained the same (CNBC 4/7/22). 

Now, having said all that is not to discourage you from looking new but rather to give you a big picture view.  Since most analysts expect that this trend will continue through most of 2022 before correcting. So, in the short term if you are looking to 'ride out' (no pun intended) the current inflationary trend, spending the 6k for a new engine might appear the cheaper option, with a couple of big caveats. You most likely will never be able to get the 6K back out of a truck with 215K+ mileage if you decide to sell it later. With that mileage, what other costly parts might be ready to go kaput, after springing for the engine? Transmission?  What kind of a commute are you expecting after graduating. Will the truck hold up to those rigors? Is that worry over future breakdowns worth the saving of a monthly car payment?  Since you have no real debt perhaps a $700-800 car payment is affordable now.  These are the questions you will have to decide on and while I suspect you already know all of this, I hope this may have given you some food for thought, in my ramblings.  Best of luck to you.

[K-in-Boston]

Echoing previous posts, you absolutely do not have too much available credit.  The only time we ever really see that being an issue is with some credit unions when people apply for revolving credit card products and have many multiples of their income in available revolving credit.  (I have 5 credit union memberships and a fairly insane amount of available revolving credit and have still never run into that issue myself.)

An auto loan or lease is a secured loan backed by the value of the vehicle and as long as your debt-to-income ratio supports you being able to afford the payments, there should be no issues whatsoever in getting approved given the information you have provided.  Also echoing previous posts, credit unions are great venues for auto loans with many having extremely competitive rates, and in the used market often unbeatable rates.  If you are considering buying new, however, don't overlook manufacturer financing as those rates can sometimes be as low as 0.00% - 1.99%.

[HeavenOhio]

@Anonymous, you've done a great job building your credit. Keep up the good work!

[krit]

You'd have to completely rebuild or replace every component of your truck to spend what a new one would cost. There's also the option of buying a 2-3 year old vehicle which would be new enough to serve you for years to come, or you could buy new and just eat the depreciation. Fortunately, thanks to your great progress, you have options. 👍 

[disdreamin]

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@krit wrote:

You'd have to completely rebuild or replace every component of your truck to spend what a new one would cost. There's also the option of buying a 2-3 year old vehicle which would be new enough to serve you for years to come, or you could buy new and just eat the depreciation. Fortunately, thanks to your great progress, you have options. 👍 

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Have you priced out 2-3 year old vehicles lately? In my experience, you might save a few thousand purchasing a 2-3 year old vehicle, but when you work the cost-per-mile it simply isn't worth it. The initial steep depreciation that is normally observed hasn't been as evident the last year or two. That said, trucks may be an exception to this recently due to higher gas prices, they seem to be coming down quicker than cars/SUVs.

OP, I think others have driven home the point about the available credit.  Personally I wouldn't put $6k into a vehicle that old without having a mechanic I trusted go through it with a fine-tooth comb to be sure there aren't other big issues lurking in the near future. That's about the age vehicles usually start $1k-ing me to death until I give up and replace them. That might have a lot to do with the climate here, where roads are salted more than half the year. If you live in a climate kinder to vehicles, yours might hold on a lot longer.

[krit]

@disdreamin Oh yes, you're right. Used car prices are crazy. My family is in the auto industry going on four decades, and I've seen some crazy trends -- but not as crazy as things are now. Down here where it's warm and dry, cars do fare better in many ways. Even with used car prices so high right now, I believe a late model, low mileage used car is still the best value. Granted, the challenge is finding one, and OP might not have that luxury