Help with buying a car...

[nfg22]

Guys I need to buy a car... and quick.... My truck isnt working and rides to work are hard to come by and work is 10 miles away....I have set my mind on a chevy cavelier because it is cheap and gets pretty good milage...I got denied for a loan from wellsfargo my bank, I have never missed a credit card payment and have a checking and savings account. But I am only 19. I can afford 200 dollar payments maybe 240 but no more a month...What are my options and what is the best thing to do? I have not much money in savings just a few hundred...also I dont need to know what kinda car is best I dont wanna start that debate.

[Mantle2600]

i Bought a new cavalier last year and let me tell you, DONT DO IT!!! Dont get me wrong their great cars and i love it, but the payments(238 mo.) and the insurance(194 mo.) are crippling my finances. I only make 7.55 an hour so it hurts. If you want a Cavalier id say go for it, but get a used 2002 or 2003 if you can.

By the way, I was 19 when I got it and it has 1.99% apr over 72 months. It was a deal GM was doing. If you can get someone to cosign for you, I had to have my dad do it for me.

[stevew]

You should just try to fix your truck, and then make those 240/month payments to yourself for the next 8 months into a savings account and you'll have enough of a downpayment to get most anything you want.

[nfg22]

I have tried to fix my truck... My uncle is a mechanic and he has helped me but it has 300,000 miles on it now and it isnt worth it anymore there is a problem every week... I have had it stop working 4 times in the last month.

[Dutch]

Wow, sounds like that truck served you well.

[nfg22]

yeah I got it with 250,000 about a year and a half ago, it now has 280,000 and I have put 400$ into it...It was good but lately it just wont work and I cant miss work cause of it.

[Cuckoo]

My only advice would be to not buy a brand new car at this stage in your life. Cars depreciate in such a tremendous degree their first year that you'd be far better off buying a one or two year old car. Many times you can get a car that still has three years or so left on it's factory warranty, under 17 or 18 thousand miles, is in very good shape (still has that new car smell), and will you save you ten thousand bucks or more from buying it new. That's what my wife and I did when we bought our first
new(ish) car, and we've been very happy. Best thing is: it's worth more than we owe on it, and that's always a good position to be in if possible.

[Swaggs]

I am in the business and may be able to help.

I believe your question is not what car to buy, but why are you having trouble getting a purchase financed.

When you apply to finance a car, your ability to buy is looked at from two points.

First, your credit score, which is based on your past credit history (based on things like how long you have had credit, how many payments you have had past 30/60/90 days, how much money you have available to you from your existing lines of credit and how much of that is already obligated). Most credit is graded from a company such as Equifax, which is on a scale (called a Beacon Score) of something like 300 (very poor) to 800 (outstanding). Most people are assumed to be capable of buying without money down if they have a score above 600.

Second, how much reliable and proven income (net income) do you make versus how much you are already obligated to pay each month (utilities, other car payments, rent/mortgage, etc). This is called your debt to income ratio. For example, if you are bringing in $2,500/month and your outgoing expenses are $1,000/month, a bank will look at you and realize you can pretty easily afford a $300.00/mo payment, but if your expenses were like $2,000/mo, you only have $500.00/mo to play around with and probably would struggle to make your payments.

I am guessing that, based on your age, you do not have very much depth/history to your credit, so major banks will be unwilling to give you a loan because they cannot grade you on your past history OR that you are a student or part time worker and do not have enough income to make a bank feel comfortable about your debt to income ratio.

Your best option, if it is available to you, is to have a relative or friend (with good credit) co-sign for you. That shows the bank that someone with a good credit history is willing to "bet" on you that you will reliably make your payments. So, if you have a parent/grandparent/older sibling, that would probaby be the best avenue.

Your other option is to do some research and find an inexpensive ($10K-$12K max) new vehicle that has a large rebate on it ($2500+) and combine that with whatever down payment you have (hopefully $500+). If you can show the bank that you are (in essence) putting down a decent percentage of the price of the vehicle up front, they will be more likely to loan you the money because most folks are not as likely to default on a vehicle they have invested in.

Hope that helps. If you need more specifics, let me know.

One other thing--never go into a car dealership telling them you want a certain car payment unless you have done the math at home. Car salesman prey on payment buyers, because there are so many ways to manipulate them (more months, money down, higher interest rates). Get an idea of how much you can afford per month and then do some research on how much car you can buy for that figure and at how many months.

[nfg22]

Can I get easily financed and I thought any used car didnt have a warranty? Also would leasing be a good option?

[Chubby]

I would suggest leasing. That's what I did until I bought a new car a couple of years ago. You get lower payments and a warranty. Yes, you're not going to win in the long run (much like renting vs buying a house) but I think leasing is a solid option for people in their early 20s or people that would be crippled with buying a car.

[nfg22]

Dola~ I am a student and I dont have 500 at themoment although I could get it in a few weeks but I need a vehicle pretty fast..

[nfg22]

how is leasing financed? please tell me more about leasing..

[Chubby]

most of the time a lease is finanaced through the car company's program (mine is through Honda since I have a civic).

Nuts and bolts is that you pay a lower monthly fee because you aren't paying for the whole value of the car over the 3 years (I always did 3 years). Everything should be totally under warranty for the duration of the lease also.

The tradeoff is you have nada when the lease runs out. You can buy the car for the balance that you owe or lease/buy another car (which of course needs another down payment).

I'd see what deals are out there for low down payment leases as I think this is your best bet since you'll need less credit and have lower payments with a lease.

[Cuckoo]

Originally Posted by nfg22

Can I get easily financed and I thought any used car didnt have a warranty? Also would leasing be a good option?

If you have a good credit history and solid income to afford the payments, you will be able to find someone willing to finance you. And used cars do often carry remainders of factory warranties.

[GrantDawg]

Leases are tough to get than bank financing. Most of the time they will want two years of past car payment history. At $240 a month you can get into a pretty nice low-end new or slightly used vehicle. You do need to check on insurance though. At your age, the insurance will set you back almost as much as the car payment.

[Swaggs]

Originally Posted by nfg22

how is leasing financed? please tell me more about leasing..

When you lease you determine how long you would like to lease for and then purchase the care for that period of time, pretty much paying the difference between the car of the vehicle new versus how much the car is anticipated to be worth when you turn it back in.

The negatives are that you are limited by the amount of mileage you can drive (most leases are for 12k or 15K per year) and that you never build equity in the vehicle.

The positives are that you can get more car for the money, you can get a new car every few years, and you never get into a negative equity situation (where your car is worth less than the amount you owe).

However, leasing requires stronger credit than buying.

[Chubby]

Originally Posted by GrantDawg

Leases are tough to get than bank financing. Most of the time they will want two years of past car payment history. At $240 a month you can get into a pretty nice low-end new or slightly used vehicle. You do need to check on insurance though. At your age, the insurance will set you back almost as much as the car payment.

I don't see how'd they'd be tougher, you're financing less money. You can get into a new leased car for less than $240 a month no problem too.

[nfg22]

Well I know that car insurance will set me back since im on my own...I can afford about 500 total in the school year so I am assuming that with 240 plus 200 for insurance that I will be able to afford it

[GrantDawg]

Originally Posted by Chubby

I don't see how'd they'd be tougher, you're financing less money. You can get into a new leased car for less than $240 a month no problem too.

I have no idea why, but they are. They require a higher beacon and like I said usually past car-payment history. They also require you to have more insurance than a regular loan.

[Chubby]

Originally Posted by GrantDawg

I have no idea why, but they are. They require a higher beacon and like I said usually past car-payment history. They also require you to have more insurance than a regular loan.

The insurance part I know because you HAVE to have collision, you can't skimp on insurance if you have a leased car (it's not yours afterall).

[GrantDawg]

Originally Posted by Chubby

The insurance part I know because you HAVE to have collision, you can't skimp on insurance if you have a leased car (it's not yours afterall).

You HAVE to have collision with a loan, too. Leases requires much higher levels (you know. Instead of 25/50/25 you can get away with a regular loan, you have to have 50/100/50 or more. I can't remember the exact numbers). It raised my rates about 20%.

[Samdari]

Originally Posted by GrantDawg

I have no idea why, but they are. They require a higher beacon and like I said usually past car-payment history. They also require you to have more insurance than a regular loan.

Well, the only additional insurance they can make you take is the GAP. Many lenders require this for new car purchases anyway, since it protects them in case of the car being totaled.

FYI, a lease is simply a modified loan, with the difference being that you can make your last payment a large sum of money (a balloon payment) or the vehicle itself. With all new car loans, the maximum value that an insurance company will pay in the case of the car being lost/destroyed is lower than the amount owed (this is commonly referred to as being upside down). GAP insurance is additional coverage you can buy to cover the difference. Since in the lease, you pay almost no principal, and you are usually upside down the entire time, the company writing the lease makes you have this. When I leased a vehicle (1998-2001) I had to buy it from the lender, and the amount was automatically part of the monthy payment. Companies have since figured out that they can write more leases by advertising payments without that amount in. When you sit down with them to sign the lease, they will of course offer to sell you this insurance, and make it part of the monthly payment, (surprise, you are no longer paying $199 a month).

[GrantDawg]

Originally Posted by Samdari

Well, the only additional insurance they can make you take is the GAP. Many lenders require this for new car purchases anyway, since it protects them in case of the car being totaled.

Ok, I guess maybe it is only Toyota that requires extra insurance. I had to raise my insurance when I leased and took it back down when I got out of the lease. It had nothing to do with GAP (that came with the lease).