Let me know if I'm wrong here.... just wanna get it cleared up first. When I get "financed", a lending institution gives me a sum of money, then I pay $xxx for xx months, correct?

As a few of you know, I'm in love with the 05-07 LGTs. However, the price is still high for me and there's no way in hell I'd be able to pay in full. My goal is to buy one completely independently, I don't want a cent from either of my parents, I want to pay for it all myself, no co-signing, I'll even use my own credit, which brings me to my next point.

I know that every time your credit gets checked, the rating goes down. If I go look for loans/financing options will it affect my credit rating when say, Capital One gives me an offer for $xxx/xx months? I don't wanna screw myself in the long run and have credit woes in my 20s like my brothers and sisters did. Also if someone has the website of a trusted online company that does financing, please post it.

What kind of terms should I look for, etc. I already know better than to get financed at a dealership. Also, how would you get it financed from another company another than the dealership, don't you have to bargain first? Do you bargain the price, then once you settle on it, look for options loans?

I was thinking student loans (where you only pay interest after you graduate/are out of school). Would that work? I hardly pay any tuition at all (community college) and books are usually more expensive. And how do student loans work anyway, does all of the accumulated interest instantly add up once you're out of school or does it only start once you're out of school?

If anyone has any advice or tips whatsoever, it would be really helpful. I just wanna know how to handle the situation in advance so that when the time comes, I'm ready. Thanks!

 

I use capital one auto finance, they have very competitive rates, however, being 18 it will be tough for you to get a loan. Do you have any credit history? Your interest rate will be so high, you might want to think of getting a parent to co-sign.

 

Get pre approved for up to $xxx , then work then work the deal up to that amount.

Be VERY careful, from what you say it sounds like you could get in over your head very easily. You might settle for less car until you finish school and get a steady income.

 

Yeah, get approved by your credit union or bank (not the dealership) up to a certain amount. Now you know how much you can spend/afford. Then go to the dealership and try to haggle the price of the car down to where you can afford (what the approved amount was).

Once that is done, you can see if the dealership financing will be better or not (better terms, rates, etc.). If not, you go with the approved loan from the bank...if it is, you have the option of going with the dealer. But please be careful and make sure the dealer doesnt' give you lower payments over a longer period of time...unless that is what you're looking for.

Dealers can probably get you easily approved for something and get you into the car, but they are shifty (ie they make a living selling cars, not giving out loans) so they will screw you on the loan with higher interest or longer loan life that ends up costing you more in the long run, if it means they sell the car.

 

WOW. Lot of questions. Shopping for a loan should have only a marginal (if any) impact on your credit score. What'll kill you is: High Debt/Income; Maxed out CC's and Min Payments; Late Payments; Default/Collecitions.

Student Loans will only loan you what the school predicts for total annual expenses and that is paid directly to the school on a quarter-by-quarter or semester-by-semester basis. You then get the difference between your School Balance and the Loan Payout. There are usually 1 or 2 payouts per Quarter or Semester. Interest accrues on the prinicpal from day 1. IOW - you're not going to get a Student Loan and use it to buy a car.

Third party Used Car Financing is a bit of a catch-22; the bank will want to know what car and how much before issuing the loan, but you don't know that until you've finalized a negotiation. However, getting pre-approved for an amount will give you a good target for search and negotiation.

There is nothing wrong with dealer financing, per se. In any loan, your payment is based on, primarily, three things: Principle, Interest Rate and Time. Since either the Dealer or a Bank will provide the same Principle, only Interest Rate and Time matter. Get Payment and Interest quotes over the same time periods for the same principle from all sources (for example: $18,000 for 36 months, 48 months and 60 months). The lowest interest rate = the lowest payment = the best loan deal (assuming all else equal, i.e. fees, default clauses, etc).

DO NOT go to the dealer and tell them, "If the monthly payment is $xxx, I can afford this car." This statement is dealer code for "I just sold a car to a sucker". They will get your payment to $xxx if there is any way possible even if you're paying for 6 1/2 years.

GL. And props for trying to make your own way.

 

What's an LGT? Are you referring to the Subie Legacy GT?

Anyhow, Bearcat's given you some sound info there. The only thing I have to add is about financing a used car. Just be aware when looking into loans for a used car. Banks typically will charge you a higher interest rate for used vs. new.

 

Have you thought about all the other expenses that come with owning a car (i.e. full insurance coverage, gas, maintenance costs, etc.)?

Sounds like you're getting over your head on this one.

If you need a car, look at something less expensive. When you're done with school, are debt free, and have a good paying job then go for the car you really want.

 

What's wrong with paying a loan over 6 1/2 years? I actually always opt for the 72 month loans because 99 out of 100 times you're going to end up paying off the entire loan before the 6 years is up, so you might as well have the payments be as low as possible along the way. That's how I do it, I'm not saying it's for everyone, but being a home owner I know once I sell my place or refinance I can easily cover what I owe on my car loan. But in this situation maybe it's not the best idea since I'm sure he lives at home and doesn't have any true equity.

It's a toss up regarding whether it's better to finance through a bank, credit union or through the dealership/manufacturer finance. Each one has their own way of evaluating what percentage rate you'll be facing. But one thing does hold true, the better the credit the better the rate. Also used cars tend to have higher interest rates than new cars.

My advice is to look for something a little less expensive. I'm 30 years old, have stellar credit and own a home, and what you're looking to finance is about what I paid for my Accord. I'd just buy something a little less expensive now, build up your credit some more, and when you're a little older with a healthier income, look to get that car you're always wanted.

 

I was getting rejected by almost every credit card company, because I had no credit. And apparently since I just moved, and was applying to a lot of apartments, they said I had too many credit checks on my record.

I got a auto loan at 5.5% over 4 years, but I went though the dealership. But the dealership had a contract with a credit union over here, so it's like I just got a loan through the credit union. I think the dealership may have some pull to get loans approved, and they really want to sell you a car. I'm not sure if it'd be any harder to get a loan if buying private party. My co-worker had to get my boss to co-sign his loan on his car for some reason, and he bought from an auction.

 

Thanks for all the helpful replies and advice, and the concern also. I'll try to answer a few questions myself.

Yep, I'm planning to get a Subaru Legacy GT. I don't plan on keeping it stock but that may be inevitable so I'm trying to manage my income and expenses as effectively as possible to afford it without racking up any debt. Don't plan on getting it soon though, considering getting a I just needed some sound advice before I go through with anything, and good advice is all that I've received so far. Honestly, the earliest I plan on buying one is fall 2008, but its still not certain. I actually do plan on buying something < $3,000 in the meantime, and selling it once I'm ready for the LGT.

My credit rating is the biggest question in the equation. I fear getting raped on the interest rates if I don't co-sign, but I don't want my parents bugging me about my car or things I do to it if I'm the sole owner. I had a credit card co-signed with my dad's name for almost a year, and I have my own credit card from BofA since . I have $0.00 in debt, and have made all payments on time.

I have considered the additional expenses of car ownership, in addition to other things like food, money to go out, buy stuff, etc. I have even sacrificed a few things to save money, but I realize my current job doesn't pay enough to support owning a newer car, yet still maintain my lifestyle. I admit at this point I would not be able to afford an LGT. I have $5,000 in my account at the moment, but I still don't want to plop it down on a car yet. I'd feel more comfortable putting at least $7,000 down and having a steady income and another $2,000 in the account just in case. Definitely not happening soon.

The only thing my parents provide for me resource-wise is free rent and the food at home. I haven't asked them for money in over a year and a half, in fact, they've borrowed money from ME, won't mention how much but a pretty gracious amount. And one of them has yet to pay it back but I don't mind because I owe a lot more to them than just money. I also plan on moving out before I turn 21, and own a house by age 30, and I know having car payments won't help those plans out, but that's way ahead in the future, and I figure you only live once, enjoy it while you can but don't screw yourself in the process.

I bought and sold my own car before, paid for ALL expenses, gas, insurance, parts/maintenance, along with the car itself, all with my money, and my name was the only one on the title - didn't finance it though. The car was a cheap 95 Integra, but it proved as a useful base for me and I learned a lot from owning it. I have an irrational fear of traditional manual transmission cars being phased out, so I'm trying to live it up and buy just 1 car that I really want and realistically can own before I get bored of them. I make sure I spend hours and hours researching a vehicle before I own one, market value, common issues, major problems, defects to look for, cost of maintenance, aftermarket support, etc.

I also know some of the tricks that dealers try to pull, like tacking on unnecessary things like paint/interior protection, underbody rustproof coating, etc. I should know, I'm already in sales and its all a waste. Also how they'll try to give you low monthly payments with a long time to pay it off, like 5+ years, but the final price is really high. Planning on negotiating for a long payment plan with manageable low-interest payments and a low final price, as impossible as it seems, but we will see. I'm as stubborn as it gets, if you're in sales I'm probably one of your worst nightmares.



Hopefully that wasn't a TLDR, but here's cliffs anyway:

-Haven't checked for any loan offers yet
-Have a decent amount of money set aside, still not ready yet (prob late next year)
-Credit rating is in question
-Plan on buying something cheap in the meantime
-I've owned and paid for a car before
-My current finances are stable and planned out, no debt, late payments
-I work in sales, plus with your guys' advice I don't plan on falling for their tricks
-Thanks for all the advice!

 

buy a house before a car that expensive

 

If they were so stable you'd have the $ now not a year from now. Worry about it when you have the $.

 

You're absolutly right. It's not really the time that is the problem. I did a poor job of making an example of why you don't tell the dealer, "Get me a payment of $xxx and I'll buy the car".

Maybe what I should have said, is the dealer will try to put you into the $xxx payment for as long as possible and/or at a higher interest rate, when in reality, you may have got the same payment on better terms (less time or lower interest) with better negotiating skills.

IOW - it gives the dealership a chance to make you pay more (in total) than maybe you should.