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Thread: I need a car. No, I don't have a tax return. Buuuut....

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    Featured Member Lady Xplicit18's Avatar
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    Question I need a car. No, I don't have a tax return. Buuuut....

    I do have a letter of employment from my club. I went to the credit union and they were giving me a hard time with not having a W-2 (they didn't get that I was a stripper until I HAD to tell them ), and reluctantly took my application. On my letter my manager put I make $3,000 a month and the car I want is $23,000. I have FANTASTIC credit, no loans or debt, zip. I don't know if a car dealership will be easier to get my car or to try to get in with the Credit Union still. Any suggestions? I need another car ASAP and I don't have a BIG down payment to impress people... blah.

    -LX
    "Strippers are like pet tigers. They are nice to look at but they are not for everyone."

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    Default Re: I need a car. No, I don't have a tax return. Buuuut....

    Please clarify what you mean by fantastic credit. Not having large outstanding debts actually has very little to do with credit score.

    Thanks to recent regulatory changes, banks and credit unions now have a mandate to 'verify' the income level of any would-be borrower. A letter from a strip club manager doesn't quite rank equally with past years' tax returns showing taxes paid on $40,000 worth of annual income, or statements from a business only bank account showing $800 worth of deposits being made on a regular weekly basis, at least from the regulator's point of view.

    From the point of view of any bank / credit union loan officer, after the mandated income verification the next thing that's going to be looked at is the 'worst case' results if the loan is approved and the borrower defaults. When a new $23,000 car is driven off the lot, it's value immediately drops to $20,000. If the borrower fails to make monthly payments, and after 6 months worth of collections efforts and document filings for repossession ( costing $1000 in legal fees ), the repossessed vehicle with X thousand miles on it might bring $ 16,000 at a dealer's auction. So in order for the bank / credit union to 'break even' in this worst case scenario, an $8,000 down payment would be necessary to cover the $7,000 net loss of principal plus the $1000 in legal / repo fees. If the loan is approved with a down payment of less than $8,000 then the bank / credit union is exposing themselves to a potential loss ... which in today's economic / regulatory climate is unlikely.

    On the flip side, 'dealer financing' of new vehicles is generally far less nitpicky in regard to the actual creditworthiness of the would-be buyer or the 'underwater' equity status of low down payment auto loans. One reason for this is that, where GM and Chrysler are concerned at least, 'dealer financed' new auto loans are actually being backstopped via US taxpayer TARP money instead of investor / corporate money ( meaning that in 'fungible' real world terms that US taxpayers would take some of the loss if the buyer defaults on the loan ). At any rate, 'dealer financing' is probably far more likely to be approved in a scenario of a low down payment auto loan from a would-be buyer with an officially undocumentable income source.

    ~
    Last edited by Melonie; 11-13-2011 at 06:23 PM.

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    Default Re: I need a car. No, I don't have a tax return. Buuuut....

    Are you planning to buy a new car? If so, you are not going to like my advice; but I wish someone had given me this advice (and I had followed it!) the first time I went to buy a car. If not, you are headed in the right direct and don't need much of the advice below.

    First, it will be MUCH easier for you to get a loan from the car dealer. They want to sell you a car and really don't care if it ends up that you can't pay for it. One trick is to give you 5 year financing. Don't fall for it. NEVER purchase a car with dealer financing. It puts you in a poor negotiating position and will cost you dearly.

    Advice #1 - Finance with the credit union. They want to loan you the money, but they want to make sure they do not get stuck with the car so they will make sure that you can really afford it. Plus, once approved by your CU, you can negotiate with the dealer as a "cash" deal. That puts you in the "drivers seat" so to speak. Get some help from someone you trust about how much you should be paying. If that person doesn't exist, buy Consumer Reports' pricing advice. It will save you a lot of $!

    Advice #2 - Buy a used car. Yes, that new car smell is enticing and you will feel great riding around in it. But, the $23K car will be worth less than $20K before you get it home. Plus, the tax, title, and registration add to the cost; these are likely another $2K depending upon where you live. I prefer to buy from an individual. Someone turning in a leased car is often a great buy. But, there are some decent buys to be had at the larger used car lots. I know that isn't what you want to hear, but I could pay cash for almost any new car I want and I wouldn't do it. I haven't bought a new car in over 20 years. People usually cite 2 reasons to buy a new car - reliability and the cost of repairs. Most cars are very reliable to at least 100,000 miles; we get tired of them before they wear out! Repairs are a pain and inconvenient; but, they are rarely more expensive than buying a new car.

    Good luck! Obviously, I am assuming that you are planning to buy a new car. If that is not true, then I apologize for intruding. I was trying to help!

    slcdon

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    Default Re: I need a car. No, I don't have a tax return. Buuuut....

    ^^^ and I should probably throw this out for discussion as well, since you stated that you don't have past years' tax returns to be used as proof of income.

    The minute the newly purchased car title is registered and license plates issued, your state motor vehicle agency is automatically going to generate a report to the IRS stating the name and social security number of the buyer, the name of the originator of the auto loan, the down payment, outstanding loan balance and monthly payments etc. From there, IRS computers are going to automatically search for past / current year tax returns from a person with the same name and social security number. IRS computers will of course be expecting to find reported income levels ( and taxes paid ) which explain how that person is able to afford to make $600 a month ( or whatever ) auto loan payments on top of the typical costs of rent, food, utility bills etc. that the IRS's database show are valid for that person's specific zip code area. If IRS computers fail to find past tax return filings, they will in all probability immediately make financial network inquiries i.e. bank account transactions, credit card transactions, other transactions appearing on the person's credit report. If these inquiries show a pattern of little or no officially 'reported' income coming in, but a significant amount of money going out, the next step is to assign a human auditor to investigate further.

    If you use the search function you'll find several older threads which discuss this issue, and potential unintended consequences, in some detail.

    I would also point out that, in general, in order to avoid this automatic IRS reporting / attention, the value of the auto purchase must be less than $10,000.

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    Default Re: I need a car. No, I don't have a tax return. Buuuut....

    ^ You definitely dont want the IRS to start investigating you! All that income youre trying to prove you made? The IRS could make you pay taxes on ALL of it.
    And you cant go back and say you didnt make it cause you just told the car people you did. they have proof.
    maybe just work for a month and get a cheapo so you don't run the risk of being audited. its best to stay under the radar with small purchases until youre legal boo.
    "We are the coolest mothafuckas on the planet....The sky is fallin ain't no need to panic"... -Outkast

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    Default Re: I need a car. No, I don't have a tax return. Buuuut....

    Quote Originally Posted by Melonie View Post
    ^^^ and I should probably throw this out for discussion as well, since you stated that you don't have past years' tax returns to be used as proof of income.

    The minute the newly purchased car title is registered and license plates issued, your state motor vehicle agency is automatically going to generate a report to the IRS stating the name and social security number of the buyer, the name of the originator of the auto loan, the down payment, outstanding loan balance and monthly payments etc. From there, IRS computers are going to automatically search for past / current year tax returns from a person with the same name and social security number. IRS computers will of course be expecting to find reported income levels ( and taxes paid ) which explain how that person is able to afford to make $600 a month ( or whatever ) auto loan payments on top of the typical costs of rent, food, utility bills etc. that the IRS's database show are valid for that person's specific zip code area. If IRS computers fail to find past tax return filings, they will in all probability immediately make financial network inquiries i.e. bank account transactions, credit card transactions, other transactions appearing on the person's credit report. If these inquiries show a pattern of little or no officially 'reported' income coming in, but a significant amount of money going out, the next step is to assign a human auditor to investigate further.

    If you use the search function you'll find several older threads which discuss this issue, and potential unintended consequences, in some detail.

    I would also point out that, in general, in order to avoid this automatic IRS reporting / attention, the value of the auto purchase must be less than $10,000.
    This is VERY important. I bought a car and registered it in June. The seller left the sale empty on purpose. He said I could say gift. I bought it for 2500 A few months later I found out this car is a piece of shit and needs 2000 of work plus some body work. I just got a love letter from my state saying I owe them 800 because my KBB for my car is 9000 or something like that. I'm a bit annoyed, but since it needs work I will send in the paperwork.

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    Default Re: I need a car. No, I don't have a tax return. Buuuut....

    I highly doubt anyone will lend you $23000 to buy a car when you only make $36000/year, especially since that income isn't verifiable.
    Actually, the OP's clubowner's signed statement was the source of the $36,000 figure. The OP's actual income could be significantly higher.


    All that income youre trying to prove you made? The IRS could make you pay taxes on ALL of it.
    And you cant go back and say you didnt make it cause you just told the car people you did. they have proof.

    Actually, a fellow Manhattan dancer caught a 'double whammy' in this regard. Because NYC clubs issue 1099's she had in fact filed several years worth of tax returns showing a slightly higher income than was reported via the 1099's. Of course this also meant that a large chunk of her actual income ... cash stage tips and cash private dance earnings ... wasn't included in her reported income. So she goes out and buys a brand new Beemer for something over $40k. This gets reported to the IRS, and after checking the IRS cost of living database for Manhattan, the IRS decides that a person reporting $50k or whatever per year in pre-tax earnings simply cannot afford to be buying a BMW while also paying NYC prices for rent, food, utilities etc.

    So the IRS investigates further. They send an agent into the club this dancer works at, who quickly comes to the conclusion that the reported $50k a year in income is probably more like $100k based on the agent's observations of club dancers and club customers. They then send the dancer an IRS deficiency notice, claiming that her actual income for the past three years has been $100k not the $50k she reported ... and that between unpaid taxes on the non-reported $50k over three years, plus penalties and interest, she owes the IRS an additional $50k in unpaid income taxes. With no positive way to prove that she did NOT earn the money that the IRS said she earned, she had no choice but to settle. The amount of the settlement roughly equalled the price of the new Beemer that she obviously could no longer afford to make payments on ( since she was now forced to make monthly payments to the IRS for back taxes instead ).

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    Default Re: I need a car. No, I don't have a tax return. Buuuut....

    ^ Wow.
    "We are the coolest mothafuckas on the planet....The sky is fallin ain't no need to panic"... -Outkast

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    Default Re: I need a car. No, I don't have a tax return. Buuuut....

    No I don't want to buy a new car.
    Yes, I make WAY higher than $3,000/month.
    Yes, I understand the risks.
    I have a score of 720.
    Credit cards.... what else.

    I need advice on going about GETTING A CAR in this situation not small talk about the IRS.
    I understand that.

    Question was: Dealer or Credit Union; And if I'd need a co-signer of some sort to get through to them since they sort of gave me a hard time but accepted my application at the CU but they have great rates.
    Last edited by Lady Xplicit18; 11-14-2011 at 07:09 PM. Reason: forgot.
    "Strippers are like pet tigers. They are nice to look at but they are not for everyone."

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    Default Re: I need a car. No, I don't have a tax return. Buuuut....

    Quote Originally Posted by BringOnTheMen View Post
    What is so wrong with a used car? You can get a decent used car for under $10,000, which sounds like a much better option for your situation. Also, I don't know what kind of car you're looking at but $23000 seems more like a luxury car and less of a "I need a car ASAP" kind of car. My Corolla was $14000 new and it's amazing. Why do you need anything more than that?
    Uhm. Nothing close to a luxury car. I still have a decent car right now but giving it to my brother. Like I said, it's used. $23,000 for a 2011 muscle car is actually pretty good to me with 1,150 miles on it.
    Last edited by Lady Xplicit18; 11-14-2011 at 07:15 PM. Reason: muscle
    "Strippers are like pet tigers. They are nice to look at but they are not for everyone."

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    Default Re: I need a car. No, I don't have a tax return. Buuuut....

    Quote Originally Posted by Lady Xplicit18 View Post
    No I don't want to buy a new car.
    Yes, I make WAY higher than $3,000/month.
    Yes, I understand the risks.
    I have a score of 720.
    Credit cards.... what else.

    I need advice on going about GETTING A CAR in this situation not small talk about the IRS.
    I understand that.

    Question was: Dealer or Credit Union; And if I'd need a co-signer of some sort to get through to them since they sort of gave me a hard time but accepted my application at the CU but they have great rates.
    If you want to keep it simple based on terms, I would say go with the credit union if you can.

    One they will only lend you a percentage of the blue book value. Which gives you leverage. The dealership will shop around to find which bank will lend them the most so that they can charge you the most.

    Two the general terms of the loan with the credit union are generally better. Look at the list of fees ... pre payment penalty, late fees, licensing fees, etc. Compare them.

    Three having a local branch to make payments and ask questions does make life more simple. Saving all receipts and making sure your payments are applied properly vs mailing it in hoping.

    Good Luck!
    Nature knows no indecencies; man invents them. ~ Mark Twain


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    Default Re: I need a car. No, I don't have a tax return. Buuuut....

    Quote Originally Posted by Lady Xplicit18 View Post
    No I don't want to buy a new car.
    Yes, I make WAY higher than $3,000/month.
    Yes, I understand the risks.
    I have a score of 720.
    Credit cards.... what else.

    I need advice on going about GETTING A CAR in this situation not small talk about the IRS.
    I understand that.

    Question was: Dealer or Credit Union; And if I'd need a co-signer of some sort to get through to them since they sort of gave me a hard time but accepted my application at the CU but they have great rates.
    hmm. alrighty then. *zip*
    "We are the coolest mothafuckas on the planet....The sky is fallin ain't no need to panic"... -Outkast

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    Featured Member Lady Xplicit18's Avatar
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    Default Re: I need a car. No, I don't have a tax return. Buuuut....

    Quote Originally Posted by Vamp View Post
    If you want to keep it simple based on terms, I would say go with the credit union if you can.

    One they will only lend you a percentage of the blue book value. Which gives you leverage. The dealership will shop around to find which bank will lend them the most so that they can charge you the most.

    Two the general terms of the loan with the credit union are generally better. Look at the list of fees ... pre payment penalty, late fees, licensing fees, etc. Compare them.

    Three having a local branch to make payments and ask questions does make life more simple. Saving all receipts and making sure your payments are applied properly vs mailing it in hoping.

    Good Luck!
    Thank you!
    "Strippers are like pet tigers. They are nice to look at but they are not for everyone."

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    Default Re: I need a car. No, I don't have a tax return. Buuuut....

    I would say go with the credit union if you can.

    One they will only lend you a percentage of the blue book value. Which gives you leverage
    True, but ... the limitation on CU loan percentage versus KBB value of the vehicle also translates into a requirement for a sizeable cash down payment ... which the OP already said that she does not have. This is the 'catch 22' advantage of dealer financing in that the more aggressive lenders who charge higher interest rates will also tolerate smaller down payments ( = higher loss risk for the lender ).

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    Featured Member Vamp's Avatar
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    Default Re: I need a car. No, I don't have a tax return. Buuuut....

    Quote Originally Posted by Melonie View Post
    True, but ... the limitation on CU loan percentage versus KBB value of the vehicle also translates into a requirement for a sizeable cash down payment ... which the OP already said that she does not have. This is the 'catch 22' advantage of dealer financing in that the more aggressive lenders who charge higher interest rates will also tolerate smaller down payments ( = higher loss risk for the lender ).
    I agree to a point .... it depends on how good you are at negotiating.

    The average percentage is 90% of the blue book. I use it to tell the dealership this is the most my lender will finance. Then I leave it in the dealership's hands to figure out how to crunch the numbers. I usually go car shopping at the end of the month during the winter when car sales are low. If they havent met their quota they are more likely to bend.

    If you stick to your guns you would be surprised what you can get. Last time I went car shopping it took literally all day. Finally i got them $700 away from my lenders amount. So I took it.

    But I also said IF she can. Always try the best option first and that doesnt work try plan B and if that works but sucks refinance with plan A! There are always options
    Nature knows no indecencies; man invents them. ~ Mark Twain


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    Featured Member Lady Xplicit18's Avatar
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    Default Re: I need a car. No, I don't have a tax return. Buuuut....

    Quote Originally Posted by BringOnTheMen View Post
    Why don't you go back to you club and ask them to write a more accurate letter then? And if you do make significantly more than that...can't you just save up the necessary deposit in a week or two?
    I have $2,000 for a down payment and I found the samer car for $19,000 now so idk...... I feel like if I put 2gs down it won't be enough to put down my interest dealership wise; it would have to be a hefty dp (don't want to pay more than $400/month).
    "Strippers are like pet tigers. They are nice to look at but they are not for everyone."

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    Featured Member Lady Xplicit18's Avatar
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    Default Re: I need a car. No, I don't have a tax return. Buuuut....

    Quote Originally Posted by Vamp View Post
    I agree to a point .... it depends on how good you are at negotiating.

    The average percentage is 90% of the blue book. I use it to tell the dealership this is the most my lender will finance. Then I leave it in the dealership's hands to figure out how to crunch the numbers. I usually go car shopping at the end of the month during the winter when car sales are low. If they havent met their quota they are more likely to bend.

    If you stick to your guns you would be surprised what you can get. Last time I went car shopping it took literally all day. Finally i got them $700 away from my lenders amount. So I took it.

    But I also said IF she can. Always try the best option first and that doesnt work try plan B and if that works but sucks refinance with plan A! There are always options

    I really want to learn how to negotiate! $700 down sounds awesome! How do I not sound desperate/cheap to them though? lol
    "Strippers are like pet tigers. They are nice to look at but they are not for everyone."

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    Default Re: I need a car. No, I don't have a tax return. Buuuut....

    Quote Originally Posted by Lady Xplicit18 View Post
    I really want to learn how to negotiate! $700 down sounds awesome! How do I not sound desperate/cheap to them though? lol
    With knowledge is power. Find out the blue book value and if at all possible be pre-approved for the loan. DO NOT take the dealerships blue book value. What most people dont realize is that blue book values are update quarterly at financial institutions. So get the most update info from them.

    Call the lender and have them run the year, make, miles, and model. This may seem like a pain to do from the dealership, but it is a good way to verify to them you do have a lender.

    The dealership may say oh we have a relationship with this lender and we will do the paperwork for you. Do not do it. Tell them you prefer to do it yourself with a loan officer you have known for a long time.

    Never tell them how much you have for a down payment. Let them think all you have is the loan.

    Lastly, just dont give a damn. Even if you love the car, never let them know. Always make them think you are willing to go find it somewhere else. Stick to your guns. If you dont get what you want ... walk out the door.

    I was helping a friend once buy a car. After a few hours of going back and forth they finally said this is the best we can do. So we got up and walked out the door. We were driving out and they set someone on a golf cart to chase us down to let us know, they could do better!!!
    Nature knows no indecencies; man invents them. ~ Mark Twain


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