JJH

iTrader: (1)

I'm looking at getting a 2008 TL type-s here in the next month or two and I'm trying to weigh my options.

I have been self employed for the past year and haven't done my taxes yet for last year, netted about $35k last year (full time student as well) and this year I will be in the $115-120k range. I'm wondering without proof of income how large of a down payment I would need to make to insure that I get approved for financing.

I have the cash to buy the car, but I want to finance it to build my credit up a little bit for future purchases. This will be my first large purchase as well.

Little about me:

21 years old, full time student, self employed and also working paid internship at $10/hour for 12 hours weekly.

I've got a 796 credit score with only one credit card in my name, $500 line of credit with ability to extend it to $2,000(asked by bank if I would like to and I declined).

I have a $10,000 student loan in my name that my parents cosigned for me and I have also paid that off. (will that help my case in getting financing?)

I'm trying to weigh my options here to see how I want to proceed.

Any advice would be MUCH appreciated.

Please no responses to just pay cash, I am fully capable of doing so but I want to finance to build up my credit. The car will be paid off in full by the middle of summer.

alexSU

iTrader: (3)

Your credit score looks good. With your money I'd buy the car in cash and get a loan for a house.

And what field are you in that you are so positive you'll make over $100k a year?

JJH

iTrader: (1)

I own an internet marketing business. Money is not the problem, and I have no intentions of buying a house anytime soon until I have a chance to live a little and travel the world.

However, I think that it is smart for me to finance it to aid my credit.

TheChamp531

iTrader: (3)

If you don't need to use credit, than don't. Owning any company you should know that. Why give free money out if you have the money to buy the car outright?

JJH

iTrader: (1)

The car will be paid off in less than 3 months after purchasing. I wont be "giving away any money". Also, I plan on writing it off as a business expense for advertising purposes for my business and want to do so before I have to pay my Q1 taxes.

RainSupreme

There is alot to factor into getting approved for credit.. age, income, debts.. debt to income ratio.. you seem to have a really good credit score but how much revolving credit do you have? If you have only one credit card and one student loan co-signed that might not be enough.. being only 21 you'll more than likely need a cosigner.. I'm not an expert on credit but I've been thru the ropes and it's not always easy getting approved, sometimes even for less expensive things let alone a car loan.. what's the worst that can happen, you go to the bank and they say "yes", "no", or you will need a cosigner...

TheChamp531

iTrader: (3)

Interesting. Hiring possibly?

DaeHanMeenGuk

^This.

Also, if you ask me, planning on financing it for only three months seems like a waste of the lender's time. You might as well just pay for the car in full and maybe just use your credit card more than you normally do if your main concern is raising your credit score. If you really want to finance a car, perhaps you should look into more expensive cars?

But then again, who knows, after he gets his car, he might make a lot of purchases with his credit card for mods and accessories for the Type S!

Turbonut

iTrader: (1)

Go to the lender and find out what they require depending on a normal loan rate. You can purchase a car with bad credit if you want to pay a rediculously high rate.

ggesq

iTrader: (1)

JJH- why wouldn't you have proof of income (at least from last year)?

JJH

iTrader: (1)

I'd rather not have a hard inquiry on my credit until I'm quite sure that they will approve me. Most dealerships will run your credit through 15-20 different banks just to see if one will approve over the other. That can significantly lower my credit score.

Right now I have $0 revolving credit, I've paid off all my student loans and my credit card is also paid off. However, I use my credit card for all gas purchases and then pay it off at the end of the month to try to build up my credit. I may stop doing that to further increase my income to debt ratio at the time or running my credit.

Yes, contact me via PM. My partner is a senior down at Mays Business School at Texas A&M.

I have no intentions of telling the lender that I will only be financing the car for 3 months, so that won't be an issue. My first mods are already planned out which will be an cold air intake, window tint, and exhaust.

That's what I was hoping to figure out here. I know that lending for a used luxury car to a 21 year old is much higher risk than lending for a newer average priced car.

What I really want to know is what percentage down payment of the total cost of the car will I be able to put down and have them pretty much not be able to say no.

lilsid112

iTrader: (7)

Just remember some banks won't let you pay it off before a certain amount of time. When I bought my car a few yrs ago, we wanted to pay it off in three months. Turns out there is a penalty if you paid it off before six months. Just double check with whichever bank you end up going with. Im sure you did this already but thought I would just throw it out there.

JJH

iTrader: (1)

I haven't done my 2011 tax return yet. Regardless, that is only 1 year of income being self employed and most banks won't even look at that as proof of income unless you have 2 years of tax documents.


Yeah, that's why I'm hoping to find my car at a larger dealership selling a few hundred cars monthly because it seems that they have more lenient lending procedures and less penalties than those doing lower volume monthly sales.

Jcaron9gt4

There's NO need to finance the car if it's going to be paid within 3 months. Just pay for the car outright, you won't gain anything by financing it for 3 months. If you want to build your credit, up your credit limit on your card...and pay it off every month. Having a larger available balance on your card will help slightly if it always returns to a 0 balance at the end of the month.

Mdumanski01

I just got a loan for 8k on my TL.. I put down the same in cash. I'm a pro caddy and haven't paid taxes on the money I've earned for that in over 5 years..as far as the govt is concerned I made less than 5k a year the last 8 years... I couldn't show proof of income, however I have a good credit score as do you.. First two banks denied it, third bank gave me 8k at 4.5%...that was with 50% down!!!

By the way.. If you pay your college loans and credit card bills on time that will build up just as much credit as paying off a car loan in three months. And he's right, don't use credit if you don't have to.. Also don't Increase your credit line if u don't need it, good move denying the bank! The more available credit you have will actually hurt your score.

Mdumanski01

I know everyone is going to tell me I'm wrong, and that more available credit will help your score. I understand credit used versus available ratio..and I still believe that you would not want to raise your limit

Jcaron9gt4

His limit is only 500...that's not going to help your credit score. Raise it, pay it off, that builds credit.

justnspace

iTrader: (1)

Also, when the dealerships/banks check your credit; it wont 'ding' your credit score. even if they check it 15-20 times, it will not hurt your score

Jcaron9gt4

Wrong. It absolutely will "ding" your credit score if ran multiple times.

justnspace

iTrader: (1)

thats not the case for me when I was car shopping.

Jcaron9gt4

How many credit checks did various dealerships do? Doing checks multiple times does lower your credit...mine wasn't affected because I went to one dealership, but my very good friend who is the finance manager for a dealership has told me to be very careful with how many times a dealership runs it.

JJH

iTrader: (1)

Yes it will, look up a hard inquiry. And then check your credit score following that

I will for last year after doing my tax return.

Credit score is fine. Ability to pay is fine. Income to debt ratio is fine. Life of credit line is fine. Proof of income...not fine.

justnspace

iTrader: (1)

I was mistaken!

nfnsquared

Don't see how it's possible for a 21 year old with virtually no credit history to have a 796 rating...

JJH

iTrader: (1)

I'll screenshot it later. Mind you this is an average between the 3 main scoring agencies.

TheChamp531

iTrader: (3)

Hard checks on credit will def. effect credit (major purchases). You have to make sure you do these every other day.

ez12a

its not too hard to get high 700s with just a small credit card as long as you're paying it off on time and not have a high balance.

I missed the days when WaMu (now chase) had free credit reports. I was always up there.

turbo_oxide

It will ding your score, but if you have multiple inquiries within a short period, the multiple inquiries won't hurt any more than the single one. I had multiple inquiries [4 or 5, within a 2 week period] several months ago when I was shopping for mine and my score went down a whopping 10 points.

"most credit scores are not affected by multiple inquiries from auto, mortgage or student loan lenders within a short period of time. Typically, these are treated as a single inquiry and will have little impact on the credit score."

http://www.myfico.com/crediteducatio...inquiries.aspx

This... At that rate, he'll be in the 800's when he's in his late 20's. People generally can't get up to that level until they've got decades of a positive established credit history.

Oh, and if you're paying off the car in 3 months: 1) bank may not allow for it; they may give you a loan, but you'll have to go longer than 3 months, which you can pay off early, but then 2) you may be penalized a fee for early payoff 3) 3 months of car payments isn't going to do much for your credit. It's the long term loans that will help your credit (10 year student loan, 15/30 year mortgage, 4 year auto loans)

JJH

iTrader: (1)

I've had 0 late payments, always kept my credit line at 0% from month to month (paying it off in full every month), and had the card for about 4 years now. I didn't think anything of it and neither did my mother being a financial manager.

I see that you are in Columbus, Ohio. There is a 2008 KBP tl type S at the dealership down there, would you be willing to have a look for me if it's not too much of a drive for you?

turbo_oxide

Which dealer?

just checked mine... i'm at 806, so i'm changing my earlier post from "People generally can't get up to that level until they've got decades of a positive established credit history." to "People generally can't get up to that level until they've got a decade of a positive established credit history."

JJH

iTrader: (1)

http://www.autotrader.com/fyc/vdp.js...standard=false

turbo_oxide

Looks like Acura of Columbus.. I might be able to swing out tomorrow (no promises). I'll let ya know.

Where are you located?

JJH

iTrader: (1)

If you can - great! If it's too far out of the way, don't worry about it

I'm in Jackson Township near Canton, Ohio.

TheChamp531

iTrader: (3)

JJH, is your FICO score actually in the high 700's?

Or are you talking about Transunion, Experian, and/or Equifax?

Reason I ask is because FICO is the head honcho when it comes to credit (you may already know that). My credit was in the mid-700's for 'credit bureaus', but not for FICO.

Assuming you have enough funds to do so, I'd shop all around the country.

Project_CLean

iTrader: (2)

you can't build your credit for 3 months dude. and probably be a waste of your time. i think you should look into getting a low interest rate instead. you would probably pay a few thousand or so in interest over the years; sure its wasted money; but that's how you build credit. you borrow and make payments; and you probably won't feel it at$100k+ a year.

Guiltyox

Let me just start by saying this: Unless your parents built your credit for you, while you grew up, I could be mistaken, but I doubt your credit score is 800'ish with you having only 1 credit card, and a small student loan.

Credit 101:

1. The best way to build credit is revolving debt (i.e. Credit Cards or home loans). Charge it up, then pay MOST of it off, but NEVER all of it. If you pay off your amounts before interest has had a chance to accrue, you've defeated the purpose (I'm not saying let interest accrue on a high balance, just pay 3/4's of the balance off).
**Note: It seems peculiar to me that the ONE credit card you have is only a $500 limit with a 800 beacon score (it may be an entry level credit card, like a student card, which has a small maximum limit)? Get a different credit and use it now, but do NOT close the old one.

2. Banks look at a number of factors, a big one being reliability. If you close your longest withstanding credit line, then you no longer have that credibility.....don't do it. They will also look at debt:income. If you have no income on paper, you'll most likely be rejected on a loan request (this is why you can list a spouse's income as "other income" on a loan application, and have a better chance of being approved).
**Note: more money + less debt = better approval rate

3. When you buy a car, the dealership already has a number in their mind that they financially cannot go under (for fear of not making a small profit), so keep that in mind. With that said, they usually will start markup (trend I've seen is about 4-5k markup). The more luxurious a car is (e.g. the more options it has on it), the more it is generally marked up, thus the more can be talked off of it.

4. When you finally test drive the car you like, fall in love with it, and decide you have to have it, they will run your numbers. This is the part where a salesman is going to try and make the most amount of money off of you. The bank will approve you for X amount, hands down (they MAY be able to stretch that a little more, if you put more down). Don't let the salesman con you, take the number off the window price and subtract 5k: offer that first (keep in mind you wont get it, you're just bargaining). The first offer is almost always bullshit.
**Note: Dealerships make more money off of used car revenue than new (because the markup is higher, all about supply and demand).

Finally: Its very hard to determine whether or not you will be approved. The fact that you've had no substantial loan before will make it harder, but not impossible. Expect a higher interest rate/higher monthly payments. DO NOT pay the car off in a few months (your credit is going to suffer for a few months, after this purchase). After you own your first car, is pretty smooth sailing afterwards :-D. This is just my . Good luck!

Acura_Dude

I'll chime in. Buying a car and paying it off 3 mos afterwards won't "improve" your score. It's too short of a time-span. For instance, if i go car shopping and i have my local credit union pull my report, lets say my score (average) drops 5-10pts. It'll take at least ~3-6 mos to gain at least those points back or more. Just a quick estimation. There's many more factors involved. With your income ($100K i so hate you right now) you'll just do better buying the car, and keep using your card. Either way you're still building credit. Now unless you want MORE to show up on your reports, finance the car and pay for it like 6-12 mos and pay it off. Any positive info stays on your reports at least 10 yrs. Myfico.com has all the info.

I'm only 22 and I know I have at least 2 car loans paid for, and 3 cards, etc. One day i'll have a mortgage too. I'd love to get in the 800s, but anything 760 and up gets the same interest rate anyway. Any i know people who've had probs in the past and had to rebuild their scores back up and did it within 1-2 yrs by managing their credit very wisely.

Getting approved with all you've listed shouldn't be a problem, just show last yrs tax-returns and if you use the bank where you have an acct then that should also be a plus too. Man... $100K/yr

BTW at your rate you're doing great, so no need to keep pushing.

turbo_oxide

Haha... wait until you're 30... $100k doesn't seem like that much anymore.

Guiltyox

I'm 23 and my spouse and I make more than that. It really isn't much anymore :-D

Acura_Dude

Ya I see that a lot with couples. But it's crazy how much debt people rack up. I hate you...



WTF i wish i could i make 6 figures. omg... I hate you too....

But then again cost of living here is pretty good compared to up North. It seems to be more expensive down south FL.

Ahhhh im depressed lol