Questions About Financing New Vehicles

stacy2 · October 2004

The dealer did tell us that a major factor in getting approved for our auto loan was longevity in employment. We put 3K cash and there was a big rebate that helped too.

rafa · October 2004

WE'LL MY WIFE AND I are thinking about buying a used car but we dont have much money to put down. We'll i have a fico score of 600 and she has a score of 620 that was in may when we lease a new titan thur nissan motor accetance corporation I have been at my job for 5 months now she been at her job for 1 and half now we own our own home we'll we pay a mortgage we can put down maybe 1000 dollors and we want a 15000 car I got a car loan thur bank one a couple years a go and had for a for a year and 2 months and payed off in full can we try bank one again please help thank you

asafonov · October 2004

[bowke28]
because, in truth, there is no requirement. putting in writing that there is would be fraud.

[grandtotal]
So, it's not fraud if you tell it to people, only if you write it down?

[bowke28]
according to the law, yes.

Thank you, Keith, I will keep this attitude in mind next time I interact with a dealer: until something is not in writing, either side can lie through their teeth.

malo_4 · October 2004

I have never financed a car before, but will on one I am purchasing this month. Can somebody explain how e-loan, lending tree, capital one or any of the other recommended online sites work? Do they send you a check that you make out to the dealer? Do I need to check with the dealer if they accept a check from one of these companies? Any info. on this would be great.

CarMan@Edmunds · October 2004

Hello malo_4. You being very smart by trying to get pre-approved to finance the car or truck that you are interested in prior to negotiating with dealers. Doing so serves two purposes, it gives you an idea of what sort of interest rate you qualify for and it often motivates dealers to beat your rate. When one is approved to finance a vehicle through an on-line bank, like some of the ones that you mentioned, they are either sent an actual check that they can fill out the price of the vehicle and dealership's name on or they are sent a draft that can be used by a dealer to secure financing. Most dealers do not like working with on-line banks because many of them force dealers to jump through hoops or take a long time to pay out. Most dealers prefer dealing with credit unions or local banks over on-line banks. They like doing business with banks that they have relationships with and arrange financing through even more.

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isellhondas · October 2004

Malo, a lot of local banks and credit unions will meet or beat the "on line" lenders. If you do decide to go that way be sure they issue you a CHECK and not a DRAFT. Most dealers won't take a draft.

jdiddy69 · October 2004

My credit is horrible i have a judgement against me for a car that i had maybe 3 years ago and that is hurting from me ever to get a car. I need to get my fiance a used car but she wants a Ford Focus. I want to buy it for her but it just seems like I am not getting any help what so ever and it is really making me feel bad for some reason I just don't understand what I should do or if there is anything I can do. I am paying on it with the garnishment that is going on and I don't know if there is any help for me at all.

jagmaj · October 2004

I am currently working on rebuilding my credit and recently pulled all three of my credit scores. My report from Trans Union is the best, as the other two have errors that I am now trying to correct. In case I have trouble getting the other two reports corrected in a timely manner, does anybody know of any banks, on-line lending services, etc., that get their credit reports from Trans Union?

CarMan@Edmunds · October 2004

Hi jdiddy69. I am sorry to hear about your credit problems. The most important thing that you can do is fix your credit to the best of your ability. Start by paying off any outstanding judgments against you as soon as possible. Also, find out your credit score. Consumers can find out their credit scores online by visiting the Web sites for the three credit bureaus: Trans Union, Experian, and Equifax. These credit bureaus charge a small fee for allowing you to access your score, but it's well worth it. The sooner you fix up your credit, the sooner you will be able to finance a new or used vehicle at a reasonable interest rate. There is a good article here at Edmunds.com for people who are in your situation. Click on the following link to check it out: Tips For Subprime Borrowers - Making the Best of Blemished Credit.

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rroyce10 · October 2004

.... Car_man brings up the best point here, pay off the judgment and you will be able to get somewhere ....

Terry.

KCRam · October 2004

jagmaj. if you file an official correction inquiry, the three major credit bureaus generally agree to present a resolution within 30 days. There's no hard fast rule regarding which lenders use which reports - it depends on what office is pulling the report and what contracts the lender has. Work with your lowest score to correct what they say is causing the score, and all the bureau scores will rise.

kcram
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mrv · October 2004

Hello all,
Great message board-very informative.
Well here is my situation.
I'm about to buy my first car, but I'm a bit worried about my credit situation. I have a 640 FICO score, but the problem is that I have closed all my accounts. So I have no available lines of credit. The problem is that I had payment problems in the past, when I was a lot younger I'm 30 now so I'm learning from my mistakes. But I have not been late in payments for over 2 years, but there are blemishes on my credit. In reality I don't need a car since I work and live in the city so I heavily rely on public transportation. But the allure of getting a car is strong and I figured it would be a good way to rebuild my credit. The problem is that I'm worried my credit is not strong enought to get financing. I am currently interested in a 2004 Mazda which is running about 17600, but I would like to put as little in downpayment, maybe 1,000 most to avoid heavily dipping into my saving. My question is will I be able to get into that car with my current situation with a downpayment of 1000 or lower? If they ask me to put more down, I will simply walk away, as I stated before I don't rely on a car for my daily activities.
So what you guys think?

kyfdx · October 2004

With a FICO of 640, you will get financed, but at what interest rate?

On another note.. as much as I love cars, there is no way I would buy a new one, if I didn't need it for daily transportation...

If you really only need it for "fun", buy something a few years older.. Obviously, you won't put many miles on a car.. You could buy a three year old car for under $10K and drive it for years.. Much cheaper than buying new.

regards,
kyfdx

mrv · October 2004

well yeah here is the thing, I tried buying a used car for under 10k, but no lender would touch me. So that is when I started doing my research and it seems that the mistake i made was closing all my accounts to avoid using them...i know bad mistake. So now it looks like I have no credit. My goal at the moment is to fix my credit so I can purchase property in the next year or two, but it seems like the only way I am able to get a line of credit is with a car loan, it seems credit cards won't touch me either. So i figured I might as well get something I would like and wouldn't mind making the payment. So we'll see, I will try and see if I can get into it for under 1k if not I won't bother.

Kirstie_H · October 2004

Odd (to me) that they wouldn't touch you for a vehicle under $10K. It might depend on the age & mileage of the vehicle, though.

Years ago, when mr. kirstie_h moved to this country and had NO credit history, we had the same problem. However, we had several dealerships who could get us decent manufacturer-backed funding for used vehicles. The only catch was that they had to be less than 3 yrs old and have less than X number of miles (can't recall the number). You might want to dig deeper and find out what the requirements are, rather than settling on a particular vehicle first.

kirstie_h
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mrv · October 2004

The vehicle was through a private seller and I was using one of the online financing services like Eloan etc.. The car was a 2000 VW Jetta so that might of played a risk. Someone suggested I go to a dealer and pick up a new or "newer" car and and banks will have an easier time giving me money. But I've been doing my reasearch and seeing what I can afford to pay and whats currently out there, the Mazda I'm interested in, is the way to go (for me at least). Was this advice correct? It seems to me the dealer will find someone that will "touch" me and give me the money....

Kirstie_H · October 2004

You have already received replies to your previous message. Click here:
gilbert91 Oct 24, 2004 2:30pm
and continue reading, and you'll see the figures explained.

kirstie_h
Roving Host & Future Vehicles Host

KCRam · October 2004

Usually when a borderline credit risk is trying to finance a new car, a bank will want to see substantial down money before they will write the contract. Since all your accounts are closed, a bank will probably want to see 30-50% cash as a down payment to make sure they're not holding the bag if you default.

If you'd still rather go with a late model used car, check for Chevy Prizms in your area. Basically a Corolla in drag, with Toyota build quality and Chevy depreciation.

kcram
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rroyce10 · October 2004

"On another note.. as much as I love cars, there is no way I would buy a new one, if I didn't need it for daily transportation..."

This makes alot of sense, especially if you don't "need" a vehicle .. getting a nice clean little 1/2/3 year old -fun- vehicle will accomplish more than getting a semi-expensive vehicle that you have to hold your breath everytime you let it sit on the street or park it someplace ..

Terry.

mrv · October 2004

Thank you everyone for the advice.
I'm definitely not putting down 30-50% down on a car I don't need. I will just have to wait and maybe like others have suggested look for something cheaper... but nothing in my price range just grabbs me...
I know im being picky, but if I'm going to make a payment every month, then it better be for something I enjoy.
once again thanks for the great advice.

jduke · November 2004

My son(con-artist) recently leased a Toyota 4-Runner from a dealer in Florida. Since his credit is bad he asked my wife to co-sign (primary) on the lease. She did with the agreement he would make the monthly payments. As of this writing, he has failed to make any of his lease payments. Wells Fargo had notified my wife who in turn, made the payments with an additional seventy dollars in late payment charges. My son lives in Florida and we live in Minnesota. My question is simple . . . can we get out of this lease? If so what are the necessary steps and options. My wife's credit rating is beyond outstanding but will suffer if my son continues to fail on his lease obligations.

Thank you

Jay
jadvik@excite.com

manamal · November 2004

unfortunately, by cosigning the lease, she is obligated to pay the lease. I am onaware of any way out. Maybe you can get the truck, but I am not sure.

anonymousposts · November 2004

I agree with manamal. She co-signed so she is jointly reponsible for the payments. I would try to get the car from your son (even if you have to take legal action). Then sell the vehicle or try to have someone assume the lease. Is it possible that she could sell her current car and drive the Toyota til the lease is over?

If not, you may take a $4000 hit selling it to someone or a dealer. So depending on the amount of the payments you may be better just paying the lease through and turning it in at the end. At least you would get the use of the vehicle instead of throwing the money away.

I have to ask this .. why did she co-sign in the first place?

cabrah · November 2004

I have a question about interest rates. I have a low credit score (about 580) alone I can get a loan for 14% so my mother agreed to cosign to make that lower. The dealership told me that banks had recently started new rules that even if the cosigner has good credit it will not help you interest rate. Is this true or is the dealer trying to sell financing.

happ · November 2004

I totaled my car last Wednesday which was paid for (my parents gave me cash to buy it after my lease was over 3 years ago). I had impeccable credit until 5 years ago when I quit my job in NJ (having just graduated from college, living with my parents), moved back to Florida and took a job where I made $15,000 less.

Therefore, my credit went south with me. I now have a 580 Beacon score. I was trying to keep that car until it died so I could pay off my other debts and improve my score.

The advice I am seeking: I need to know if I should even attempt to go to the dealerships and try to obtain financing. I am looking at getting a $10,000 car, with a $3,500 down payment. I have been at the same company for 5 years and now make a great deal more money than I had started out with. Does that matter?

Thank you for any help you can give!

bobotheclown · November 2004

Go to your local credit union and sit down with a loan officer to see what kind of rate they can offer you. That way you have a basic idea of what kind of rate you should be getting when you go into the financing deparment of the dealership. Just make sure you qualify for the credit union's field of membership.

Here's a link to a Edmunds article with tips for finding lending if you have a low credit score. http://www.edmunds.com/advice/finance/articles/48242/article.html

pscdoc · November 2004

Hello, I was wondering if someone could explain to me how the dealers come up with the finance charge amount from the annual percentage rate. I just purchased a new vehicle. The total amount financed was approximately $36,400.00 with a apr of 1.9% for 5 years. How is the total finance charge calculated from these figures? I would appreciate any and all explainations. Thank You.

kyfdx · November 2004

They plug your principal and interest rate.. along with the term into an amortization calculator.. This gives them a monthly payment.. They multiply it by the term... Say, $650/mo. times 60 months = $39,000.

$39,000 minus $36,400 (principal) = $2400 finance charge..

You can see an amortization calculator here:

http://www.hsh.com/calc-js-synd.html

pscdoc · November 2004

Thank you very much kyfdx! That makes more sense. I was beating my brain trying to figure out how they came up with the total finace amount from the contract I am looking at.

pscdoc · November 2004

Well, I think just about anyone can get financing for a used or new vehicle these days and especially this time of the year. My credit wasn't the best and I even have a chapter 7 on my credit from 2 years ago and I was able to secure a 1.9% interest rate but I did put 5K for a down payment. Best bet is to just shop around and see what the car manufacturers are offering on the vehicle you are shopping for.

CarMan@Edmunds · November 2004

Hi pscdoc. There is a great article on how to calculate finance payments here at Edmunds.com. Click on the following link to check it out: Simple Finance Calculations - You Do The Math. You can also use the finance calculators that are available on this site to calculate your car's payment for you: Edmunds.com Loan Calculator.

Car_man
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rroyce10 · November 2004

** but I did put 5K for a down payment** ...

Thats what it takes, some heavy cake down .......

Terry.

pscdoc · November 2004

Thank you for the link!

pscdoc · November 2004

LOL, yes it does sometimes take some heavy cake down I suppose. But, they actually wanted 10K after my initial offer. but I didn't budge and they eventually met my offer. It just takes patience and ALOT of time negotiating,

CarMan@Edmunds · November 2004

You're very welcome, pscdoc.

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monet5 · November 2004

Hi, Car_man. Long time watcher, First time typer.. I'm interested in a new car and wanted to understand the difference between Balloon Financing and Leasing. My basic understanding is that they are both the same, but that with balloon the title is in your name. But do they use the same money factor and residuals? I'm looking at an '05 Audi A6 (3.2). I also live in Chicago, Illinois and I've heard that leasing is not a good option here because of the "lease tax" that the city hits you with.

Thanks for the help.

Kirstie_H · November 2004

A reporter is interested in speaking with someone who has experienced negative equity with a car loan. (Meaning that you have traded in a car before you paid it off and have rolled the leftover loan amount into your new car loan.) She would like to talk with you about why you decided to do it and how you feel about it now. Names can be changed, if necessary. Please contact Pam Krebs, Edmunds.com PR at pkrebs@edmunds.com by end of day today, Monday, Nov. 8, with your name and daytime phone number.

CarMan@Edmunds · November 2004

Welcome aboard, monet5

. You are right that balloon notes and leases are very similar in that they provide consumers with a low monthly payment and the option to purchase the vehicle that they are driving for a predetermined amount of money at the end of their contract. Also as you mentioned the main difference is that your name is on the vehicle's title with balloon notes, while the bank's name is with leases. While the residual values for banks' lease and balloon note programs are often, not always, the same, the interest rates that are associated with them are almost always different. The interest portion of lease payments is calculated using lease money factors, while the interest portion of balloon notes is calculated using either "balloon factors" or normal interest rates.

I usually do not keep tabs on banks' balloon note programs because balloon notes are much less popular than leases, but I actually did happen to see Audi's balloon note program for the vehicle that you are considering recently. Audi is currently charging 4.45% interest on balloon notes on 2005 Audi A6 3.2 models up to 42 months in length. Much like lease money factors, dealers are allowed to mark-up balloon note interest rates to add additional back-end profit to deals.

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monet5 · November 2004

Thanks, Car_man. I'll let you know how things turn out when the car arrives in 2 weeks.

CarMan@Edmunds · November 2004

You're welcome, monet5. Keep us in the loop.

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Kirstie_H · November 2004

A reporter is looking for consumers attracted to GM's plan to lock the interest rate for a purchase of both the current and NEXT car or truck. If you know about this program and would like to offer your opinion, please e-mail jfallon@edmunds.com by Monday, November 15. Thanks!

ukwes21 · November 2004

Do banks really check on employment by calling your employer? Or is the pay stub what they go by? Thanks

driftracer · November 2004

especially in "lower beacon score" situations, considering th erisk they're taking.

18fan · November 2004

I know for a fact that some lenders do call the employer for verification (not just for car loans). I have taken several of those calls over the years.

bobotheclown · November 2004

They call to verify pay and length of employment usually. A lot of people lie about how long they've worked at a company and go as far as to forge pay stubs.

functionfirst · November 2004

I have not financed a car in many years and have never financed thru a car company. I had intended to pay cash for my next vehicle, which will probably be a Chrysler product. However, the salesman told me I could be a $1500 rebate if I financed through Chrysler. He said all I had to do was to make 3 payments; then pay off the loan. My interest cost would be "negligible" for the 3 months and I could keep the financing rebate.

Is it true that I could do this?

kwietstorm6 · November 2004

if you are trying to buy a car (used). I have one from earlier this year and it had no mistakes. I am looking to buy a used car in the next 1-2 months and have figured out how much car I can afford. The last time I looked at all 3(around spring) my beacon score was 762 and I have not done anything major since then (or before).I just want to have a clear idea of what my most recent financial picture is before i start asking for money from my credit union et al.

kyfdx · November 2004

If your score was okay then, it'll probably be okay now.. I wouldn't bother spending the money to check it again... because your C.U. will likely do it for you.. 760 is a good score.. you won't have any problems.

stickguy · November 2004

he is correct. The interest you pay for a few months will be negligible when compared to the $1,500 rebate. They just know that most people can't pay it off early, so they will get the full pop on the interest (probably at a fairly high rate).

As long as the contract doesn't have an early payment penalty (which I don't think it can), you will come out ahead.

hophop1125 · November 2004

Hi - My husband and I are going to buy a car in NJ. The price of the car will be about 19000, plus tax and fees...say 21,000 total.

Our credit scores are very high, over 780. Where should we go to get the best deal? We want to buy a honda crv and they are not offering low rates for that model right now.

Thanks in advance for your help.

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