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Thread: Buying a car?? Help!

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    Dizzy Buying a car?? Help!

    Hi everyone, I am new to the site! I am 19 and I am a cam girl and a dancer at a club. I have a good amount of money for a deposit down on a car. One problem, no paystubs or paychecks to prove income. Help! I don't know where to even begin.

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    Default Re: Buying a car?? Help!

    This point has been discussed in a bunch of other threads, but here are the 'basics' ...

    - as an independent contractor dancer / camgirl, you are a self-employed small business operator. To lenders, this means that your future income is unpredictable / undependable.

    - as an after-effect of the 2008 'crash', banks are now required to verify the incomes of persons they loan money to rather than simply taking the borrower's 'word' at face value. Employee pay stubs obviously aren't part of the equation for self-employed dancers / camgirls. A 100% acceptable substitute is a copy of previous year tax returns which show how much money you reported to the IRS as having earned. A somewhat acceptable substitute is a copy of your ( business ) bank account statement showing regular deposits being made.

    - non-bank lenders aren't bound by the same income verification regulations as banks ... thus they are much more likely to write a new auto loan / lease in the absence of 'proof of income' documentation. Also, some banks will side-step income verification if the loan has 3rd party backing ( example GM car loans through Ally Bank and similar 'seller financed' auto loans ). Collectively, such loans are considered to be 'subprime'. The lenders understand that the probability of such 'subprime' loans going into default is much higher than loans made to borrowers with steady jobs / verifiable incomes. Thus the interest rates, fees etc. associated with 'subprime' loans are typically higher.

    - some non-bank lenders will not only side-step income verification, but will also side-step minimum credit score requirements. Such loans are considered to be 'deep subprime'. Essentially, such auto purchases are virtual 'rent to own' arrangements, with the seller ( i.e. companies like TimeBuyer ) overcharging on the sale price of the vehicle PLUS charging a very high interest rate ... in anticipation that a significant percentage of autos sold to 'deep subprime' buyers will wind up being repo'd as a result of buyers defaulting on monthly payments.

    In real world terms, a young dancer / camgirl who does not have a decent credit rating / established credit history, who does not have an established small business financial history via a couple of years worth of tax return filings, etc. is most likely going to be relegated to 'deep subprime' options ... i.e. being forced to 'pay out the a$$'. Because of this, the option of avoiding a loan altogether by saving up several thousand dollars to outright purchase a halfway decent second hand car is usually a much better option.

    However, keep in mind that purchasing and registering a car will result in a report being issued to the IRS by the state motor vehicle agency ... and potentially a different report being issued by the auto seller to the IRS as well. This in turn will result in IRS computers attempting to match up tax returns filed by the same person which show a sufficient amount of 'after tax' income to explain how that person was able to afford buying a car in addition to paying for typical living expenses and paying taxes. Or put another way, purchasing a $10,000 second hand car with cash will probably lead the IRS to expect that the same person reported at least $25,000 worth of annual gross business earnings on their tax return, yielding $20,000 in 'after tax' income ( after $5,000 worth of taxes were paid ) to explain where the $10,000 to purchase the car came from.

    Finally, it's worth mentioning that all auto lenders are acutely aware of the fact that, in the event of financial distress on the part of the borrower, the IRS has absolute priority over the lender banks / companies. This in turn can mean that the ability of those lender banks / companies to repo their car may be blocked by an IRS lien. This is usually not much of a concern if the banks / lenders are writing a loan for a check stub 'employee' ... because they know the person's employer has already withheld estimated tax money from every employee paycheck, and that the person's employer has already filed and paid that estimated tax money to the IRS. However, in the case of a self-employed small business operator, those responsibilities fall upon the small business operator themselves. Thus it can be helpful if a would-be self-employed auto loan applicant can show the lender that her quarterly IRS estimated tax payments have been made. Those quarterly IRS estimated tax payments can also serve as ( indirect ) proof of income.

    Generally speaking, for a single girl with no children, the estimated federal tax rate is likely to be around 25% of her total earnings. The 1st quarter 2015 deadline for paying estimated taxes owed on income earned between Jan 1 and April 1 was April 15th. The upcoming 2nd quarter 2015 estimated tax deadline for paying taxes owed on income earned between April 1 and June 1 will be June 15th. Also, if the person lives in a state which levees its own income tax, separate quarterly state estimated tax filings and separate quarterly state estimated tax payments to the state tax agency are necessary. While varying widely from state to state, generally speaking the effective state tax rate for a single girl with no children is likely to be in the 5% ballpark ( which comes on top of the 25% effective federal tax rate ).

    Bottom line in today's world is that having cash in hand is no longer enough. Besides having cash in hand, that money must also have a 'paper trail' to show how it was earned, to show that appropriate taxes have already been paid, etc.
    Last edited by Melonie; 05-31-2015 at 07:18 AM.

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    Default Re: Buying a car?? Help!

    Do you have tax returns? Do you have bank statements? How much is a good amount of money for down payment?
    Nature knows no indecencies; man invents them. ~ Mark Twain


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    Default Re: Buying a car?? Help!

    I got a car last year. never asked for any of that like years ago. And this was a mercedes dealership.
    Last edited by michele11; 06-02-2015 at 06:17 PM. Reason: Added info

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    Default Re: Buying a car?? Help!

    Quote Originally Posted by Adrianasgods View Post
    Hi everyone, I am new to the site! I am 19 and I am a cam girl and a dancer at a club. I have a good amount of money for a deposit down on a car. One problem, no paystubs or paychecks to prove income. Help! I don't know where to even begin.
    Depends on the dealership, your down payment vs. car price, your credit score, and cosigners...

    I was in the same situation a couple months ago. One dealership would take a manager letter but wanted an absurd interest rate and down payment. Another wouldn't ask for proof of income as long as I put 30% of the purchase price down. One would take 3 months of bank statements. One would give me awesome terms, if I had a cosigner.

    I ended up at Carmax, and had a fantastic experience... I actually just finished preaching their virtues in another thread, haha. Honestly, at your age and this being probably your first car, I would advise you to try them: it was a very transparent process, no slimy sales shit (they get flat commission regardless of the car price), the sticker price is what you pay plus a $200 doc fee and sales tax (NO haggling or upselling options). They ran my info in front of me, and showed me all the lenders that approved me and their terms. You can totally make sure you're good to go and will get approved BEFORE you test drive something and love it. I got a good interest rate, paid a fair price, and did not have to show one lick of income proof. The only downside is that what is on the lot is all they have, they can't order you a car or anything.
    All that said, I'm 23 so I have 5 years of a good credit score, with a prior auto loan paid in full. At 19, you won't have much of a history so YMMV...

    If you go a traditional dealer route, either bring in 30%+ of the estimated price, or 3 months of bank statements, or last year's tax return, assuming you filed and claimed enough money. They want to see that you make enough every month to pay your other debt (credit cards, etc.) and rent in addition to the car, so they may ask about that stuff.
    As Melonie said, non-bank lenders are much easier. I have heard of many people being financed by Mercedes Finance, Toyota, etc. without any proof of income stipulations. Ask the dealer if they have a 'captive lender' like that.
    You can also apply to some non-bank companies before going to the dealer (gives you a bargaining chip so to speak)... if you are deadset on buying a new car and don't care if it's a ridiculous interest rate, there is probably one of them who will approve you. There's always those dealers who say "everyone approved"... "everyone approved" with 30% down and a 21% interest rate. If you go that way, make sure the lender will let you refinance. I believe Santander and Westlake Financial will approve almost anyone.

    Melonie has a good point that if you have a significant amount saved, you might be better off finding something to pay cash for though. It is actually a very good idea, since you don't know if you're going to remain in the industry and able to afford whatever lifestyle you have now plus a new car (I know, we all say we'll stay in it but minds change).
    "People jack off with the left hand and point with the right."

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    Default Re: Buying a car?? Help!

    Quote Originally Posted by michele11 View Post
    I got a car last year. never asked for any of that like years ago. And this was a mercedes dealership.
    I am assuming you have awesome credit, Michele. Is that correct?

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    Default Re: Buying a car?? Help!

    Well I own multiple homes but my credit was 750 and at the time I bought the car it was around 660 due to tenants who never paid on time and destroyed my property.

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    Default Re: Buying a car?? Help!

    I'm assuming since she is 19, she doesn't have much or if any credit and that is probably why it is so tough for her.

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    Default Re: Buying a car?? Help!

    My 2 cents (speaking as a former Californian) the statistic is that most auto repos happen to people under the age of 25...meaning that auto dealers really don't like very young people purchasing cars unless they have a co-signer (usually a parent or relative.)

    Aside from that hurdle, the cost of insurance + other auto related costs makes it harder for someone with typically low income to keep up with the long term cost of an auto loan.

    In short, your best bet is to buy something free and clear with cash, or go to a "buy here pay here" independent auto dealer.

    IF you can sweet talk a relative into co-signing for a more expensive auto....do that and pay it off as fast as possible.

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    Default Re: Buying a car?? Help!

    IF you can sweet talk a relative into co-signing for a more expensive auto....do that
    Involving a co-signer essentially substitutes the co-signer's credit history, credit rating and income ratio / ability to pay, in place of those of the car buyer. This is a very effective technique IF you can find a willing co-signer. However, this is increasingly difficult, given the fact that the co-signer's own credit rating and income ratio / ability to pay are going to be affected by the loan they have co-signed for as if the co-signer had actually taken out that loan themselves.


    you go that way, make sure the lender will let you refinance. I believe Santander and Westlake Financial will approve almost anyone.
    Very good point !!! Many of the lenders catering to 'deep subprime' borrowers will impose early repayment penalties, fees, etc. as a means of effectively forcing the 'deep subprime' borrower to still pay all of the imputed interest charges which the lender would have received had, say, 5 years worth of on-time 18-21% interest rate monthly payments been made per terms of the original loan.


    I'm assuming since she is 19, she doesn't have much or if any credit and that is probably why it is so tough for her.
    This is one 'negative' factor. However, being self-employed is probably just as much of a 'negative' factor. As mentioned earlier, from the standpoint of the auto lender, their largest 'security' is the ability to repo the car if the borrower defaults on the loan. However, where self-employed persons are concerned, the much higher risk that the borrower will fall behind on tax payments as well as car payments ... and the ability of the IRS to 'seize' the car as a result of unpaid taxes ( thus pre-empting the lender's ability to repo said car ) ... is now a growing concern. This is understandable since, if the IRS pre-empts a repo, and the borrower files for bankruptcy, the auto lender's losses are potentially increased by an amount equal to the resale value of the car.
    Last edited by Melonie; 06-04-2015 at 03:38 AM.

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    Default Re: Buying a car?? Help!

    If she has cash she should just go get a reasonable car and pay cash. I wasn't in this industry at 19 and bought my first car off my parents. When I wanted a fancy sports car I pleaded with them to cosign. After a few hours I lay on the floor and screamed and cried and threw a fit. My dad gave in. Lol.

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    Default Re: Buying a car?? Help!

    Aside from the "I want!!!" factor...you will have to remind yourself that an auto is rarely an investment. It's going to get worn out over the time you pay it off even if you baby the car. You also cannot control if some a-hole smashes into your car & totals it, OR someone steals it. (A huge problem in my home state- I had to call the cops when I found a burned out truck that was stolen, stripped, dumped and still smoking from the gasoline fire. Some auto theft rings will put autos on flatbed trucks to get them to the chop shop...bye bye car.) SO if you aren't prepared for the worst case scenarioes of auto ownership...don't waste a ton of money on an auto purchase. PLENTY of reliable brands have models that are around a decade old, look great and are good to own if the original owner did some maintanance on it.

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    Default Re: Buying a car?? Help!

    Honestly I think you should avoid getting into a car lease if possible. Not only will you be paying monthly, plus interest, you will also have to pay for full insurance which is much more expensive than just liability/basic insurance you can get on a car you own free and clear. Unless you're trying to build up your credit car notes are a BAD idea imho. You can get a nice, dependable vehicle for a couple grand most places. Or save for a month and get something nicer. After having to give a car I bought with my ex back to the bank (because I could no longer afford the insurance AND the car payments) it ruined my credit score for years. I bought an ugly but reliable van from a friend and only pay $70 for insurance a month, compared to $500 + $200 in insurance I was paying on my leased car.

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    Default Re: Buying a car?? Help!

    ^^^ along similar lines, trying to figure out how large of a monthly car payment one can 'afford' over the next 5 years is a huge crap shoot these days. Is your level of gross earnings likely to increase, stay the same, or drop ? Is the amount of taxes you must pay going to increase, stay the same, or drop. Are prices for 'necessary' items, from rent to food to energy to health care going to increase, stay the same, or drop ? Auto lenders don't care if your rent was raised by $100 a month, if your ACA penalty tax was raised to 2.5%, if your grocery and utility bills have gone up etc.

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