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Bankruptcy and Vehicle Financing
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The article went on to say that there are something like nine time more credit card solicitations sent out each year than there were 10 years ago and the requirements have gotten very low. (For example yesterday American Airlines sent me a "Gold Card" application that only requires an income of $15,000 per year)
Now back to the point: the article said that the response of the credit card companies is going to be to stop offering accounts to high risk borrowers.
Do you think that this will extend to car loans, and if so, will it increase the difficulty of recently bankrupted people in getting loans?
On one side, these folks are almost debt free and can't file bk again for 6 years, a plus.
On the other, something caused them to fall under the waves into bk.
Really depends on the reason for the bk. If something like a layoff or uninsured medical bill, this person may be a fine risk once the causative factors are permanently cleared. If the reason was impulsive spending and bad financial stewardship, the party's likely to screw up again.
Possibly some "bottom feeders" will drop out of the credit industry. I think there'll always be a second chance out there for solid people who've had some recent bad luck.
2. If you STILL think taking the so-called "easy" way out was a great idea.....
;^)
Anyway, has anybody seen SaveKaryn.com? What a brilliant idea! I don't condone her prodigality, but certainly praise her chutzpah and innovation!
I seriously doubt that Sable will run you $300 a month in repairs! I've never had an old car cost me that much, even when I amortize the purchase price into the equation. My old '79 Newport, purchased for $250.00, only ended up costing me about $100 a month total over the 2 years I had it. And that's including a rebuilt transmission! I think the worst was my '89 Gran Fury, which came out to around $150 a month.
I guess the thing that's disconcerting about his situation is why must he have a new car right after filing bankruptcy?
What's wrong with buying a nice used 2 or 3 year old vehicle and keep it up to snuff with regular maintenance. Then drive the thing for as long as possible then when he was more financially stable then possibly buy something new.
The mere fact that he could still get financing for a new car at all is frustrating to someone like me and my wife, since we both work hard and drive very used cars. We dug ourselves out of a financial hole also, it took time but it can be done.
Mazda has asked for, and been given some very good advise in this forum.
Instead of heeding this advise he will do what he has already justified in his own mind.
blazer...GOOD FOR YOU! You did the right thing!
You asked the question, now be adult enough to hear the answers.
2017 Accord Sport CVT Mod Steel Metallic
Now I'm the last guy you could accuse of such things but I do believe you are rejecting some perfectly good advice in here because you want to block out what you don't want to hear by calling it a moral judgement. It IS a moral decision whether you want to admit that or not. The morality of the lenders - and I do not deny that some credit card companies and such these days are pretty close to being loan sharks - has nothing to do with your own sense of morality. They are separate issues.
I would also say that in terms of depreciation I think you vastly underestimate the market. First, even Honda and Toyota depreciate more than what you are saying and second there are perfectly good, dependable alternatives - Nissan and Subaru sprin immediately to mind - that depreciate more quickly. The fastest depreciation hit you can possibly take is just signing your name on the deal.
That said, I do applaud pieces of your game plan. Loads of folks in your shoes run out a lease in order to reduce monthly payments which is certainly a prescription for disaster and, as lemko described, a way to get buried beyond your ability to recover.
Keep us posted and continued good luck.
The decision has already been made and he is simply seeking affirmation of that decision. He isn't getting much of it here so he's defensive. Pretty classic Psychology 101 stuff.
"I had a hard time finding actual stories on edmunds in regards to people getting approved for car loans after BK. "
Think about it. Since the banks WILL do it, maybe there aren't very many stories because it's not a good idea. It certainly puts pressure on you not to get into payment trouble again...
Here's an article you may want to read. You'll have to cut and paste the two parts of the link together as Edmunds won't permit a link of more than 115 charachters. Perhaps someone here can help with that.
Not Paying Your Bills? It Could Cost You a Job.
http://www.washingtonpost.com
/ac2/wp-dyn?pagename=article&node=&contentId=A41829-2002Jul21¬Found=true
That aside, consider a good used domestic. I highly recommend a 2000 or 2001 Chevrolet Impala. This is one car I'm confident will see you through 8 or 9 years of ownership with little trouble and will probably cost less than that new Corolla. An older Lumina might be worth considering. Sure it's not stylish but you get almost Camry-like reliability for a fraction of the price.
Getting approval for a car loan after bankruptcy sounds easy. Just looking at the screamer ads in the newspaper is enough proof. Making the payments, on such terms, is infinitely more difficult.
Potential employers do credit checks now before making employment decisions. If you screw this one up by missing some payments (which will show up on your credit history), it may be a long time before you get a decent job. I assume that you could use a better job since the one you are working now is 50 miles away and isn't paying the bills.
Our company, as well as approximately 40% of industry now use this method of screening applicants. Read the article in the Washington Post that I gave the link for. Companies use this because responsibility in paying bills is a predictor of job performance. One bankruptcy may not count against you, but a bankruptcy followed by more missed payments afterward may be viewed as a predictor that you are not a desirable employee.
This isn't intended to be mean or sarcastic. It's intended to point out that your choice of buying a new car when you may not be able to afford it may have long term consequences.
Don't fall into the trap of thinking that the bank would not lend you the money if they didn't think you can afford to make the payments. They will.
There's quite an interesting article in Wednesday's WSJ about mortgage loans... With the economy slowing, foreclosure rates are up. Many of those losing their homes are not unemployed but just have less hours of work. They were given loans by the banks that they could barely afford. When things changed they couldn't afford them.
I assume that you'll be taking a 60 month loan.
Are you confident that your income will remain stable every month for the next 5 years? That you won't incur any new currently unforeseen expenses?
Did you foresee the expenses that made you bankrupt the first time five years in advance?
An older car on a 2 year loan would be a much smarter way to go.
S
ure,people with spotty credit pay more -if-they want it.This customer is just as valuable to a company as the "good"credit customer-they pay more for the product.Most businesses have a mixed bag of customers.If only half of these customers pay you must charge them the appropriate "vig".The steady payers benifit -lower rates-and the "others"pay the price for their"sins".
I know this off topic,but it's called capitalism.There is no morality involved just a bottom line.Mazda is simply making a business decision.Whether it's a good one or not I have no way of judging.I'm sure the executives at ENRON and WORLDCOM have much better credit ratings then Mazda-would I rather have them working for me?It's a tough world out there and a person has to do what he thinks is right for himself and his family.This seems to be Mazda's motivation.I hope he has made the "right"choice.If he is wrong our system will allow him to try again-that is a good thing.Remember,debtors prisons cost money and the residents are removed from the customer base.
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I wonder just how far a person can rationalize with that ethic. On one extreme, stealing food for one's family can perhaps be accepted by a society that basically wants everyone to succeed to some extent. At the other end of the moral spectrum, funding a little drug running now and then is sometimes the only thing a guy can do, just to make ends meet with the yacht payments you know.
The point is, preying on society is preying on society - period. We can excuse some things when a person is fighting for survival, but this is not survival, it's fighting for a new car because he wants a new car.
The trick here is, while it is indeed a good thing that society allows him to try again, they only give him one "mulligan" per seven years. He's cashing that one in right now and then has a seven year window during which he is, I believe the technical term is, screwed. He is very confident the new plan will work and he will take it from here. I for one hope he is right and can look at this positively years from now.
I think the message that many in here are trying to send is that they think he may be beginning to paint himself into a corner quite opposite where the door is. I hope he is right and he certainly is confident enough in his decision. I worry because I know some of the posters in here who are arguing strongly against him are quite knowledgeable in financial reality and I value their opinions.
Since the only thing that will tell the tale is time I do applaud the fact that whatever seems to be said here he keeps coming back to keep us updated and I hope he will do so either way until he has gotten completely through this or the topic gets shut down - whichever comes first.
I wouldn't hire anyone who had credit problems unless they had a good reason for it (not, as mazda put it, "I didn't feel like paying off the CC companies"). We run background checks (including credit checks) on everyone we hire. Looking at someone's credit gives you a pretty good look into their self-control and character, or lack thereof.
If someone doesn't think that bad credit is a big deal, they might not think it's a big deal to skip out on work, or steal from the company, either. I'm sure they could find a way to rationalize that, too.
However, I don't think buying new is a good idea unless the manufacturer has some rate subvention.
For example if you were to buy a Saturn you could get 12.9% I'm fairly sure based upon what I know.
Ford has a program for 11.9%.
I don't know what Toyota has but if they don't have a program you're going to be paying at least 19.9% if not 20+.
THATS the main reason I think you should consider a used car. I'm extremely biased but I think you should do yourself a favor and go try out the L200 Saturn. Used they make a great buy as a lightly used one can be had for around 10-11K. It has to be the most underrated car on the market. Seriously, just go drive one.
Unless you're planning on paying the car off very quickly 20% interest is a killer....
You people are amazing...
No accusation of criminality has been made at any time. If a person's spending habits are such that he inadvertantly borrows and spends to the point where he has extreme difficulty repaying the money, he is neither immoral nor criminal, but perhaps financially inept. If he decides to solve his financial gluttony via bankruptcy rather than through hard work and self control, he risks repeating the sequence all over again by changing none of his own habits (which caused the problem BTW), making his own recovery more difficult in the long run. IMO a case can be made that he is acting imorally, since he chose an otherwise avoidable path in which some creditors will not be fully repaid at all.
To then compound that action by imediately seeking to establish more credit than he needs (i.e., a new vs. a significantly cheaper used car) he exacerbates the risk and underscores his lack of concern for his creditors. That, to me, IS imoral.
In fact, it is probable that my friend (who did no buy as expensive a house as mine, but instead has a comperable payment) would have been better off without BK...he was 45K in short term debt (CC).
This is not a moral argument....this is financial. BTW, I imaging with 30% down, approval would be trivial on any secured item.
"I wouldn't hire anyone who had credit problems unless they had a good reason for it (not, as mazda put it, "I didn't feel like paying off the CC companies")."
What that means is that if someone got into credit problems/BK through some strange turn of events (got fired, illness, etc.), then I wouldn't hold that against them. Even if they got into in on their own, if they at least tried to repay their creditors, I'd also give them the benefit of the doubt. But if I interviewed someone who got his/her self into trouble and made no real attempts to repay the creditors and just file BK instead, that person wouldn't be working for me. One of the things that drives people to embezzle money from their employers is living beyond their means. Obviously, someone like the person I described above has trouble living withing his or her means.
I never said that most people who file BK are immoral or criminals, they're not. But the statistics do say they're more likely to steal from the company than people who have good credit (because the people with good credit exhibit more self-control by living within their means). So if all things are equal, guess who I'm going to hire?
Mazda did indeed get in over his head on medical issues - his dad's - and got in as some would say here pretty honestly. Do I question his getting out strategy. I'm all for buying year or two old used cars with rock solid reliability ratings. This is particularly true now because with all the new car deals the used car market is flooded and thus prices are down. GREAT deals to be had out there on perfectly fine recent vehicles that have nothing wrong with them other than a former owner with stars in their eyes.
Actually buying two year old good vehicles is my normal car buying habit. I'll admit that I bought my current two vehicles new but out of let's say over 20 cars I bought 4 new and two were dogs (the famous Windstall and an 80 VW Rabbit). Took a bath on both vehicles. I quite honestly have a better reliability record personally on used vehicles and that is without the existence of extended warranties.
We have certainly learned over the life of this topic that Mazda is going to do what he is going to do. Keep it coming and hope we stay civil enough that we get to see how it all plays out.
Please note that I just now learned that while Mazda and VW turn up as "no such word" in the spell check it recognizes Windstall as being correct. Way to go!
While his dad's situation definitely sucks, it clearly wasn't the biggest factor in his filing. His dad's debt was only 25% of the total that was discharged.
As for getting approval for new car. If you put down 5k and willing to pay 13% on a 2 years loan, I think that you should be able to find a bank to loan you the rest. After all, what's risk to the bank as long as they force you to insure the car. But do you have 5k and can you afford 13%? if not, probably have to wait for next life.
It's like an alcoholic saying "I'll just have one beer".
Stinky - in reference to your earlier post (how Mazda ran up the debt) - you remembered the details better than I did. Point taken.
STILL gotta go for used car! Eliminate debt. Eliminate debt. I am still doing that in my own way and at my advanced own age but have two rightside up cars, a house and no bankruptcy ever. Heck, I don't think I've had a late payment in 10 years....
Life is a lot more enjoyable when you're not stressing about how to pay your bills.
In 2 yeras the Accord is paid off and a couple of more (well a little less time than that) the Ody is paid off. I will drive them until they die and its specifically due to my past experience with Hondas not dying and being pretty good for what they are that I bought them.
I would very much liek to get to the long term goal of not owing anybody anything.
As far as insurance ratings go maybe people who have lots of accidents tend to be financially irresponsible also-causing them to declare BK.This seems as reasonable as BKs causing people to have accidents.
Toyota is running tv ads in my area-da south-welcoming buyers with bankruptcies.An aquaintance of mine with terrible credit is now selling NEW cars,prior to this he was a collector for a large retailer.
Unlike the embezzler a person who files for BK is following the law.It's not stealing.Stealing is bad no matter if it's a loaf of bread to feed your family or to buy a yacht.Once we get into making exceptions we fall into the trap of putting our moral values into the equation.Since we all have somewhat different values this can create chaos.Since the courts are supposed to reflect the will of the people(i think)at the time they were written,until they are changed the people who are declared BK are on the side of the law.Some may feel there is a "higher"law but try that argument next time you fight a speeding ticket.
As it is i can charge anyone any amount of interest i want to(up to the legal limit).They can accept my rate or go elsewhere-if it is too high -they will go elsewhere.
There is nothing illegal about mazda declaring BK and if I want to I can charge him a high interest rate.He will however buy at the best rate he can get.That is how it works.Also if he takes great pictures at a fair price -what do i care about his BK?
I'm thinking now he should've.
I never said they WOULD steal, I said the statistics say they are MORE LIKELY to steal. I stand by that comment.
My basic message questioned the sanity the purchase of a new car immediately following a bankruptcy. The little "smiley" basically had a two letter message which began with b and ended with s and stands for something that would not stand for very long in this or any other topic in Town Hall. The sentiment stands, however.
I am now questioning whenI go out to dinner how much of my purchase is covering for the fact that "bankrupt" diners did not pay for theirs. This is rather distressing as I really have quite enough of a problem dealing with feeding myself without feeding those who skip out on paying.
Mr. stinkypinky, while having a rather odd name and being rather abrupt, speaks a great deal of truth. Fezo seems to be a very nice man but overly generous in second chances especially considering the fact that he has stated that he does not use such a tactic.
Very interesting topic. I must go getout the check book right now and go pay my just debts.