Car loans and no approval...

[crazyeight]

We bought a car last saterday for: my car (5500) and $12500 (cash/loan). We DID NOT have a loan approval already as we weren't exspecting to buy a car that day (or for a a week or so at least). I have applied for 2 auto loans and we've gotten denied for BOTH. They are saying we don't make enough with our current debts. This new loan is the EXACT same payment (give or take $10) as what was on the other car. DH got an auto loan last year when we already had my car payment and now we are getting denied for pretty much the same thing. We don't have any new debts......unless something that we paid off in FEB is still showing up on our credit report. I haven't looked at it recently. If we don't get a loan we aren't going to be able to keep the car (obviously). We need $12000 to give to the dealer by May 15 (stated on our contract thing). I know that I should check our credit report so I need some recomendations on which companies are the cheapest or what place you like.

I also don't know what would happen if we told the dealer that we needed to trade back. I would imagine that they would give us "trade in value" on the car ($13,500 according to edmunds) and tell us we're screwed or even try to sell us our car back for $7000 when we just paid it off. Our last chance is to go to the dealer and see if they can get us financing or go through where we had my old car financed through but I just don't know whats going to happen. I am about to cry because I really like this car....i just paid $140 to have all the windows tinted, the sunroof was installed on thursday and I don't want to get screwed over....but I think we already did. We CAN afford this car....we can't afford to buy my car back or loose $4000 worth of "car".

FWIW: Dh makes $2163/mo gross and I do odd jobs and make about $200 but theres no real record of that......
We have DH's car loan at $270/mo and normal bills, our current credit card LIMIT is $3500 spread across 3 cards and we technically (waiting on some refunds from returned products) owe about $500 total. 25% of our income is $540 (before taxes) and I think this is the max that most loan companies will go on an auto loan....i think. i just don't know what to do.

Help.

[xmysticprincessx]

PMed you!

[1growingsprout]

why did you leave the car dealer with the car if you did not secure financing?

based on your husbands salary approx 25k/year, his car loan, your rent/mortgage.. your debt to income ratio may be too high whether you have credit cards or not... your income is undocumented so the bank is unable to verify it.

im sorry you are dealing with this, for a short time i worked in the financing dept of an auto dealer and we called many a customer to return the vehicles for lack of financing.

[gracesmommy]

Eeeeesh....that's a rough situation. Especially since you have altered the car (windows/sunroof) and the dealer may give you a hard time about that if you have to return it.

Was one of the applications with the automaker's finance arm, or with your credit union? Both are often sources of looser lending. The dealer really, really wants to sell you that car, so they're motivated to find a way to finance it. There are subprime auto lenders but you may have to go through the dealer to get to them. Good luck!

[crazyeight]

the alterations on the car are making it better. the sunroof was done by their own body shop and the window tinting comes with a lifetime transferable warrenty. i only had to pay for the window tinting but the sun roof was thrown in free because it was a make/break deal thing.

we haven't tried to go through the dealer yet. i *think* that we would get approved but i do think that we would get a terrible rate and although i know dh would rather do it himself i would rather ask FIL to cosign for us. its not worth the money to try and be prideful!!

1growingsprout-we don't have a mortgage, we have one car loan and our credit cards are paid off MONTHLY its so hard to show the lenders that because we have small credit cards it LOOKS (percentage wise) that we are maxed out but we in fact have better financial outlooks than many other poeple our age (and older!! ) i was the one who decided to take the car even though we didn't have financing. we were NOT increasing our monthly payments and it was hard to find a car that was only a year old and in this model. i *though* (wrongly ) that because we were getting the same (approx) loan payment per month we would be approved.

when you had to have customers return the car was there penalties, did they get their trade ins or cash back? i am hoping that if worst comes to worst FIL will co-sign and we will not have to do that but i am curious and would like to prepare ourselves for that.

i am not quite sure how they do the debt to income ratio for auto loans and such but heres out debt as of TODAY (not according to the credit report):
3 credit cards: $758 with a total credit limit of $4350 (17.5%) (waiting on $98 of refunds so $660 that we owe...15.2%)
1 car loan: $9900 with a monthly payment of $270 until Oct 2010 (12.5% of our monthly gross income)

yes our yearly income is just under $26000 GROSS but we have no rent/mortgage, utilities or other monthly installments (like furniture etc). we will be carrying $385 of the credit card debt until DH gets his clothing allowance but we don't have any minimum monthly payments on that for another 4 or so months. and IF they only look at min. payments (which is why its on a credit report right???) its like $10-$20/mo for the credit cards.

thanks.

[1growingsprout]

when our dealership had to 'call back' the car, the customer had very little chance of obtaining the trade in car... those generally left the lots nightly for auction, tent sales, used car lots etc....

also the finance dept will pull a credit report for your outstanding balances, they will not care if you awaiting 'credits' etc... also keep in mind each time you apply for a loan your credit is pulled, each pull is 2-3 point, so if your credit is pulled 5 times, that could lower your score approx 15 points.

the credit dept looks at % of available credit. it doesnt matter if you have total credit of 1k or 100k, they look at the amount available.

many times the approval or decline comes down to the person working the file, not the acutal finance guy in the office. the finance guy puts all the info into the computer system for a response. this where the approval/decline and terms are laid out..

im sorry you are going thru this and it must be nerve wrecking ... i would go back to the dealer and the finance dept and see what they recommend.

[velochic]

I hope you can get this resolved soon.

Some food for thought... first of all, it sounds like this was an impulse buy (because you said you hadn't planned to buy a car that day). Impulse buying a shirt is one thing, but a car needs lots of planning. Dh and I spent 3 years researching cars before we bought one. Did you buy the car you were intending to buy from the beginning or was it, "Oh I've got to have it"? Car salesmen see that gleam in customers eyes and they're like vultures.

The purchase price of the car is $18,000 and the trade-in value of the exact same car is $13,500. That is an IMMEDIATE loss of 25%. If you wanted to buy, say... a house and they told you, "The house is only worth $75,000, but you have to pay $100,000 to buy it", would you? Buying a brand new car is NOT a good financial move unless you have money to burn (and then in that case, it's just an emotional decision). Buying anything that is going to lose 25% of it's value in 2 seconds is probably not a good buy, YK?

You said you can afford the car, but you're not even sure you can get financing on it. Banks will do everything in their power to loan you money. They WANT you to borrow. They make a killing off of it. If you cannot get a loan, you can't afford it.

Impulse buying is usually how people get into financial dire straits. I hope you can get this straightened out, I really do, without causing too much financial hardship. I'm just an old fuddy-duddy that wants to see young people make sound financial decisions.

[Free Thinker]

I agree w/ alot of what velochic is saying. My dad is a used car dealer, but he works out of his home, just him and my brother, and they don't do any financing whatseoever, and ususally no trade ins. He has always told us to not buy anything more than what we could afford, preferrably using cash. We have borrowed one time, for 0% financing on a new truck that was 5 years ago and we now have it payed off, and we still drive it. Vehicles are really a dime a dozen! Of course, this doens't help you now, but honestly if you have no rent/mortgage, how do you think they figure that in to what you can pay? They are figuring what a normal person has an expenses, and rent/mort. is usually a biggie! Do you know how they are running your numbers? Do you have anyone who can verify your no rent status? HOw long do you plan to live w/ no rent?

Now I don't want to bore you, but I do want you to really think about what I"m going to say next. Most people do not understand it, and they live payment by payment/paycheck to paycheck. When you take out a loan, the biggest portion of your payment goes toward interest (which is basically nothing! The ability to get the car now instead of saving and waiting), with a smaller part going toward the pricipal. The longer you have your car, the lower the pricipal is, and the less of your payment goes toward interest, and more goes toward the pricipal. Just b/c you have the same payment does not mean that you are paying the same amount, you are starting all over again paying the higher portion in interest. I am going to try to show you an example, these numbers are not accurate, jsut trying to explain my point.

Okay, when you buy a something and your payment is $200/mo, you might be paying $195 on interest, $5 on principal, the next month you make your $200 payment say $193 on interest, $7 on principal. So you've payed out $400, but you've only paid off $12 of that toward the principal. NOw, my numbers are in no way accurate, I just hoped to show you that the payments you are making are really not making a dent into the principal until over 1/2 way into your contracted payment time. At the end of your payment time, you will be paying a smaller portion toward interest, and a larger portion of it toward the actual price of the car, make sense? Go and look at an amatorization schedule to see exactly what I mean. Most people want to trade up 1/2 way thru, but they haven't gotten the car 1/2 way paid off, as most of that $$ has gone toward the interest. What happens is that they roll that amount over into the next loan, which makes it even bigger.

All of this to say, please be careful w/ car loans! Cars are expensive, but unlike real estate, they do not increase in value. Good Luck and I hope you can find a lender, or maybe even trade for something that does fit your budget/loan amount better

[Emmeline II]

Originally Posted by dhinderliter

the alterations on the car are making it better. the sunroof was done by their own body shop and the window tinting comes with a lifetime transferable warrenty. i only had to pay for the window tinting but the sun roof was thrown in free because it was a make/break deal thing.

Alterations on a car do not add value as they might for a house.

This won't help you now, but in the future:

1. Pull your credit report and score BEFORE you START shopping for a car.
2. Do NOT start car shopping without pre-approved financing.

[Emmeline II]

Originally Posted by 1growingsprout

also the finance dept will pull a credit report for your outstanding balances, they will not care if you awaiting 'credits' etc... also keep in mind each time you apply for a loan your credit is pulled, each pull is 2-3 point, so if your credit is pulled 5 times, that could lower your score approx 15 points.

.

This is not necessarily true for certain things anymore like car shopping and mortgage shopping. You are allowed to have many "pulls" for a certain period.

[QUOT]}While multiple inquiries can negatively impact your score, most credit scores are not affected by multiple inquiries from auto or mortgage lenders within a short period of time. Such inquiries are treated as one and will have little impact on your credit score. Mass inquiries by marketers are not seen by lenders and do not impact your score; neither does pulling your own credit report.... when shopping for a big-ticket item or going on a shopping spree in a department store, it is probably wise to pass up the 10% discount offered by many retailers for opening a new store account. [/QUOTE]

[crazyeight]

i am going to the finance dept. with my records and seeing what they are going to offer/recomend. i will have proof that one credit card ($800) is paid off and that the loan for our car ($2647) is also paid off. i did some calculations last night and from our CURRENT (i.e. proveable..printable etc) debt ratio on the credit cards are: $724 owed on a total line of $4350 so debt ratio is 16.6% and our car loan is $270/mo which is 12.5% of our gross montly income. thats all the debts we have.

velochic--it was an impusle in that we didn't plan to buy that night. it was not an impulse in that i had researched several (like 20) cars and driven/looked at 3-5. it was narrowed down to 2; the mazda5 or the nissan quest. i read reviews on the quest and it seemed they had lots of problems and that scared me off. i was then set on the mazda5. that was the car that we needed and i wanted. i researched the car and the options and pricing. they were asking $17995 WITHOUT the moonroof as a normal price. since it was the last day of the month they were doing alot of sales though so i asked (long story to get here...) if we could get the car for less. round and round we went and we actually paid $16600 for the CAR but it was $1400 for license, doc, title, registration etc. so we got almost $1400 knocked off the price. its actually an 06 not "brand new". the $13500 on the car is TRADE in value the private party value is $15600 (the retail on it w/ the new stuff is $19000 according to kbb.com). i don't think we got that bad of a deal.

i agree that banks will do everything in their power to loan you money but they also have to have the correct information. with the things that are on our credit report now we actually have $3400 LESS debt than what shows on our credit report and when those get taken off (officially and actually impacts our FICO) our scores also should go up but i don't think banks can "predict" or make loans on their predictions so we get screwed because credit reports aren't updated enough. we ARE responsible, we don't carry any debt besides DH's car ($9900 as of yesterday). so my plan of "attack" is to print out proof or get phone numbers to the companies that can prove that we actually have less debt than our credit reports...report! also we aren't getting a loan on the "entire" car. we had $5500 trade in and $500 cash for the car. $18000 (price out the door)-$5500 (trade)- $500 (cash)= $12000 loan.

believe me that we can afford this car. its EXACTLY the same payments (give or take $10 even at 8% interest...we checked BEFORE buying) as my old car.

i understand about amortazition (i can't spell it though ). but i didn't want to have to save for 5 years before we could buy the car. besides on the old car we had a loan for 5 years but we paid it off in 2.....

i do know now that we should have a blank check in hand or at the very least the finance dept. approval before we sign for the car. i had not realized that we would get declined for a loan because of the credit debt that the loan officers *think* we have. its going to take some work and i am going to have to actually get on someones desk to show them but i am hoping that with the proof we have they will approve us (and for something better than 8% i hope).

[Emmeline II]

You could try the finance guy at the Family Support Center for help in dealing with the dealership about this.

[crazyeight]

i always forget about the support center. i need to find ours...hehe.

also i forgot about the rent/mortgage. we can live rent free as long as we want. when/if we move off the base we get $900+ more/month for living expenses so it doen'st come out of our paycheck for that.

also a random question. we have a dell account (paid off) but its open and has a credit line of $1500...would it be better to close this or leave it open? i know it increases our "percentage of debt ratio" but it also increases our ability to get into debt and if they are thinking we're poor then i was thinking its better to have this closed. i didn't include this in my percentage of debt ratio above FYI. i told dh to close but he doen'st do anything unless i ride his butt.

[1growingsprout]

but i didn't want to have to save for 5 years before we could buy the car. besides on the old car we had a loan for 5 years but we paid it off in 2.....

i dont understand that line of thinking.... :
JMHO that if you want something bad enough you will SAVE for it and beable to pay cash for it. why pay the bank interest?? i realize you paid off the old loan in 2 years but there is no way to predict what the future holds...

also changes to your credit, closing accounts, payments etc can take upto 60 days to reflect on you CBR. Finance professionals are tied to what the cbr says.

good luck and keep us posted

[crazyeight]

Originally Posted by 1growingsprout

but i didn't want to have to save for 5 years before we could buy the car. besides on the old car we had a loan for 5 years but we paid it off in 2.....

i dont understand that line of thinking.... :
JMHO that if you want something bad enough you will SAVE for it and beable to pay cash for it. why pay the bank interest?? i realize you paid off the old loan in 2 years but there is no way to predict what the future holds...

also changes to your credit, closing accounts, payments etc can take upto 60 days to reflect on you CBR. Finance professionals are tied to what the cbr says.

good luck and keep us posted

if we waited 5 years to save to buy a new car....then our entire life would have changed by then. we will be overseas most likely. we will have our old beater car that is just not a good car for us....it doens't have enough space for dh at ALL and its just not something we wanted to do. we bought that car because we HAD to (our old literally died the day we bought it). it was that or walk to work/groceries etc. we have dd now (unplanned) and we also have friends and family that live far away....driving is much cheaper with 2 kids and our old car it was impossible to drive. many things culminated into buying the car now instead of in 2-5 years.

if we had a car loan for 5 years and paid it off in 2 it shows (at least to me etc) that we are aware of our debts, our willingness to put extra money towards our debts and that we don't just blow money cause we want to...we put it towards bettering our financial situation.

[shelbean91]

Have you tried capital one auto finance? You can apply online, get an answer right away, and get a blank check within a few days. I applied and was approved for financing through the dealership, which I accepted, but immediately refinanced through capital one at a lower interest rate. If applying for a new loan, be sure to put the total amt of the sale price and the amt of the trade as down payment.

[lisalulu]

Did you buy a Mazda from a Mazda dealer? They also offer loan approval online. I think its mazdacredit.com so you wouldn't necessarily have to go into the dealer. In fact when we got our Mazda, we went in preapproved through our credit union and mazda beat their rate by 1% and have been super easy to deal with.

Is it normal to be able to take the car away w/o financing? I've never heard of it before.

I'm also wondering since you say you have no rent-are the places you are trying to get approval from assuming you have rent? maybe that is something you could inform them of?

[crazyeight]

Yeah i tried capitalone auto. they denied me also but they also didn't "talk" to me. it was just their automated system so their computer thinks we have lots of debt also. i will be calling them if USAA can't approve us when I talk to them.

Yes we bought it through a mazda dealer so i will check out their financing but i think if its automated we'll still get denied which is why we might have to do alot of this in person. but i will check it out. thanks!

[lisalulu]

Originally Posted by dhinderliter

Yeah i tried capitalone auto. they denied me also but they also didn't "talk" to me. it was just their automated system so their computer thinks we have lots of debt also. i will be calling them if USAA can't approve us when I talk to them.

Yes we bought it through a mazda dealer so i will check out their financing but i think if its automated we'll still get denied which is why we might have to do alot of this in person. but i will check it out. thanks!

Mazda is automated too-bummer!

[Vanessa]

Are you members with USAA? Try them if you haven't. They really get military situations better. Are When you say 2613 are you excluding BAH? Sometimes loan places like for military members to include the BAH but then state that they pay rent. Good luck!