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Car loan question

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athomas
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Car loan question  Reply with quote  

So I went to Honda on Saturday to pick up a Civic Si. The bank denied my loan because I have another new car loan from six months ago that is still active (this loan will be my wife's car, new one is mine).

The finance manager said the bank said they would approve me if I am trading in, and the sales guy who did loans for Wells Fargo for 20 years said that was true. Both let me know that if I bring in my wife to cosign the loan application that they would approve the new loan. Does this sound right to you guys, or a load of crap?

I make 91k a year and my credit score is a 614. Not excellent, but about average for nowadays. No negatives for 2 years or so on my credit history.

Let me know if I can clarify further.
Post Sun Oct 20, 2013 9:00 pm
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athomas
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Anyone?
Post Mon Oct 21, 2013 2:38 am
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Wino
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There's not even close to enough information here to get any suggestions.

1. What other loans do you have besides these cars?
2. How much is the wife's car loan and payment?
3. How much is this car loan and payment?
4. How much is your house payment or rent?
5. What are your other monthly expenses? (Utilities, phones, cable, food, medicines, health insurance, etc.)
6. What annual expenses do you have? (Car insurance, flood insurance, car registration and title, etc.)

Lastly, 614 is poor credit for someone making $91K per year. It shows a basic unwillingness to pay your bills, to any creditor. It really doesn't matter your reason for not paying in the past. To the lender, your credit score screams "bad risk." Your score puts you in the bottom 25% of those who get credit, not "about average." Around 700 is "about average," which surprises most people.

As far as the wife co-signing, I say "Why not? She's your wife, and in most States, she's already on the hook for 50% of the loan, anyway." I don't think my wife co-signed on her car loan, but I know she's on the title. I only remember signing the documents myself. Did you cosign for her loan? Also, if you did not cosign for her loan, why is it on your report? Correct answer: "Because we're married."
Post Mon Oct 21, 2013 2:47 am
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coaster
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According to this website http://creditcardforum.com/blog/what-is-the-average-credit-score/ the median FICO score (reported by Fair Isaac Co.) for all age groups and locations is 723. (Apparently they don't report the mean, but in a large enough set it's usually pretty close to the median. Highly unlikely to be as presumed by the OP, and if this post is indicative of his approach to a loan application, I wouldn't lend him money, either).

Ditto the above post by Wino; I have nothing to add.

~Tim~
Post Mon Oct 21, 2013 5:16 am
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athomas
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1. What other loans do you have besides these cars? None. I'm renting. $1800/month
2. How much is the wife's car loan and payment? $22,000, $387/month
3. How much is this car loan and payment? $22,500, $367/month
4. How much is your house payment or rent? $1800/month
5. What are your other monthly expenses? (Utilities, phones, cable, food, medicines, health insurance, etc.) About $400 minus groceries, gas, etc
6. What annual expenses do you have? (Car insurance, flood insurance, car registration and title, etc.) Tags are $128 every two years. Renters insurance is $12/month
Post Mon Oct 21, 2013 12:35 pm
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littleroc02us
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45k in car loans will never lead you to financial success. I wouldn't do it. I haven't had a car loan in over 10 years and it has helped me build a large net worth. What's wrong with your current vehicle? Since you make 91k a year, how long would it take for you to save up 10k? For cars, that's all I ever pay cash for, that means a low mileage sedan that is 3-4 years old that is already depreciated greatly and is quite the value and will last at least 10 years. You take a loan out on a 22.5k car, it will immediately lose 5k off the lot and then you already own an underwater car.

As for cosigning. I guess if you don't like the person your having cosign, that might be a good idea, that way when the deal goes bad you don't have a friend anymore. Smile Don't do it.

Risk comes from not knowing what you're doing. (Warren Buffet)
Post Mon Oct 21, 2013 2:25 pm
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Wino
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With the figures you've given, you can afford the payments for the car; however, I suspect that your figures are incomplete.

No credit card debt? No student loans? No personal loans for ATV's, motorcycles, boats, or other recreation items? I think you're leaving out a lot of your finances, especially on the debt side.

What is your total debt load? You have about $2700 total to work with before you exceed your "limit," according to the 36% rule; though I disagree with such a high debt load with no mortgage. You should be no higher than 25% so you can save the additional 10% toward saving for a house.

You didn't mention car insurance, which you MUST have with a car loan; medical insurance? dental? vision? cell phones? Cable TV? Big box store electronics, home improvement, or "other" hobby-type item on credit cards?

I find it hard to believe you have a 614 credit rating with only one car loan that's right around 5% of your monthly income, and a debt load of 24% of your annual income. Go through your bank records for the last month, and write down what you spent and where you spent it. Then, try to figure out your ATM withdrawals and where that money went.

You really need to listen to Dave Ramsey, Suze Orman, or Clark Howard. They're all on TV or radio, and all of them warn about excessive debt. You're heading toward bankruptcy if you don't change your ways. Your credit score and the fact you were turned down for a car loan say you've already over-extended your finances. If you don't get things under control, you're going to find yourself in a very bad situation if anything goes wrong in your life. Illness, job loss, divorce, injury... just about anything is going to be a major impact on your standard of living from the hints and peeks we've had of your finances and general attitude toward money, debt, and entitlement (to a loan, in your case).

PS. I'm not trying to be a butt head, but you're anonymous here, so I'm giving you what you need to hear, not what you want to hear.
Post Mon Oct 21, 2013 3:18 pm
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athomas
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quote:
Originally posted by Wino
With the figures you've given, you can afford the payments for the car; however, I suspect that your figures are incomplete.

No credit card debt? No student loans? No personal loans for ATV's, motorcycles, boats, or other recreation items? I think you're leaving out a lot of your finances, especially on the debt side.

What is your total debt load? You have about $2700 total to work with before you exceed your "limit," according to the 36% rule; though I disagree with such a high debt load with no mortgage. You should be no higher than 25% so you can save the additional 10% toward saving for a house.

You didn't mention car insurance, which you MUST have with a car loan; medical insurance? dental? vision? cell phones? Cable TV? Big box store electronics, home improvement, or "other" hobby-type item on credit cards?

I find it hard to believe you have a 614 credit rating with only one car loan that's right around 5% of your monthly income, and a debt load of 24% of your annual income. Go through your bank records for the last month, and write down what you spent and where you spent it. Then, try to figure out your ATM withdrawals and where that money went.

You really need to listen to Dave Ramsey, Suze Orman, or Clark Howard. They're all on TV or radio, and all of them warn about excessive debt. You're heading toward bankruptcy if you don't change your ways. Your credit score and the fact you were turned down for a car loan say you've already over-extended your finances. If you don't get things under control, you're going to find yourself in a very bad situation if anything goes wrong in your life. Illness, job loss, divorce, injury... just about anything is going to be a major impact on your standard of living from the hints and peeks we've had of your finances and general attitude toward money, debt, and entitlement (to a loan, in your case).

PS. I'm not trying to be a butt head, but you're anonymous here, so I'm giving you what you need to hear, not what you want to hear.


I had debt in the past but paid it all off over 3 years ago. My score was low, that's why it still kind of is a bit low. I'm carrying a balance on my cards but it's not excessive. Scores take time to come up. I'm not "heading towards bankruptcy" or overextending anything..
Post Mon Oct 21, 2013 3:22 pm
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Wino
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quote:
Originally posted by athomas
I had debt in the past but paid it all off over 3 years ago. My score was low, that's why it still kind of is a bit low. I'm carrying a balance on my cards but it's not excessive. Scores take time to come up. I'm not "heading towards bankruptcy" or overextending anything.


A credit rating over 600 with only the items you've listed would not stop a car dealer from giving you a car loan, albeit at an interest rate around 15%. You should have been able to repair a credit rating to above 700 in three years, as well. Do you have a recent bankruptcy? Is your work history less than 2 years? Have you recently moved from out-of-State? Is there a judgment or lien against you?

There's got to be a reason you did not get the loan. From what you've said, you would have been granted the loan. The low score alone would not stop someone with what you've said about your finances from getting this loan; and yet, you didn't get the loan.

Your statements are not showing the whole picture. As I said earlier, you're anonymous here looking for insight. We're trying to give you some insight, but there's something missing here, and without that piece, we cannot offer you any ideas to go forward.

I omitted it before, but I agree that you've got too much car debt if you buy another new car. Cars go down in value, not up. You should try to avoid borrowing to buy anything that loses value consistently. Save up and buy an $8,000-$15,000 used car like a Honda Accord or Toyota Camry. Both are economical, reliable, and hold their value well.
Post Mon Oct 21, 2013 4:17 pm
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athomas
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quote:
Originally posted by Wino
quote:
Originally posted by athomas
I had debt in the past but paid it all off over 3 years ago. My score was low, that's why it still kind of is a bit low. I'm carrying a balance on my cards but it's not excessive. Scores take time to come up. I'm not "heading towards bankruptcy" or overextending anything.


A credit rating over 600 with only the items you've listed would not stop a car dealer from giving you a car loan, albeit at an interest rate around 15%. You should have been able to repair a credit rating to above 700 in three years, as well. Do you have a recent bankruptcy? Is your work history less than 2 years? Have you recently moved from out-of-State? Is there a judgment or lien against you?

There's got to be a reason you did not get the loan. From what you've said, you would have been granted the loan. The low score alone would not stop someone with what you've said about your finances from getting this loan; and yet, you didn't get the loan.

Your statements are not showing the whole picture. As I said earlier, you're anonymous here looking for insight. We're trying to give you some insight, but there's something missing here, and without that piece, we cannot offer you any ideas to go forward.

I omitted it before, but I agree that you've got too much car debt if you buy another new car. Cars go down in value, not up. You should try to avoid borrowing to buy anything that loses value consistently. Save up and buy an $8,000-$15,000 used car like a Honda Accord or Toyota Camry. Both are economical, reliable, and hold their value well.
No bankruptcy, been with the current company for 2 and a half years.
Post Mon Oct 21, 2013 5:30 pm
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Wino
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quote:
Originally posted by athomas
No bankruptcy, been with the current company for 2 and a half years.


Then go to a different car dealer. You should get the loan.
Post Tue Oct 22, 2013 9:05 am
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oldguy
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quote:
I'm carrying a balance on my cards but it's not excessive. Scores take time to come up. I'm not "heading towards bankruptcy" or overextending anything.


As others said, technically you are not overextending. But you are doomed to paycheck-to-paycheck living. Your expensive tastes - new cars, trendy rental - means that you have budgeted to match your income stream (as opposed to building wealth).

It's really fairly easy for someone with a $91k income to become a millionaire. Invest $5000/yr at 11%/yr for 30 yrs = a million. (and if you use a 401k you'll get an extra $1200 tax refund - so your cost is really only $3800). Most investing books point out that houses are our biggest appreciating asset and cars are our biggest depreciating asset. You have no house but you have TWO new cars.
Near-new cars depreciate at about $4000/yr - two = $8000/yr. (just the loss of value, not gas, ins, etc) And that is 'net', it represents over $11,000/yr of your $91k gross. (The $21,600/yr rent represents about $29,000 of your $91k gross. Ie, $40k of your $91k goes to just cars & shelter.

Note: Our cars both have over 100,000 miles on them, we usually keep them for close to 200,000 miles, about 10 or 12 yrs. The savings on depreciation went toward building our millions. (You'll also read in investing books that most millionaires drive older cars Very Happy )
Post Wed Oct 23, 2013 3:08 am
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CjSantana
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quote:
Originally posted by oldguy

Near-new cars depreciate at about $4000/yr - two = $8000/yr. (just the loss of value, not gas, ins, etc) And that is 'net', it represents over $11,000/yr of your $91k gross. (The $21,600/yr rent represents about $29,000 of your $91k gross. Ie, $40k of your $91k goes to just cars & shelter.




Are there any suggestions on what the "right" mix is? I mean obviously 43% is too much. Surely the "right" number is not zero. Is this an "anything in between as long as your comfortable with it situation? Or an "no more than x%" kind of thing?
Post Sat Jan 04, 2014 12:55 pm
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oldguy
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quote:
Are there any suggestions on what the "right" mix is? I mean obviously 43% is too much. Surely the "right" number is not zero.


You have to break down the components.
Shelter. If you are a renter, the goal is 'low cost'. But if you are a house owner, the goal may be to own a big house because houses appreciate rather than depreciate. Eg, I have seen houses that cost $24,000/yr and the value increased $30,000/yr in value - so you might wish that you were paying $48,000/yr and getting a $60,000 boost in value?

Cars. The depreciation is the cost of ownership, not gas, tires, oil, etc. So the actual goal is zero. Eg, you could buy a 4 or 5 yr old car with 80,000 miles and drive it 120,000 miles over the next 10 years. You'd pay about $6000 for the car and sell it for about $4000. So your depreciation cost would be only $200/year.
Conversely, you might buy a new car for $25,000, drive it 4 years and sell it for $10,000. Your depreciation cost would be almost $4000/year - big difference.
Post Sat Jan 04, 2014 3:43 pm
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