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I am ready to purchase a car and will need a loan.
Should I go to LendingTree.com to get multiple quotes on loans or should I just get loan from the dealership? I would like a 72 month car loan.
My credit score is somewhat ok, probably about a 550 or more.
Thanks for the help.
A couple of points:
- You aren't "ready to purchase a car" unless you have the ENTIRE purchase amount of the car in a savings/checking account right now.
- Stop buying cars on car notes, or if you are going to use a car note, you better put a significant amount down and pay that car off within 2 years.
- Your credit score is NOT okay. You have a 550 credit score, anything under 580 is considered Very Risky/Poor, which is the lowest credit tier you could possibly be in. The one before it is 580 - 669 which is considered Below Average/Not Good. For you to be at "okay" status, you would need to be at "Good" Status, which is 670 - 739.
- If you get approved for a car note, it's most likely going to be from one of those rip off "Buy Here, Pay Here" crap lots.
- My recommendation, save up money and buy a decent car out of pocket from a car dealer using New Cars, Used Cars - Find Cars for Sale and Reviews at Autotrader, look at the Car Fax and make sure everything on the car runs pretty good. Buy one for about $2,500 - $6,000 out of pocket. Get the basic insurance that you need to put it on the road, no need for full coverage.
I saw low income people purchase cheaper cars and get burned, time and time again. They tried to save money buying an inexpensive used car and inevitably they would run into trouble doing even basic mx on the car, things would break, wear items were due to be replaced, it wouldn't pass inspection due to an environmental system going out, etc. Eventually they gave up and purchased an inexpensive new car with a low monthly payment and 5+ year warranty that allowed them to finally start getting ahead. I also completely disagree with putting basic insurance on the car, most times these people don't have the extra money to go out and buy another car if they wreck it. The difference between liability and liability + collision isn't much money per month, on the order of $20-$30 depending on coverage level (which for these folks should be state minimum).
A cheap used car is going to cost at least $100/month to maintain on average. No, it won't cost exactly $100 every month, but over the course of ownership that is about what it will cost, between wear items like struts, timing belts, O2 sensors, etc. etc. even discounting the possible failure of the major powertrain components. An inexpensive new car will run around $100/month more than that for your 5 year payment, with no risk of major components failing (due to the warranty) and this allows them to get back on their feet as reliable transportation is a major component in that.
I saw low income people purchase cheaper cars and get burned, time and time again. They tried to save money buying an inexpensive used car and inevitably they would run into trouble doing even basic mx on the car, things would break, wear items were due to be replaced, it wouldn't pass inspection due to an environmental system going out, etc. Eventually they gave up and purchased an inexpensive new car with a low monthly payment and 5+ year warranty that allowed them to finally start getting ahead. I also completely disagree with putting basic insurance on the car, most times these people don't have the extra money to go out and buy another car if they wreck it. The difference between liability and liability + collision isn't much money per month, on the order of $20-$30 depending on coverage level (which for these folks should be state minimum).
A cheap used car is going to cost at least $100/month to maintain on average. No, it won't cost exactly $100 every month, but over the course of ownership that is about what it will cost, between wear items like struts, timing belts, O2 sensors, etc. etc. even discounting the possible failure of the major powertrain components. An inexpensive new car will run around $100/month more than that for your 5 year payment, with no risk of major components failing (due to the warranty) and this allows them to get back on their feet as reliable transportation is a major component in that.
A $100/month on an old car is usually less than the depreciation on a new car, so the idea that they solve their financial woes by buying new just doesn't add up.
I saw low income people purchase cheaper cars and get burned, time and time again. They tried to save money buying an inexpensive used car and inevitably they would run into trouble doing even basic mx on the car, things would break, wear items were due to be replaced, it wouldn't pass inspection due to an environmental system going out, etc.
That's why you buy like I suggested. By shopping through autotrader, getting a carfax on the vehicle, and buying from a reputable dealer. From the notes provided by the OP, they should be looking at purchasing a car between $2,500 - $6,000 out of pocket, no note. And they need to do this from a reputable dealer, not those drive by "buy here/pay here" crap lots. A reputable dealer you can find through the inventory searches on auto trader and they should include the carfax on the vehicle for FREE.
Quote:
Originally Posted by wheelsup
Eventually they gave up and purchased an inexpensive new car with a low monthly payment and 5+ year warranty that allowed them to finally start getting ahead.
Quote:
Originally Posted by wheelsup
A cheap used car is going to cost at least $100/month to maintain on average.
- The OP has a 550 FICO score, which is bad credit, they aren't going to get approved for an "inexpensive new car on a low monthly payment".
- Also, define inexpensive new car? What price range is that?
- Also, I don't believe anybody should EVER buy a new car. Makes no sense. I just bought a 2015 Camaro, it was used with 17k miles on it, in excellent condition. I bought it using the autotrader strategy as I mentioned above. Buying used allows someone else to take early losses on the depreciation and also saves you thousands of dollars in purchase price....for essentially the SAME car most of the time.
Quote:
Originally Posted by wheelsup
I also completely disagree with putting basic insurance on the car, most times these people don't have the extra money to go out and buy another car if they wreck it. The difference between liability and liability + collision isn't much money per month, on the order of $20-$30 depending on coverage level (which for these folks should be state minimum).
What world and state are you living in? With bad credit (550 FICO) there's no way in hell full coverage would just be $20 - $30 more a month than the basic insurance to put it on the road. Plus, putting full coverage on a car you bought for let's say $4,500 (which would go down in value to perhaps $1,500 by the time you drive it off the lot) is completely stupid.
A $100/month on an old car is usually less than the depreciation on a new car, so the idea that they solve their financial woes by buying new just doesn't add up.
The issue isn't the depreciation costs. Those are hidden. The issue is the $600 bill (that they can't pay) and many days of downtime (and lost income) that kills their ability to reliably get to work and puts their employment at risk as well as inability to budget. I've seen it a bunch of times, I buy their old cars for a song and flip them and listen to their stories. They are all the same. They tried to go cheap and lost big time. Many lost many thousands of dollars, not just in initial purchase but ongoing mx costs, money that could've been put toward a down payment on a car that would get them to work. Even at min wage you're talking just two days of income a month to buy a new car vs the old beater.
Like I said I see this exact scenario all the time. Ultimately after many wasted dollars, possibly a job, and weeks or months of frustrations they all capitulate and just do what they should've done from day one.
You buy a new car for $12k. After 5 years it's worth $6k. You didn't lose $100/month in depreciation AND $12k. You've lost $6k over five years which is $100/month. The same amount, on avg. a crappy cheap used car will burn through. Except you've had reliable transportation with no popup unplanned costs. The key here is buy a cheapie car and that limits your upfront costs and depreciation loss. A $12k depreciates less than a $30k car.
That's why you buy like I suggested. By shopping through autotrader, getting a carfax on the vehicle, and buying from a reputable dealer. From the notes provided by the OP, they should be looking at purchasing a car between $2,500 - $6,000 out of pocket, no note. And they need to do this from a reputable dealer, not those drive by "buy here/pay here" crap lots. A reputable dealer you can find through the inventory searches on auto trader and they should include the carfax on the vehicle for FREE.
Reputbale dealers don't sell cars in the $2,500-$6,000 range. Those are the exclusive domain of "buy here pay here" shops or Craigslist sellers.
Quote:
- The OP has a 550 FICO score, which is bad credit, they aren't going to get approved for an "inexpensive new car on a low monthly payment".
- Also, define inexpensive new car? What price range is that?
I can't speak to the OP's situation or credit score, of which even he himself he admitted he had no clue what it was.
Inexpenisve is the cheapest Kia, Hyundai, or Mitsubishi on the lot. Around $12k.
Quote:
- Also, I don't believe anybody should EVER buy a new car. Makes no sense. I just bought a 2015 Camaro, it was used with 17k miles on it, in excellent condition. I bought it using the autotrader strategy as I mentioned above. Buying used allows someone else to take early losses on the depreciation and also saves you thousands of dollars in purchase price....for essentially the SAME car most of the time.
That's fine, that is what you believe, but in general over the last 5+ years buying a slightly used non-luxury car has not made financial sense.
17k miles is a lot of miles for a one year old car especially for that car. My hunch is that is a former rental car. I've bought former rentals before but I would never buy a sports car from a rental fleet. It is not the same car. It's at least a year old, with 17,000 miles on it, from an unknown history.
Quote:
What world and state are you living in? With bad credit (550 FICO) there's no way in hell full coverage would just be $20 - $30 more a month than the basic insurance to put it on the road. Plus, putting full coverage on a car you bought for let's say $4,500 (which would go down in value to perhaps $1,500 by the time you drive it off the lot) is completely stupid.
No-fault states are quite high. In states that don't have that language, liability and collision is fairly cheap. I was paying $15/month for just liability in VA, $20 in NC, at 50/100 coverage (over age 25). Full coverage on my wife's car is $40/month in NC.
The issue is the $600 bill (that they can't pay) and many days of downtime (and lost income) that kills their ability to reliably get to work
Quote:
Originally Posted by wheelsup
You buy a new car for $12k. After 5 years it's worth $6k. You didn't lose $100/month in depreciation AND $12k. You've lost $6k over five years which is $100/month. The same amount, on avg. a crappy cheap used car will burn through.
Hey pal, if they can't afford a $600 repair bill (which they shouldn't have THAT MANY OF if they do the proper upfront inspections, with car fax, and buy from a respected dealer like I said), then how in the hell do they afford a $12,000 new car? They can't handle a Used $5,000 car but they can handle a $12,000 car? Your solution to their "problem" is to spend another $7,000 plus (that's before interest on the note) that they don't have?
Plus your calculations are utterly ridiculous. He buys a new car at $12k and in 5 years it's worth $6k, in your mind that's equivalent to buying a "crappy used car" because he's going to burn through the same amount of depreciation during the 5 year time period?
- For one, when he buys the $4,500 used car like I SUGGESTED, he shouldn't have to continue to do many major repairs. The purpose of the car is basic transportation, to and from work or school, until he increases his income AND credit rating to get into a more fancy car.
- The $12,000 car might be worth $6k in 5 years (or 7 years), but he is still going to be with same car note based on the $12,000 (plus interest) car loan that he got into for a fixed 5 - 7 year term. Which means he's going to be paying a HIGH monthly rate (not this $100 a month crap you are talking) for a car that's worth NOTHING. I see this all of the time with people who buy from these buy here/pay here lots.
Your advice is horrible....you sound like a sleazy car salesmen.
Quote:
Originally Posted by wheelsup
I've seen it a bunch of times, I buy their old cars for a song and flip them and listen to their stories. They are all the same.
Well, lo and behold, you are a sleazy car salesman.
Actually it's you who are failing the grasp the concept I am putting forth. That's fine.
No, I don't sell cars. I have a fairly good and respectable job, knock on wood. I also have a lot of time off that I enjoy spending taking things apart and fixing them. It's fun for me.
Both seem to be in good enough condition, both have a car fax that you can check out the history (which looks good), both come from reputable dealers (not crap lots), both are under $6,000.
They have high miles, but they are in good enough condition to not give the OP major problems as they commute from work and school. In 2 or 3 years, when their financial situation is better and credit is better, look at selling the car (or trading it in) and then going for a more fancy/later model vehicle.
Don't lock yourself into HIGH CAR NOTES for new cars you can't afford when you are in a low financial situation. That's how people end up with financial problems!
Quote:
Originally Posted by wheelsup
I can't speak to the OP's situation or credit score, of which even he himself he admitted he had no clue what it was.
He told you what it was, his FICO is around 550, that's bad. That's the lowest credit rating tier in the country.
Quote:
Originally Posted by wheelsup
That's fine, that is what you believe, but in general over the last 5+ years buying a slightly used non-luxury car has not made financial sense.
17k miles is a lot of miles for a one year old car especially for that car. My hunch is that is a former rental car. I've bought former rentals before but I would never buy a sports car from a rental fleet. It is not the same car. It's at least a year old, with 17,000 miles on it, from an unknown history.
Dude please. You are buying the SAME damn car but saving thousands of dollars in purchase price and depreciation costs. And I bought it from a reputable dealer, excellent condition, excellent car fax. Buying brand new makes no damn financial sense whatsoever.
Quote:
Originally Posted by wheelsup
No-fault states are quite high. In states that don't have that language, liability and collision is fairly cheap. I was paying $15/month for just liability in VA, $20 in NC, at 50/100 coverage (over age 25). Full coverage on my wife's car is $40/month in NC.
Well, that's not how it is in Michigan pal. You aren't getting full coverage on anything for $40 a month over here.
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