Credit Scores and Vehicle Financing

holm100 · August 2008

Does a credit score effect the money factor when leasing a car?

qbrozen · August 2008

Are you sure on all of your numbers. When you say "on the lease" do you mean the contract? Are you looking at the Cap Cost or the Residual?

Reason I ask is because all of your payments total right around $2k. So I'm wondering if the total cap cost wasn't $13k and residual $11k.

I don't know what rate you got, but you basically paid $5660 over the life of the lease. Maybe $800 of that was fees. I have no idea if you paid a security deposit. I don't know what your tax rate is, etc. So pretty much impossible to know if you "got screwed."

qbrozen · August 2008

yes.
same as a finance rate.

volvomax · August 2008

yes.
same as a finance rate.

Worse than a finance rate actually.

qbrozen · August 2008

sorry. meant to say your credit affects your MF, just as it does with financing.

Unless you mean to say your credit more adversely affects MF than finance rate? Sooo... put simply, if your poor credit score adds 2 points to your finance rate, it may add 4 points to your MF? If that's true, I didn't realize that, and its interesting to know.

volvomax · August 2008

Let's put it this way, if your score is under 650 a bank isn't going to lease you at all.
But, that same bank would offer you a finance rate.

qbrozen · August 2008

interesting.
and good to know (not for myself, but others that ask me for car advice).

holm100 · August 2008

Okay then, if I am getting lease money rates and residuals for various car models on line (edmunds for example), how do I determine what mine will be if I have an excellent credit score. I know that I have to have all this information in hand before I go to the dealer. Thanks

kyfdx · August 2008

All the numbers that Car_man quotes in the Lease Questions forums are the best possible rates. Those are the base rates for top tier credit..

If your credit is excellent, those are the rates you should be asking for.

regards,
kyfdx

basscadet · August 2008

This is not true, strangely enough. BMW is at least one that will lease a 600+ score. (equifax).

volvomax · August 2008

This is not true, strangely enough. BMW is at least one that will lease a 600+ score. (equifax).

We are talking about banks, NOT the captive lenders.

weverhat · September 2008

I am in the market for a new Subaru. I see they are currently offering 4.9% oac. Checking the rates at banks and credit unions, it looks like their best rates start around 6.5%, so the Subaru financing looks pretty good. I find out that to qualify for the top tier you need a FICO above 700, and that Subaru will use whichever of your three FICO scores is the highest. I check my scores from Myfico.com. My highest is 716. Great - I think I qualify.

I am ready to go ahead and the dealer checks my credit. He says my highest score was 645 (which puts me in the 6.9% tier). I tell him I just checked Myfico.com and my highest score is 716. He says the "auto score" is sometimes different.

So I search online and discover that the three credit bureaus also maintain "FICO Auto Industry"/ "Auto enhanced" scores which place greater weight specifically on your auto loan history.

So here are my questions -

- Why is my "Auto enhanced" score lower than my "classic" FICO score? The only reason I can think of is that if it places greater weight on my auto-loan history, it is very short. I have only had one auto loan which I paid off over 12 years ago and I have kept that car ever since. So my auto-loan history is very short compared to my complete credit history which includes 15 years of never missing a single payment on any of my credit cards, student loans, utilities, etc.

- What do most dealers use to qualify you, your "classic" FICO score, or you "auto enhanced" FICO score? If they only use the "auto enhanced" score, I feel like I am actually being penalized for paying off my car loan early and keeping my car for so long.

volvomax · September 2008

Most lenders use the Auto Score exclusively.
It's not a dealer issue, the dealer isn't approving your loan.
The dealer has to use whichever score the lender requires.

Auto lenders ARE primarily concerned w/ your auto repayment history, not so much your credit cards or student loans.

jsmith25 · October 2008

I checked online and paid for my scores from equifax and transunion, they are 742 and 775, should I be able to lease a 2009 subaru impreza at the best rate? Does anybody know what their cutoff is for the best rate?...We have lease many cars, 2 mazdas, and 2 jeeps...I think these are good ratings, but worried...Is the rate that I paid for to see the rate that Subaru sees? What agency do they check in with to get my score?

volvomax · October 2008

The score used depends on what part of the country you are in.
Here in AZ, most lenders use Experian. So, your Equifax and Transunion scores don't matter. Occasionally, a lender will accept a bureau other than the one they routinely use, but it is rare.

Score is only 1 component of the banks decision on rate tier. The car you are leasing matters(some captive lenders have special rates for certian cars and crappy rates for others, banks tend to have 1 rate for all cars) how much you are borrowing. Are you putting money into the lease? At elast start up fees that is.
Are you trying to bury any inequity?
What is your debt to income ratio?
Do you have any late payments or a prior BK?
all these questions factor into the rate you will get.

jsmith25 · October 2008

I'm in Canada...I don't know what my Experian score is...it seeems you cannot get it online...but I have the other 2 scores. It is a Subaru impreza 2009, and we are looking at leasing. I just hear that sometimes the score that they see isn't what you see or think you have. Debt to income ratio acceptable. No late payments or prior BK...

volvomax · October 2008

You should be fine.

dch_dude · October 2008

I have a 637 beacon (equifax) then a 642 and a 645 (exp & tran). I was recently approved for a new honda through american honda finance but changed my mind. I want an 04 Merced C Class. Should i try mercedes financial or another bank.

joel0622 · October 2008

The terms will be allot different on a 5 year old car then a new.

Go to your bank see what terms they affer then shop that term at the dealer.

volvomax · October 2008

Financially, you will be better off w/ the new Honda.
The rate is gonna be much higher on the 04 Benz,not to mention insurance,repairs,etc.

dch_dude · October 2008

I have an 08 volvo for my reg. vehicle, this is just a toy.

Kirstie_H · October 2008

Financing aside, I'm not sure that I would consider most Hondas to be good "toy" vehicles. They are a lot of things, but "toy" isn't high up on the list.

volvomax · October 2008

Financing aside, I'm not sure that I would consider most Hondas to be good "toy" vehicles. They are a lot of things, but "toy" isn't high up on the list.

Yep. Although I wouldn't consider a C-Class much of a toy either. Unless it was an AMG.

neuralfraud · November 2008

Ive spent hours looking through the forums here, and from what I see there's a lot of variance in people's comments regarding credit score. What I'm looking for is anyone with a score between 630-660 who's recently (in the last month-3) purchased a new vehicle?

What kind of interest rates were offered? How many years? I honestly don't know what to expect. My current vehicle was purchased in '04 and my score was in the gutter - 527. I have a 23.25% interest rate which sucks.

Based on the good credit advertised rates, I'm kinda expecting between 9-12%. I have a very low D/I ratio and recently paid off some debts that were negatively impacting my credit.

I went to the dealer today with my most recent report from Experian (643) but unfortunately being saturday I was told to come back on a monday. I figure this means the In-house lender said "NO THANKS!" - but if they try and offer me anything highre than 12% im not interested.

My history isn't perfect but I haven't had a late payment in over 18 months and I've been with my employer for 2 years now - so I'd like to think that those two coincide positively..

Thanks for any info!

oldfarmer50 · November 2008

"...I have a 23.25% interest rate..."

Ouch! Is there any way you can pay off that loan first before you get another car. That rate must be killing your wallet. Just the thought of paying more than DOUBLE the purchase price on a 5 year loan would keep me up at night.

I haven't borrowed since the you know what hit the fan but I think getting rid of as much debt as possible will improve your score and reduce your rate.

There have been rumors that anyone under 700 is having a hard time borrowing money.

volvomax · November 2008

Score isn't everything.
Debt to income and payment history(esp car payment) is just as important.
Also, how much you are borrowing in relation to invoice is important.
If you are dealing w/ a captive lender you should be under 12%.
However, a bank may put you over that mark.

neuralfraud · November 2008

12% ? ratio of debt to invoice? I'm not sure I understand that. Why would anyone only finance 12 % of the actual invoice?

On the other hand, do you mean I should have offered at least 12% DP?

I just got a call saying that the banks would "like to see some additional household income".

I make a good amount of money, much more per year than the cost of the vehicle I want to buy. I did not need a cosigner with a mid 500 score to buy a $10,000 vehicle at 23.25% interest so even in today's market, that seems like BS to me. Ive got a solid payment history on my car loan and other loans - only negatives were collection accounts that are now clean.

Thanks

volvomax · November 2008

12% is interest rare, not LTV.
Ideally, you should be financing less than the ivoice of the car you are buying, including TTL

Since the banks want more income then, in their judgement you don't make enough money to afford the new car PLUS all your existing commitments.
Also, your past histry DOES matter. Collections, late pays all work against you, even if they were all in the past.
Please keep in mind that the rules have changed since you last bought a car.
Banks are scared to loan money to people in your situation.

jspence83 · December 2008

Hi to all, I have a few questiong. But, first off would like to thank everyone for there advise. I have a 2003 Explorer and looking to trade it in on a truck for my husband for Christmas. I think my credit score is around 680 o 690, depending on which credit organization(sp) you go to. I do have some credit cards with anywhere between 20-75% on the total credit limit. Which we plan on paying most off in the next 3-4 months, he is in sales and get mostly get huge commission for 3-4 month periods. The payoff is just about the total value of the car, I might have about 1500 from the positive equity in the Explorer to put towards the new used truck. I am going to drive his car that is paid off, and edventually sell or trade in sometime next year and get myself a newer car, I dont want to spend 25000 but somewhere between 14,000 to 18,000. To still keep our 350-380 dollar a month car payment at possibily 48 to 60 months. I dont have any money to put down, just the Explorer. I was wondering weather or not I will have a problem getting a loan, and what kind of rate I can expect. I make about 40 grand a year, and i have about 30 grand in student loans that I will start paying back towards the end of next year. Trying to get us both decent cars, before then. Any help or advice???...

Thanks.

dtownfb · December 2008

Now that the average price of gas is under $2, why not keep the Explorer for another year or so? it will give you a chance to pay off your credit cards which will improve your credit score. Also with no credit card payment, you can put more toward the Explorer and possibly pay it off early. Or save money for a down payment.

Right now, you may get approved for a loan but no dealer wants your Explorer on their lot. This means you will be lucky to get what you think the Explorer is worth. Explorers haven't sold well since 2004 and no one knows how long these low gas prices will hang around. Also you have student loans starting up soon. Why get strapped into a car loan before you have to start repaying the student loan?

My advice is hold onto the Explorer as long as possible. Take care of the credit cards first then work to pay off the Explorer. Save up for a decent down payment

joel0622 · December 2008

Now that the financial counseling is over I will answer your question

I see no problem what so ever with you getting a loan as long as your household income is enough to continue servicing the debt load you already have.

dtownfb · December 2008

Sorry, I had to toss that advice in there. I knew one of you finance guys would "answer" her question.

grandtotal · December 2008

Joel0622 did not "answer" the question, he answered the question.

dtownfb · December 2008

Whatever..

isellhondas · December 2008

I happen to think your advise made good sense.

mookie14 · December 2008

I have 07 accord and i JUST avoided a repo what happen was i moved back to ohio and to my shock ohio has a upfront sales tax on leases and the amount $1055.00 now i was in the south and ive had on and off employment my spouse has been holding it dwn. 30 pst due days twice at got the lease 7-07 it ends in 8-2010 so i was paying my note only to find out i was not i was paying
the dam tax so what happens i turn out to be dam there 60 days pst due. So they got there $$$ and im like what the ??? So im asking when i do pay off this lease with all the mess ive been through and paying it off & on time will i be able to get another honda , toyota before this i had FLAWLESS CAR CREDIT WILL THIS STOP ME GOING AHEAD THANKS.

joel0622 · December 2008

Depends on what you do with the rest of the lease. Any more slow pays and I would say you will have a problem.

fezo · December 2008

Have you called Honda (or whoever the lease is with) to explain the situation? I had something a few years back where I had health things going on and it backed up my loan payment because I wasn't paying attention. I basically said if they'd take the last month I owed and move it to the end (in effect turning a 48 month loan into a 49 month loan with a month skipped) that I could take it from there and not screw up with late payments. They thought about it for a minute and agreed.

My credit score is up in the 700s so I guess I survived. I think it's always best to try and straigten theings out. Maybe they'll accept breaking up the payments for you.

mookie14 · December 2008

Talked to them yesterday and honestly really its my fault if i had NEVER came back north i would not have been in this so lesson learned. let me ask this this besides the upfront tax on leases if you move within the state you live is ther ANY FEES, Taxes etc. besides renewing stickers on a lease? i do not want this to happen never again so im on a misson to find out help me out guys thanks. Ps reminds me of one kurtis blows rhyme you get up and start you day and the finance man tows your car away. As long as i can help it i am not NEVER GETTING MY CAR REPOED ITS NOT FUNNY WHEN IT CAN HAPPEN.

mookie14 · December 2008

If I purchase a new Honda and trade in my current leased Honda, I've read that I could still be responsible for personal property taxes. I've already paid an upfront tax in OH - is that the same as the personal property tax? I know about the registration, etc. but are there any more charges that I should be aware of?

kyfdx · December 2008

As far as I know.. Ohio doesn't have a personal property tax on vehicles. Some states do (KY for example).

If you haven't paid that tax on cars you've owned, you won't pay it on your leased car.

regards,
kyfdx
visiting host

blueiedgod · January 2009

I have 07 accord and i JUST avoided a repo what happen was i moved back to ohio and to my shock ohio has a upfront sales tax on leases and the amount $1055.00 now i was in the south and ive had on and off employment my spouse has been holding it dwn. 30 pst due days twice at got the lease 7-07 it ends in 8-2010 so i was paying my note only to find out i was not i was paying
the dam tax so what happens i turn out to be dam there 60 days pst due. So they got there $$$ and im like what the ??? So im asking when i do pay off this lease with all the mess ive been through and paying it off & on time will i be able to get another honda , toyota before this i had FLAWLESS CAR CREDIT WILL THIS STOP ME GOING AHEAD THANKS

Are you sure these were not property taxes on the vehicle. Few states have them, CT, OH.....

If these indeed were sales taxes, I would look into the taxation laws. Most states don't collect sales tax on vehicles that have been registered in other states for 6 months to 1 year prior to arrving to the state.

$1055 sounds like property tax, not sales tax on a lease.

al_2003 · February 2009

I've had some credit problems in the past year, mainly due to some serious health problems at home (not me). My income is good, my D/I isn't bad, but because of the bills associated with the health problems my FICO is in the mid to upper 500s. I also have 2 late pays over the past year between my 2 car loans. My car does need to be replaced this year, unfortunately. I already stretched it a year or so past when I would normally have replaced it.

The dealers keep telling me to fill out an online credit application to start the process, but I think I'm giving the dealer too much leverage right out of the box.

Does anyone have any workable advice here? I think I'll need to borrow around $25,000.

Thanks in advance...

verdugo · February 2009

Sorry to hear about the health problems.

You need to borrow $25,000? That's a lot of money. One thing you don't mention is how much you have to put down. Do you have any negative equity on your current car?

I'm thinking you should be looking at cheaper cars.

al_2003 · February 2009

I'll probably put 10% - 15% down. That's what I need to spend because I need to deal with disability aspects (wheelchair, other gear, etc.). Cheaper vehicles are not really options at this point, unfortuantely.

volvomax · February 2009

In your case, it isn't a question of dealer leverage.
It's a question of you getting a loan at all.
Banks don't want 500 level credit right now.
I'd find a car you like and go thru the loan process and see what happens.
Regardless, you are gonna pay a high rate IF you get done.
You could also try to get pre-approved without a dealer. Either with a Credit union or through an on line lender like Capital One.
That way, you would know going in what you are looking at.

verdugo · February 2009

Ahh, I understand now. Volvomax has good advice. Best of luck.

sharronm · March 2009

Hello,

I am currently in the market for a new used car. I plan to use my car as a trade in -- worth approx. $10k-$11k but still owe $9,000 on it. My credit report is very good with a FICO score of around 760. However, my debt to income ratio is around 41-42%. The amount I am seeking to borrow is around $15,000 for 60 months. I'm just wondering - during these hard economic times, have lenders imposed stricter rules when it comes to DTI ratios? I'm just wondering what the odds are of getting approved for a car loan with what some may consider a high DTI ratio.

volvomax · March 2009

Yes, lenders are getting much stricter on debt to income.
However, you aren't borrowing a lot of money, not much more than you currently owe.
given your score, you should be ok for a loan provided that your other factors(time on job, homeowner,repayment history) are all good.

sharronm · March 2009

Thank you for your response. Yes, these factors seem to be in good order (I have been employed with the same organization for 26 years, a homeowner for 20 years, and my repayment history is perfect).

Interestingly, I am having a difficult time finding the model in which I have selected (2006 Hyundai Azera Limited) - my Internet search is within a 75 mile radius of Albany NY. Perhaps the economist are right - people are holding on to their cars longer!!

Thanks again.

Credit Scores and Vehicle Financing

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