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Thread: Considering financing a new car

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    God/dess greenidlady1's Avatar
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    Default Considering financing a new car

    Sorry for so many questions guys but I need help, lol and that's what we're here for, right? I have payed cash for every car I have owned for the last 6 years. Before that I financed a car for 7 grand and paid it off with no problem. Before that my father co-signed a car for me but when I moved out took it away and ended up voluntarily repoing it but that was 9 years ago. My last credit report I saw was like two years ago and that shows little to no credit with the credit I do have being fair, I guess because of the car a couple of dr. bills. I am looking at a 22,000 vehicle. I am going to put 2k to 5k down on it. GMC claims to have 5.9% financing, however, if my credit is fair that may not apply to me, right? The reason I wanting to do this is because I want to finance a home within the next 3-5 years. I want to build my credit so I will be able to do this. What do you guys think?

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    God/dess montythegeek's Avatar
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    Default Re: Considering financing a new car

    20K will have a payment of $500 or so over 4 years. If you do get it make sure there is an automatic debit to your checking account each month (and make damn sure the money is in there).

    Reliable pay counts.
    The first thing GMAC will ask itself is "can she afford $500/mo with her other bills". You may think you can, and you may be able to, but they have to believe it based on documents.

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    God/dess greenidlady1's Avatar
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    Default Re: Considering financing a new car

    Why should I get it automatic debit?

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    God/dess Gynger's Avatar
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    Default Re: Considering financing a new car

    On a completely different note.. but something to consider.. get something that gets good gas mileage.. you don't want to end up with a $500 car payment and then a gas bill of a couple hundred as well (depending on how far you drive)...

    What about buying something around 10-15k instead? You'll still build your credit rating, even if you don't get a great interest rate, plus if you are going to be putting down that much for a down payment, you'll still have time to build your credit by making payments which will be lower...

    Also, even if you only have two accounts you are paying on consistently, it will build your credit quickly..

    Speaking from experience about paying off a bill that is reflecting negative... if it has gone to collection, it will say, "Collection-Paid" or something along those lines, it will show paid, but also that it was in collection which is against you...

    Hope that helps.


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    Default Re: Considering financing a new car

    Yes, thank you very much. My credit score was around 550 last time I checked it and that was a couple of years ago. I worry that it will be harder to get financing on a used car. Isn't it easier to get financing on a used one? I know it will depreciate a lot more but at least it gives me a chance?

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    God/dess VenusGoddess's Avatar
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    Default Re: Considering financing a new car

    Quote Originally Posted by greenidlady1
    Isn't it easier to get financing on a used one? I know it will depreciate a lot more but at least it gives me a chance?
    Used cars depreciate at a much lower rate than brand-new ones. Want a new car but don't want the depreciation? Go buy a previously leased vehicle. You can get a vehicle with low miles and immaculate interior that is only 1-2 years old. You won't have the depreciation on it, but you will have reliable payments and a "like new" car.

    A 550 credit score isn't that good. I would look into cleaning up your credit before you go shopping for a car. The "incentives" are offered to people, usually, who have credit scores of 680 and above. That doesn't mean that you cannot get a good rate, though. And, don't let EVERYONE run your credit. Only run your credit when you are absolutely sure you want a car. Too many credit inquiries will bring your score down. A few points can make a big difference in financing.

    Get quotes from your insurance dude about the cost to insure your new car. And, for god's sake...buy the damn "gap insurance"!! It costs a few hundred dollars, but if anything happens to your car, the gap insurance will cover the difference between what you have left on FINANCING the car and what the MARKET VALUE of the car is. You don't need rust-proofing, you don't need most of the "extras" they try to sell to you. But, get the extended warranty (if you intend on keeping the car for a long time) and get the gap insurance!! Of course, check with your insurance agent...they may offer gap insurance at a lower cost...but definitely get it!

    Otherwise, go see my other post to your other question. LOL

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    God/dess greenidlady1's Avatar
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    Default Re: Considering financing a new car

    Is is possible to get financing with my credit score like it is? I could save more money and pay cash but I want to build up my credit. Is it harder to finance used rather than new? I have heard it's easier to finance a new car even though it's more money because they want to get you on interest rates. I plan on paying this thing off in two years. If I pay it off sooner than planned do they still get the full interest rate amount?

    I need a car kind of bad right now. We have three cars, one was an old clunker, Jeep Grand Wagoneer we just used to take trash, haul things, etc. It is pretty much done for. My husband was driving down the road the other day and the breaks went out completely, luckily he was in town and was okay. I am not extremely worried about fixing it because we rarely use it anyway. I also have a little Daewoo, I bought right before Daewoo went bankrupt and paid cash for it. It gets excellent gas mileage and is a great little car. It has over 100,000 miles on it though. We lastly have a Suzuki Sidekick, however, my husband sold it a few months ago to a girlfriend of mine who doesn't have her license yet. We are trying to help her get her license so she can take the vehicle over and get it out of our name. When this happens we will only have one vehicle. So, it's kind of a
    tough situation.

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    God/dess VenusGoddess's Avatar
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    Default Re: Considering financing a new car

    Without looking at your credit report and seeing exactly what is going on...it would be hard to say. HOWEVER, used car financing can be gotten as easily as new car financing. The big difference is the depreciation. Don't buy brand new...let someone else take the hit. Buy 1-2 year old lease. No one would ever know that it wasn't new.

    You could get financing on a 550 score...but, you can expect to pay a much higher interest rate (probably around 14-20%). If you take the loan out for 48 months (for lower payments) you could always make 2 payments a month (depending on your credit company, you may have to make a payment to them and a payment to a savings account). You want to have at least a 12-24 month timely payment history to help your credit. You may even want to consider getting a credit card in which your deposit to the card would be your limit...and just charging a tank or two of gas a month and paying it off. After about 6 months of that, it'll help your credit score as well.

    I forgot to add that if you make timely payments for 12-15 months, you can check your credit score and if your score has gone up, you can see if your current credit company would be willing to refinance your loan for a lower rate. What happens is two-fold. 1) your car loan is shown as being paid in full and on-time. 2) you get the benefit of a higher credit score and lower interest rates.

    But, if you can...get those collections removed by either disputing them or by making a deal (like I mentioned above) and getting them off your credit report!

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    Default Re: Considering financing a new car

    The disputes are about three years old. If I attempt to pay them off now will it change things?

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    Default Re: Considering financing a new car

    Quote Originally Posted by greenidlady1
    The disputes are about three years old. If I attempt to pay them off now will it change things?
    Yes, it will. As Venus is politely trying to tell you, your present credit score is well below the threshold that auto companies and banks consider eligible for 'incentive' financing, and partway into the territory that auto companies and banks consider to be 'subprime'. This will probably translate into your being able to get a car loan rather easily, but being saddled with an interest rate which isn't very attractive. That difference will probably mean that your monthly payments on a 4 year loan will be more like $550 instead of $500, and that the total cost of paying off the car will be several thousand dollars higher.

    'Fixing' the disputed items on your credit report will definitely result in your credit rating going up after 2-3 months. As a result, the interest rate offered to you on a car loan should go down.

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    Veteran Member TJAndDani's Avatar
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    Default Re: Considering financing a new car

    Quote Originally Posted by greenidlady1
    My credit score was around 550 last time I checked it and that was a couple of years ago.
    With a score like that you are looking at a huge down payment. And a used car from Jim's Used Auto's "Where EVERYONE rides." And then it will come with an autolock out if you forget to pay the bill.

    Pull your credit report again at: www.annualcreditreport.com its free. It wont tell you your score, but its good to see what is on there. You never mentioned if those dr's bills had been paid, if not that could be dragging your score down quite a bit.

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    God/dess montythegeek's Avatar
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    Default Re: Considering financing a new car

    Quote Originally Posted by greenidlady1
    Why should I get it automatic debit?
    As VG and I have been trying to explain an automatic debit means that the bill is gonna get paid on the date due unless your account is overdrawn by the payment. Doing what you say you are going to do counts!
    That way nothing is likely to go wrong, no forgetting, running out of stamps, losing the payment book, being out of town and forgetting the payment book. This is a plus for your credit rating. This is to improve your score by being reliable.

    The first step as VG and Mel. explain is to negotiate your way out of those delinquencies on your record. Settle them with the biller.

    Consider getting half the car. I am in the process of trying to sort out my gf's finances and was looking to trade in her Caddy with a $500/mo payment. From a limited sample of looking you can get a low-miles vehicle in the range of a PT cruiser about 1-2 years old for about $10-12 K and a payment of about $300/mo for 3 years instead of 4. Use the extra $200/mo to clear other debts and you will be in much better shape in 2-3 years.

    Remember those graphs from math class showing a line going down very fast on the left then still going down toward zero? That is what used car prices look like. To get to ownership costs add in a line going up from almost zero in the beginning to a higher value further out--this is repair cost.
    The "sweet spot" is the 1-4 year old range where the depreciation is not too fast and there are few repair costs other than changing the oil.

    PS the vehicle mentioned is just a reference and not a specific endorsement. Now is a good time to buy a used car because of all the tradeins from the vehicle incentives.

    When the car and the back bills get paid put 100% of what you were paying in savings.

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    Default Re: Considering financing a new car

    One thing that I have done also is a single payment lease. I have only seen these offered by Ford credit. I have done a 2 year lease and with a price off of sticker of 15% with incentives and a residual of about 55%,The residual is what the car is worth in 2 years i.e. 11,000. this would leave the cost of the automobile at about 30% for 2 years of use. i.e. a $20,000 list auto would be $6,000 on a single payment.

    Instead of making $300 / month payments, it is one payment of$6,000. It is less risky for the finance company because it is all up front, and you build the credit. The other advantage is that if you like the car after 2 years you can then buy it .... with better credit.

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    Veteran Member TJAndDani's Avatar
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    Default Re: Considering financing a new car

    ^ never heard of that, good advice.

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    Default Re: Considering financing a new car

    Thanks so much TJ, I did go to the annual credit report and checked my credit at equifax, now I know what I need to pay off. My credit score is actually 532 . I just have two things I need to pay off. It said if I pay them off my credit score would go up to 588.

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    Default Re: Considering financing a new car

    Just remember, before you pay them off...make them agree to erasing all negative reporting!! That will help your score even more. And, don't pay a dime until you have that letter in your hands!!

    You should really be up into the middle of the 600's to really get a good rate...but it's a start!

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    Default Re: Considering financing a new car

    I'll remember to do that. I appreciate it Venus.

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    Default Re: Considering financing a new car

    Okay, I have a couple more questions. First off can your credit score go down 80 points from 5 inquiries? If so, when will it go back up? If not, can unpaid debt continue bringing it down?

    I paid one of my debts off on my credit report today. They are going to fax me a letter tommorrow once the check clears the bank. The account was under collections on my report. So, the orginal debtor and the collection agency are showing up my report. Will the orginal debtor come off my report as well since I paid the collection agency off.

    Thanks again, Lisa

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    God/dess VenusGoddess's Avatar
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    Default Re: Considering financing a new car

    Quote Originally Posted by greenidlady1
    Okay, I have a couple more questions. First off can your credit score go down 80 points from 5 inquiries? If so, when will it go back up? If not, can unpaid debt continue bringing it down?

    I paid one of my debts off on my credit report today. They are going to fax me a letter tommorrow once the check clears the bank. The account was under collections on my report. So, the orginal debtor and the collection agency are showing up my report. Will the orginal debtor come off my report as well since I paid the collection agency off.

    Thanks again, Lisa
    Ok...first...you should get a letter of wiping out all bad stuff from the creditor BEFORE you send the money. Otherwise, they get the money and they don't hold up their end of the bargain...and you cannot prove otherwise. You get the letter from them, then you send in the payment, and when the payment clears, you send THAT along with a copy of the letter to the Credit Bureaus and clear your account that way.

    As for the original creditor/collection agency thing...it'll only clear the collection agency. When a company sends you to collections, what they are doing is selling off your file. For the original company, they write off the loss (they also write it off on their taxes, but that's another story). If you pay the collection agency off...well, then it'll show a Paid collection. That's not going to help you much. What you WANT them to do is to DELETE any adverse marks against you. Some agencies will do it on the drop of the hat...others won't. It's also important to know that you NEVER pay the full amount to the collection agency. You always negotiate a pay off amount (they have nothing to lose, anyways).

    And, yes...your credit score can drop dramatically with too many inquiries. YOU may think you only have 5 inquiries on there...but inquiries stay for SIX MONTHS. That means that credit card you applied for but got turned down for 5 months ago is still on there along with the new inquiries. Rule of thumb...if you ABSOLUTELY want it...then run your credit. But, letting people run your credit "just to see" is a no-no.

    Another thing that a lot of people do not know...when a company runs your credit, they have to, by law, give you a copy of the report if you ask. If you go to car company A and they run your report, but turn you down for financing, then you can get a copy of your report (on the spot) and use it to go to another company. They'll want to run their own credit, of course, but at least you have a copy of the report for them to LOOK at and see if they can work with it before they run your credit. If they cannot work with it...you've saved yourself a credit inquiry. You can also pull a tri-merge credit report yourself (it won't nick ya) and take that with you. Also, I recommend signing up for the credit alerts. They send you an email anytime something happens to your credit (new inquiries, score increases/decreases). This is especially helpful when you are trying to clean up your credit.

    One last thing...keep all copies of all payments made. You can use these as proof that collections were paid, etc. In some instances, finance companies will make exceptions if you have proof that collections were paid off, but is not showing up on the credit report. Guard paid receipts/cancelled checks/cleared money orders/letters of payoff with your life. Don't throw them away until the adverse accounts drop off (about 7 years).

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    God/dess greenidlady1's Avatar
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    Default Re: Considering financing a new car

    So, in other words it does not do be a lot of good to pay off deliquent credit card accounts? I only have two that are deliquent plus some medical bills which everyone says doesn't count against you when applying for an auto loan or mortgage. I orginally owed 1800 on this one I paid off today for 875. My other orginal is like 800 and the end of this week I hope to pay it off too if it will do me good. Then I will be all clear except for medical bills.

    I checked my credit like you guys suggested at Equifax, it was 532. I checked it myself again today at transunion and it was 455. Can it go down that much from me trying to get a auto loan? Btw, I can get the car I want for 20k but I have to put 5k down and prove my income, which I should be able to do in a few weeks. I wanted to put 3k down orginally but they could only approve me for around 14k with that. And they told me my interest rate would probably be around 20% but once I paid on it for a while and brought my credit up I could refinance it.

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    God/dess montythegeek's Avatar
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    Default Re: Considering financing a new car

    Green,
    You said that you also wanted to buy a house in 3-5 years so why not consider this option. Rather than borrow to the hilt at high rates to buy a 22K car, buy an $11k car and save the rest for when you want to buy a house. Clear up the old debts and get them out of your report as a negative, then save for house. Both of these moves improve your credit rating and make you less risk for the future lender. Then the house payment costs less too. And the insurance payment on the car is lower, and odds are it uses less gasoline, and has lower maintenance costs as well.

    PS paying off a car payment early is not always cheap since early payments are discounted against the obligation. The lender like you to pay it off because the early payment penalties are often very high. Check fo the following rules in the payment terms "rule of 72". If it appears there paying off early to refinance does not save you much. Money not borrowed does not have to be paid off.

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    Senior Member FL Dancer's Avatar
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    Default Re: Considering financing a new car

    I also highly recommend not financing a car.

    Buy one that you can afford to pay for in full at time of purchase. You can always sell it and buy a better car when you have more to spend on a vehicle

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    God/dess VenusGoddess's Avatar
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    Default Re: Considering financing a new car

    Quote Originally Posted by greenidlady1
    So, in other words it does not do be a lot of good to pay off deliquent credit card accounts? I only have two that are deliquent plus some medical bills which everyone says doesn't count against you when applying for an auto loan or mortgage. I orginally owed 1800 on this one I paid off today for 875. My other orginal is like 800 and the end of this week I hope to pay it off too if it will do me good. Then I will be all clear except for medical bills.

    I checked my credit like you guys suggested at Equifax, it was 532. I checked it myself again today at transunion and it was 455. Can it go down that much from me trying to get a auto loan? Btw, I can get the car I want for 20k but I have to put 5k down and prove my income, which I should be able to do in a few weeks. I wanted to put 3k down orginally but they could only approve me for around 14k with that. And they told me my interest rate would probably be around 20% but once I paid on it for a while and brought my credit up I could refinance it.
    The one thing about credit bureaus is that they never have the same score. Equifax may have 689, Transunion may have 622, and Experian may have 599. The thing about trimerge reports is that most lenders will take the MIDDLE score and work off that. Some places ONLY pull one bureau and will work off that. One of the things I did was call the car dealer financial managers and ask them which credit score they went off of. Then, I went to the car dealers that used the bureau which I had the highest score at. Heh...I got a better rate way.

    Next...medical bills do matter. While most lenders will be more forgiving on them (knowing that emergencies happen and not everyone has medical insurance) it will have an affect if you have TONS of medical bills. If you have $2,000 in medical bills...it's more forgivable than if you have $15,000. You should work to pay off those medical bills, though...because they will come back to bite you in the ass. Unless they are more than 5 years old...I would suggest that you think about starting some kind of payment plan on them.

    Like I said before...paying off your debt is a good thing to do. However, if you make a deal with the creditor that they'll wipe out ALL negative comments/marks on your credit report if you pay $875 in full...that's great! Now, you tell them that as soon as you get the letter from them stating the exact terms of what they'll when they receive your check...and signed by someone who has the power to authorize that kind of transaction in that company, then you'll send the money. If you send the money before you get the papers...they can reneg. They can report your account as "PAID COLLECTION" and there's nothing you can do about it. You may want to do more research into dealing with creditors before you go paying off more debt.

    I agree with FL Dancer that you should get a car that you can pay for in full. Leave the financing for when your credit score goes up later. yeah, you can refi your car later on down the line...but you'll save a lot more money and help your credit even more by cleaning it up and THEN going to get a loan.

    Hope that helps a bit.

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    Default Re: Considering financing a new car

    Yes, you have helped me a lot. The account I paid off for 875 will be a paid collection, he told me that up front. He said they didn't delete the information. Once they receive payment then they send or fax me a letter stating it was paid in full and then I send it to the 3 credit bureaus. I told him I would provide a fax number as soon as I find someone's fax I can use. I am working on that now. He said they automatically send a letter within 21 days also. Is this going to help my credit at all?

    According to the Equifax similator if I pay the two credit cards I owe on off it will help clean up my credit.

    I owe almost 11,000 in medical bills. I have had seven operations for endometriosis and my insurance didn't pay but so much. They were suppose to pay 80% but I think they only paid 80% up to a certain amount and then after that I was to be responsible for the rest. Until the the last couple of years I have been out of work a lot. So, a lot of bills got behind. I like dancing because it allows me to work when I can. My husband is a floorman at my club, so he can't help a lot. Unfornuately, a lot of the financial burden is on my shoulders.

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    Veteran Member toxicgirl's Avatar
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    Default Re: Considering financing a new car

    honestly- you're paying too much for a car. i dont like car dealers. always trying to screw me over and one dealership laughed at me when i went in to find an 84 caravan. they said, no you want a new van. no i dont! dammit! glad i didnt get it w gas prices even though the one i found was only $100. plus you need to look at the long term- newer cars are more complex and more expensive to fix. i'm also biased- i dont like new american cars. if you go american- go back to the 60s and build it up yourself. seriously- spend the $ on an automechanics course- it will pay off.

    if you're trying to get a house- take an old lot and build it up yourself. buy the land and an old warehouse and turn it into a home. dancing gives you the time and fund to do so- then it will be the way you want it. just beware of possible toxic landfills nearby...

    and remember- no credit is better than good credit.
    "RIP THE SYSTEM"

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