Credit Scores and Vehicle Financing

boomchek

You can but it depends on your income and current debt load. Someone may have Tier 1 credit but be overlaoded with debt (that they're paying on time), therefore they might not qualify for an extra loan or lease.

tifighter

Yeah, I hear you. Debt is low, so I think there should be little issue there. Naturally, the debt to income ratio would be even better even we applied jointly, I imagine. What price the xmas surprise?

Mr_Shiftright

You could do what a friend of mine did---just gave her a set of car keys for the car but uncut blanks...took her a minute to figure out what it meant. Then they went down andn picked out color, options, etc. This was a BMW 328ix.

boomchek

I did that to my sister on her 19th birthday. But the car was a used one and it was ready for her at my dealership.

tifighter

This would be nice, but my wife would probably kill me if I made her go to a dealership. She is not a shopper nor a car person, and would be bored out of her mind...even though its for her!!

grandtotal

Does your wife want/need a new car? Would she appreciate the extra debt load? I know if it were my wife she would not appreciate a surprise like that, but your wife may be different.

tifighter

We're both in agreement that we need a second car, as coordinating life with only one is getting harder and harder. She just hates dealing with the details. She isn't a car person and doesn't really know the difference between a Mercedes and Kia. That said, she consistently points out the same type of car and since she wouldn't know where to begin to figure out what it is, I'd like to do all the legwork for her and just park it in the garage and hand her the keys. Hence the question.

I hear what you're saying, though. It may not work for everyone... :surprise:

kyfdx

Both of our cars are in my name... even though my income only represents about 40% of our household income..

From a strict debt/income standpoint, the numbers might not look that great, but I have top-notch credit, and it's never been an issue.. My wife is similar to yours, in that she doesn't want to deal with going to the dealer.. I used to negotiate deals, then have her just show up to sign the papers, but even that got to be a hassle..

So, now... once the deal is done... I go home and pick her up, and all she has to do is drive back home...

No comment on the situation about surprising her with a car... good luck with that..

Mr_Shiftright

These things have a way of backfiring. I'd leave as many options as possible on the table.

arg4

It is obvious that the credit score is important to avail a next loan. But how can I retain my credit score at the same time save my money by not paying whole of my paycheck to the lender?

arg4

The increase in Credit card misuse has made Federal Govt to take strict measure on the individual's next purchase. So Credit Score was introduced to prevent money lenders to lend money for "Bad Creditors".

In many a case, the lender may reject sanctioning a loan to such people or if his case is genuine & now he is worthy enough to pay, then lender will ask high premium with high interest rate.

For an average American, this is a bigger burden & so most of the time they will be rejected on availing a loan.. Thats why purchasing a "LOAN" for a car is very tough for an individual with bad credit score.

You have to consider the risk the lender is taking too. Isn't it??? :lemon:

arg4

The increase in Credit card misuse has made Federal Govt to take strict measure on the individual's next purchase. So Credit Score was introduced to prevent money lenders to lend money for "Bad Creditors".

In many a case, the lender may reject sanctioning a loan to such people or if his case is genuine & now he is worthy enough to pay, then lender will ask high premium with high interest rate.

For an average American, this is a bigger burden & so most of the time they will be rejected on availing a loan.. Thats why purchasing a "LOAN" for a car is very tough for an individual with bad credit score.

You have to consider the risk the lender is taking too. Isn't it???

verdugo

It is obvious that the credit score is important to avail a next loan. But how can I retain my credit score at the same time save my money by not paying whole of my paycheck to the lender?

The answer is very obvious too. Don't borrow as much. :shades:

dtownfb

You got it. It also helps to pay off other obligations before borrowing more. A simple budget can help.

verdugo

Yes, that's also a very good point. Ideally, they'd do both. Pay off other debt and borrow less.

soplush

I had a good credit rating until I got laid off for 18 months.. My score naturally took a big hit, plummeting over 100 points.Thankfully I got a job 3 months ago making a good income, and I really need a different car. Is one manufacturer's financing more "lenient" towards people with bad credit than others? If there's a sizeable rebate available, does that help me at all?

Thanks.

Mr_Shiftright

Wait, back up a minute. Your credit score doesn't go down automatically because you lose your job. Without getting too personal or detailed, what else happened?

Or, let's just disregard that for the moment. I think all lending institutions are more strict than they used to be, but as a rule, leasing requirements will be more stringent than loans.

The short answer is, IMO: "you shop for money the same way you shop for the car".

In other words, you can bring your own financing to the table no matter what manufacturer's product you are thinking about buying.

soplush

If you haven't had the pleasure, let me break it down for you:

I was laid off, had 6 mos severance and benefits. After that, I started drawing unemployment which roughly equals an 80% paycut per month. I had savings, but that was gone in another 6 months. Meanwhile my expenses increase because I have to pay for my own medical insurance now, at about 400 a month.
Oh by the way I had to have surgery AND had a car accident while laid off too.

Net-Net - Expenses go up, income plummets, bills get prioritized over other bills,some bills don't get paid, credit rating takes a hit. One car gets repo'd,..you following me now? :-)

Thanks for your response though, I appreiciate it.

Mr_Shiftright

Yeah, I figured that one bad thing led to another...what I meant was that the Unemployment Office doesn't notify your credit bureau. So there were other "events", albeit very necessary ones, that led to deterioration of your credit.

So this rating has to be built up slowly back to where it was, and having a good salary now isn't necessarily going to help that score right off the bat.

I guess a lot depends on what that score is--how bad the train wreck was. If it's really low, then your interest rates are going to be high.

700 and above - Very good to excellent. Lenders will have no problems giving you a loan

680 to 699 - the "Good" category. This is still pretty solid territory.

620 to 679 - the "Okay" category. If it's closer to 620 they may ask you for other forms of evidence, including professional references, job history, income statements, etc.

580 to 619 --- Since 620 is the absolute cutoff for prime rate, this range puts you in the "marginal" category...not BAD, but not great.

500 to 580 -- this is where you can get credit but you're definitely going to get beat up on interest rates.

Below 500 -- I probably wouldn't try to ask for credit at this point.

Figure something like this: (just ballpark, I'm not a financial expert)

700 or higher 6.3-6.5%
620-699 6.8-7.6%
500-619 8.9-9.9%

Hope this helps!

cadillacmike

I know this is a year old reply, but you really should title the cars in both of yourt names. If something happens to you, she can't sell your cars, without a POA.

Kirstie_H

Not necessarily true - in my state (MO), on the title application, there's a "transfer on death" option, where you can name someone to whom the title automatically transfers if you die.

geffen

Recently i went out car shopping and have been turned down by 3 different dealerships on obtaining a retail loan on a used car my credit score is 640 range i do have a few credit cards on my credit report my denial reason has been excessive debt or debt to income. when i got to the third dealership the finance mgr said i had shopped myself out because of all of the inquires to my credit report from other auto dealers and banks. am i basically out of the car purchasing market since i've had serveral inquires into my credit history? the third dealership is offering me a lease option which im thinking over.

Mr_Shiftright

That doesn't sound right to me. You'd best be careful. Generally speaking, credit requirements for a lease are even stricter than for purchase. Make sure you really understand the interest rates on the lease you might be interested in.

604doc

Also, my understanding is that several inquiries all around the same time count as one inquiry, because b people do shop around for the best deals, whether it be a house loan or car loan etc., so the comment that you had too many inquiries doesn't seem right.

Mr_Shiftright

Also correct I think. The dealer's rap doesn't inspire confidence.

jenboss

I have a good overall credit score of 740, but high debt/income. Do auto loans or lease financing factor the debt/income more than the number of your credit score? I would prefer to lease, but either way I don't want my credit report pulled if the debt/income ratio is going to throw me out of the game. I own 3 homes (2 are rental properties) and dont currently have an auto loan. Its the mortgages and some credit card debt that weighs me down on paper. I dont have any late payments and am employed.
Thanks for any guidance!

timmy15

I just purchased and took possession of a new Nissan car. The finance manager checked my credit rating and it was 822. I also have a very good and high paying job. The finance manager assured me my credit was excellent and that the 0% financing would be no problem. Thus, I put down a 50% deposit on the car and drove away. Two weeks later, I received a call saying Nissan Motor Acceptance Corp denied my loan. They would not say why. They demanded I pay cash or return the car. I told them the car already has 2,000 miles on it as I took it on a cross country trip during the last two weeks. They then said, that I must pay them the cost for wear and tear on the car, which is significant. Do I have any recourse against the dealer? I purchased this in good faith, put down a deposit, and was virtually guaranteed I would qualify for the loan.

jenboss

Google "car loan denied after possession." good info online.

ksccts

Credit score 822...check
High paying job...check
50% deposit...check
Denied loan...hard to believe

Can you not finance through a bank or credit union? This story makes no sense...

Mr_Shiftright

No you have no recourse because when you read your contract you will see that it says "subject to approval by the lending institution' or something like that.

And yes you have to bring the car back (in most cases). The best resolution would be to return the car (your part) and the dealer not to charge you for use (their part). If one or the other digs their heels in, then it becomes a legal issue and you'll have to bear that expense.

You can claim that they "promised" you financing and that this constitutes a contract, but I kinda doubt any court would really enforce that type of argument unless you had it in writing, or saw such a guarantee in an ad (e.g. "we never turn down anyone for financing" )

But even THAT is a loophole, because they'll get you financing all right, just not at the previously agreed rate.

Also I have to say I agree with the other poster, something about this story doesn't quite add up. Have you forgotten something?

megros

I figured that I'd ask about this here. The deal I'm loking at is for a 2011 Town & Country Touring. MSRP is over $29,000, and then there's a $2,000 manufacturer rebate and then if financed with a specific bank they will offer $4,000 more rebates, but there is a $3,500 balloon payment at the end of a 72 month loan. The dealership keeps assuring me that I can just refinance the loan with my credit union without any penalties and they have also told me this can be done at anytime. Anyone have any experience with this? With the dealers pricing, rebates and my trade I'm looking at financing $21,446.

I don't want a balloon payment, which is why I would refinance -rate on balloon loan is 7.18% and rate with my credit union would be 3.25% (already pre-approved). Advise, thoughts?

qbrozen

My thought is if you have to finance $21k for 72 mos and still have a balloon payment at the end, then you can't afford this vehicle.

megros

I would refinance to get rid of the balloon payment. I'm under the impression that the balloon payment will be paid off at the moment of refinancing.

I would refinance for 60 months -not 72 like the initial financing has.

qbrozen

So did you already take the dealership financing? I'm confused. Why would you even agree to it when you could have taken a shorter loan term?

Whether or not you can get out of it is completely up to the bank doing the original financing. If they have a prepayment penalty, then you are stuck. If no prepayment penalty then, yes, you can refinance at any time.

megros

No, I have not taken the financing through the dealership -I would only do that to get the additional $4,000 in rebates. I had just never heard of the balloon payment thing, so it's a bit foreign to me.

Basically if I don't do the financing at the dealership I loose $4,000 in rebates. The reason I would do the refinance is that the rate through the dealership is horrendous and I wouldn't want a balloon payment.

qbrozen

well, ask about prepayment penalties and make sure it is stated in the contract somewhere. Maybe even just call the bank in question. I'd also question why the loan needs to be structured that way. Shouldn't the rebates still apply to a non-balloon finance? And, if not, then that would indicate to me prepayment of this special loan would be a problem.

timmy15

I agree it doesn't make sense. And, no one will say why. Nissan Motor Acceptance Corp says they will send a letter, but cannot say anything over the phone. That's why it is so frustrating. The dealer is just being a jerk. I think there was something placed wrong in the application/communication between the dealer and NMAC, but no one will discuss it. I could easily get a loan, but the 0% interest is why I purchased the car from them.

timmy15

An update to my post. Instead of paying the dealer for wear and tear on the car, I decided to just pay it off. So, I brought in a check for the entire balance and that was it. Now, at this time, I still did not know why my loan was not approved, despite having an 822 credit score, a good job, and no debt. I FINALLY received the letter from Nissan Motor Acceptance Corp explaining why my loan was not approved. It said my debt ratio was too high and my credit score was too low. I brought the letter to the dealer, who contact NMAC and after some discussion it was discovered there was an error in the paper work. The dealer blamed NMAC and I'm sure NMAC blamed the dealer. I think the whole thing was a scam for them to get out of the 0% financing. Be careful out there.

Mr_Shiftright

So they wanted an 840 instead of an 822? LOL!

verdugo

. I think the whole thing was a scam for them to get out of the 0% financing.

Well, it kind of worked :P

Glad that you were able to pay it off. Enjoy your car and thank you for the follow up post. Most of the time, we don't get to find out what happened.

Mr_Shiftright

Well in most cases, that's still the cheapest way to buy a car, especially since putting your car money into a savings account isn't very fruitful these days.

knight_ru

Out of curiosity - any tips on how to negotiate listed financing rates? I have excellent credit but do not want to pay the advertised 2.9% financing charge in this market.

thanks in advance.

Mr_Shiftright

Often the rates are pegged to other incentives, so if you want the incentives you have to pay the rate. This is all set up by the captive financing institution.

You can shop for money just like you shop for a car however. If you think you can beat 2.9% privately, go for it.

knight_ru

For example - a regional bank is offering 2.5 for the same amount of months - If I bring that in, will they match it, or would I just be better off getting approval for that and bypass the negotiation process?

Mr_Shiftright

Well be on your guard here. They may *say* they'll match it, and even write it up at a lower rate, but the contract will read "subject to approval of credit" blah blah---and then you may find that the financing didn't go through even though they gave you the car. Not a good situation.

As long as the incentives/rebates on the car (if any) aren't tied to the dealer's financing, then it's a wash as far as I'm concerned. I've always used my own financing as I have access to local assistance if I need it.

superman5

I have a question about financing.

I am planning to purchase a vehicle. My credit score is 738 (EXPERIAN) but I have CC debt about 40% of my available balance and income to debt ratio is about 24%.

I have obtained car loans previsouly, paid off two full term loans in last 10 years.

I am little worried that my debt might be a problem for me to obtain financing or get a horrible APR rate%.

Would it be better to try to get financed by a car dealer or through a bank?

Which lender would be easier/more favorable to obtain a loan with good interest rate?

I am thinking about applying through one of major banks such as b of a or chase and see what they offer but I dont want them to do a hard inquiry and hurt my credit rating.

Any advise would be greatly appreciated.

jwilliams2

Well, they will have to do a "hard inquiry" to approve you. The dealer should be able to get you a decent rate, but I would want to have my own approval as a back up and to make sure you get the best rate. Keep in mind:

"There is logic built within the FICO credit scoring system that treats multiple mortgage and auto inquiries as one search for credit (a.k.a. only one hard inquiry).

The goal of this logic is to prevent consumers from being penalized for being aggressive interest rate shoppers and only count the fact that they’re looking for one loan against them. The alternative is to have their scores negatively impacted for each and every individual inquiry.

Some of the versions of the FICO scoring credit-scoring models group inquiries into 14-day increments while others group them into 45-day increments. However, since you don’t know which version of the score you’re being scored with, it's best to do all of your shopping within a 14-day window."

verdugo

Well in most cases, that's still the cheapest way to buy a car, especially since putting your car money into a savings account isn't very fruitful these days.

I totally agree, but that wasn't the OP's original choice. If he had wanted to pay cash, he would've paid cash from the start.

joe350

I have a credit score in excess of 725 but was surprised to know that Capital One Auto Finance rejected my loan application of $35000. I do understand that credit score is not the only factor for giving out a loan. I never have financed anything big in my life but have a steady job as Electrical Engineer for the past 4 years after getting out of school. Anyways, now I want to look into other options. I want to know about some of the sources that can pre-approve me for a loan of $35K. I have read about websites such as myautoloan.com but not sure if these are legal sites and am worried about losing my personal information. Are there any auto-loan sources that you can recommend so that I do not have to deal with the dealer financing? Please advise.

dtownfb

Did you find out why you were rejected? Did you try your bank or credit union? can you put additional cash toward the purchase of the car and lower the loan amount? Why not the dealer?

Here's the section on auto loans from Edmunds: http://www.edmunds.com/car-loan/

If you got rejected by Capital One, my fear is you are heading toward a car loan with a high interest rate. Not sure an online auto loan broker is the way to go.