# Car Buying Advice-First auto loan



## JoeClark (Jun 30, 2017)

Hello,

I found a car which I want to buy for $11k. I was at the dealer today to get it and I chose to finance it. I wanted to put a $2000 down payment and pay tax upfront. They gave me an option of paying 295/mo for 60 months which gives a number of $17700...the interest rate that they got me for is 7.8% which is to high in my opinion. My credit score is 740 but I never had any loan or mortgage, they said that its that high because of that. Even with 7.8% interest it doesnt add up. Its my first loan so I dont really how it works. 
I said that I am going to get a loan myself and come back with cash. I also went through Auto Loan Video for help but did not find any help.
Could you help understand it? 
Was a a good deal or did they want to rip me off?

Any help will be appreciated.
Thank you.


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## LAuberX (Jun 3, 2014)

a 740 credit score should get you a rate of LESS than 4%. how much is the car worth on KBB.com?

the fact you have a credit score of 740 means you pay your bills, you deserve a MUCH better rate.

join a credit union, best rates in most cases, or look at the used car site "Carvana" and see what rate they would give you.


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## Cableguynoe (Feb 14, 2017)

JoeClark said:


> Hello,
> 
> I found a car which I want to buy for $11k. I was at the dealer today to get it and I chose to finance it. I wanted to put a $2000 down payment and pay tax upfront. They gave me an option of paying 295/mo for 60 months which gives a number of $17700...the interest rate that they got me for is 7.8% which is to high in my opinion. My credit score is 740 but I never had any loan or mortgage, they said that its that high because of that. Even with 7.8% interest it doesnt add up. Its my first loan so I dont really how it works.
> I said that I am going to get a loan myself and come back with cash. I also went through Auto Loan Video for help but did not find any help.
> ...


7.8 interest is not horrible, but with good credit it can definitely be better.

Also, buying an $11k is not a bad thing. However, if you're doing it primarily for Uber, I would highly recommend maybe looking at something more like $5k-8k range.
You can find good cars for that price. Honda Civics, Ford Fusions's etc.


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## negeorgia (Feb 1, 2015)

I would never recommend buying a car with some else's money.


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## steveK2016 (Jul 31, 2016)

No i agree regardless of what his score is, hes not going to get a 4% on a first time loan. Hes lucky to get a single digit loan for a first time loan. Sometimes average credit scores but with good car payment history can be better then a high score but no major loans. Anyone can get a 700 by just having a few hundred dollar credit cards and paying $10 minimums on time. Its another to know if youll make $300+ payments on time.

However, if you are financing under $9000 your monthly should not be near $300. It should be around $220-230. Make sure they arent padding you with extra warranties (unless you want it) or gap insurance (unless you want it)

Ideal financing would mean $20 in payments for every $1000 financed. Thats the easy estimation we used when i used to be a car salesman. Sp if you had qualified for 4% it should be under $200, maybe 180 a month.

That extra $60 in payments screams to me something like $900 gap and a $2100 warranty plan.


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## Cableguynoe (Feb 14, 2017)

negeorgia said:


> I would never recommend buying a car with some else's money.


You have 11k lying around?


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## steveK2016 (Jul 31, 2016)

Cableguynoe said:


> You have 11k lying around?


Doesnt everybody?


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## sellkatsell44 (Oct 25, 2015)

steveK2016 said:


> No i agree regardless of what his score is, hes not going to get a 4% on a first time loan. Hes lucky to get a single digit loan for a first time loan. Sometimes average credit scores but with good car payment history can be better then a high score but no major loans. Anyone can get a 700 by just having a few hundred dollar credit cards and paying $10 minimums on time. Its another to know if youll make $300+ payments on time.
> 
> However, if you are financing under $9000 your monthly should not be near $300. It should be around $220-230. Make sure they arent padding you with extra warranties (unless you want it) or gap insurance (unless you want it)
> 
> ...


nvm on the 9k, I see he's putting 2k down

Usually they'd like to see that you can manage credit, and some financiers/lending companies would like to see at least three lines of credit although I find it's not necessary if you have a long standing history of making on time payments. Someone with a 740 and 2 years worth of credit filed isn't weighted the same as someone with a 740 and 10 years of credit filed.

Sometimes it's worth checking out a credit union or your local bank (preferably one that you or your parents have established history with) and see what they offer. Do it all within 30 days since your credit will be pulled.


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## negeorgia (Feb 1, 2015)

Cableguynoe said:


> You have 11k lying around?


Yes.


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## MadePenniesToday (Feb 24, 2017)

I agree with others that said check out a credit Union. Also maybe check out capital one. A few years back they gave me a loan at 6.3% with a 630 credit score.


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## Toyota Guy (May 18, 2016)

I worked as a car salesman for over 25 years. 7-8% for a first time buyer who has never had a significant loan before is fine on a used car.

You pay $11,000 plus taxes plus registration plus "fees".. Should be in the neighborhood of $12,000. With $2K down, finance $10,000. Payment should be about $200/month. Sounds like the dealer is adding an extended warranty, credit life, gap insurance, and anything else he can think of. 

Go to the Used Car Dept of a new car dealer with a good local reputation. You'll pay a little more, but they have more riding on their reputation.


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## Cableguynoe (Feb 14, 2017)

negeorgia said:


> Yes.


That's great. But what's your recommendation to someone that doesn't and needs a car?


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## MR5STAR (May 18, 2015)

What kind of car and how many miles on it?


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## ShinyAndChrome (Aug 18, 2017)

negeorgia said:


> I would never recommend buying a car with some else's money.


This is silly advice. Actually, buying a car with somebody else's money is better than your own. Isn't it? If I could buy dinner with your money or my clothes I would as well. I currently have a car note at 2.3%. Why would I ever use my own money to buy something if I could buy it at that rate? I can make more money investing the difference in an index fund (and yes, I do have money sitting in a brokerage account now instead of paying down that loan. I've also been carrying a $40k balance on a HELOC for the past decade because I was paying below prime in interest AND that interest was tax deductible. It cost me close to nothing to carry that loan).

As for OP google "auto loan calculator" and the math does not work out at all. 7.8% on 60 months $295 is equivalent to a purchase price of $14,500. There is no way your taxes are $3500 on that car.

Definitely get a loan from a local credit union. 740 credit score is good, don't let them bamboozle about lack of credit history--that is already baked into your score. They are taking you for a ride. Get the car if it's nice ,but don't go through them.

Also, if you are getting a car for uber get either a used minivan so you can XL or get a prius. Ignore FUD about used prius batteries. The gas costs will save you significant dollars. They are a truly crap drive but with operating costs of car essentially being the only overhead (deducted miles taking out taxes on the income), gas becomes important, and in a prius you'll get 45 mpg all day long driving around the city.


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## ShinyAndChrome (Aug 18, 2017)

EDIT: I responded to a post that has been deleted, so to be a gentleman I will edit this response out and the nested quote


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## Robert finnly (Jul 1, 2017)

Just make sure its great on gas, has a good warranty and not the standard buy here pay here junk.. 

Your monthly payments sound a little to high though since you have such good credit

Im paying 10k on a 4.5k car but least my payment is $160 a month


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## negeorgia (Feb 1, 2015)

ShinyAndChrome said:


> EDIT: I responded to a post that has been deleted, so to be a gentleman I will edit this response out and the nested quote


My bad, I replied to your post without fully reading what you had posted and wanted to amend it. Thanks for the do over.


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## bmedle (Jul 19, 2017)

Shop around, and don't depend on the dealer to get you the "best deal." They'll give you what they think you can afford. You should have no problem, with your credit score, to get a more competitive rate.


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## chamomiami (Jan 23, 2015)

new car big dealer more options.. if financed by the factory bank even better Ej. Toyota financial


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## steveK2016 (Jul 31, 2016)

chamomiami said:


> new car big dealer more options.. if financed by the factory bank even better Ej. Toyota financial


First time car buy is going to have a hard time being financed by factory finance. Those guys typically only finance to people with damn near perfect credit, which includes long term history with large ticket items, such as previous cars. Well, at least thats how NMAC was.


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## NoPooPool (Aug 18, 2017)

Toyota Guy said:


> I worked as a car salesman for over 25 years. 7-8% for a first time buyer who has never had a significant loan before is fine on a used car.
> 
> You pay $11,000 plus taxes plus registration plus "fees".. Should be in the neighborhood of $12,000. With $2K down, finance $10,000. Payment should be about $200/month. Sounds like the dealer is adding an extended warranty, credit life, gap insurance, and anything else he can think of.
> 
> Go to the Used Car Dept of a new car dealer with a good local reputation. You'll pay a little more, but they have more riding on their reputation.


Joe, listen to Toyota Guy. I too sold new and used for a few years some time ago. Try Tech Credit Union. They have rates as low as 1.99-2.49%. Every situation is different, but they would be able to tell you what your options are and at what price, based on your 740 credit score and your $2K down.


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## pacifico (May 13, 2017)

Cableguynoe said:


> That's great. But what's your recommendation to someone that doesn't and needs a car?


But he said "I want" a want is not a need


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## negeorgia (Feb 1, 2015)

Cableguynoe said:


> That's great. But what's your recommendation to someone that doesn't and needs a car?


Needs a car or needs an 11k car? I would recommend to someone that doesn't have 11k, to stop thinking that they need an 11k car. I used to let my credit score determine what I buy. Now, I let my savings account determine what I can buy. You get what you save/plan/prepare for; not what you wish for. Nothing wrong with wanting an 11k car, but I wouldn't pay $14-17k for an 11k car, especially if I didn't have a savings account. Not having much savings is the worst time to buy your stuff the most expensive way to buy your stuff.


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## Cableguynoe (Feb 14, 2017)

negeorgia said:


> Needs a car or needs an 11k car? I would recommend to someone that doesn't have 11k, to stop thinking that they need an 11k car. I used to let my credit score determine what I buy. Now, I let my savings account determine what I can buy. You get what you save/plan/prepare for; not what you wish for. Nothing wrong with wanting an 11k car, but I wouldn't pay $14-17k for an 11k car, especially if I didn't have a savings account. Not having much savings is the worst time to buy your stuff the most expensive way to buy your stuff.


Of course everyone knows that cash is the best way to buy things. 
Not disagreeing with anything you said. But banks and credit cards exist for a reason. 
People don't have the savings to buy what they want/need.



pacifico said:


> But he said "I want" a want is not a need


If you read his post carefully it sounds like he needs a car. Yes he used the word want because he had already found the one he liked, or the one he"wanted" to buy. Wouldn't sound right to say "I need to buy that one"


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## negeorgia (Feb 1, 2015)

Cableguynoe said:


> Of course everyone knows that cash is the best way to buy things.
> Not disagreeing with anything you said. But banks and credit cards exist for a reason.
> People don't have the savings to buy what they want/need.


As with most issues, perspective and mindset are at the root. Listening to the Dave Ramsey show callers changed my point of view. When people admitted doing dumber things than I had done with their money. Had more debt than I had. Had a smaller income than I had. Then they were able to get debt free and save an emergency fund. I started to believe I could too. So did I have 11k lying around 7 years ago? No. Do I today? Yes. I changed what I believed and that changed what I did. Those changes in what I am doing, changed my financial world (not drastically, but no longer paycheck to paycheck and now paying cash for used cars). So if $1000 will change your life, then get $1000 and change your life. Easiest way to get $1000? Work a little more, spend a little less until you have $100. Repeat 9 times.


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## NoPooPool (Aug 18, 2017)

negeorgia said:


> As with most issues, perspective and mindset are at the root. Listening to the Dave Ramsey show callers changed my point of view. When people admitted doing dumber things than I had done with their money. Had more debt than I had. Had a smaller income than I had. Then they were able to get debt free and save an emergency fund. I started to believe I could too. So did I have 11k lying around 7 years ago? No. Do I today? Yes. I changed what I believed and that changed what I did. Those changes in what I am doing, changed my financial world (not drastically, but no longer paycheck to paycheck and paying cash for used cars). So if $1000 will change your life, then get $1000 and change your life. Easiest way to get $1000? Work a little more, spend a little less until you have $100. Repeat 9 times.


To OP, Tech Credit Union home office is Crown Point Indiana. They have other offices in Crest Hill Illinois and various other locations. Just an FYI, not sure if you are in the Chicago metro area, so I figured you should be aware of that in case you are not Uber Chicago. Good luck!


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## pacifico (May 13, 2017)

ShinyAndChrome said:


> This is silly advice. Actually, buying a car with somebody else's money is better than your own. Isn't it? If I could buy dinner with your money or my clothes I would as well. I currently have a car note at 2.3%. Why would I ever use my own



Why some one would pay $1.50 for $1? ( auto loan) And then after a while seen his $1 becoming 50 cents ( depreciation )


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## negeorgia (Feb 1, 2015)

ShinyAndChrome said:


> This is silly advice. Actually, buying a car with somebody else's money is better than your own. Isn't it? If I could buy dinner with your money or my clothes I would as well. I currently have a car note at 2.3%. Why would I ever use my own money to buy something if I could buy it at that rate? I can make more money investing the difference in an index fund (and yes, I do have money sitting in a brokerage account now instead of paying down that loan. I've also been carrying a $40k balance on a HELOC for the past decade because I was paying below prime in interest AND that interest was tax deductible. It cost me close to nothing to carry that loan).


There are those that talk tax deductible interest (payments), credit scores (payments), and MPG (with car payments). Then there are those that talk running a business debt free and making an emergency fund a priority. People have temporary losses of income from time to time. Those with less monthly bills and cash on hand tend to panic less during the low income months than those with no wiggle room budgets.



NoPooPool said:


> To OP, Tech Credit Union home office is Crown Point Indiana. They have other offices in Crest Hill Illinois and various other locations. Just an FYI, not sure if you are in the Chicago metro area, so I figured you should be aware of that in case you are not Uber Chicago. Good luck!


I believe the OP is NYC.


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## ShinyAndChrome (Aug 18, 2017)

negeorgia said:


> As with most issues, perspective and mindset are at the root. Listening to the Dave Ramsey show callers changed my point of view. When people admitted doing dumber things than I had done with their money. Had more debt than I had. Had a smaller income than I had. Then they were able to get debt free and save an emergency fund. I started to believe I could too. So did I have 11k lying around 7 years ago? No. Do I today? Yes. I changed what I believed and that changed what I did. Those changes in what I am doing, changed my financial world (not drastically, but no longer paycheck to paycheck and paying cash for used cars). So if $1000 will change your life, then get $1000 and change your life. Easiest way to get $1000? Work a little more, spend a little less until you have $100. Repeat 9 times.


Cant disagree with this. It is so easy to make even good money and have no equity. I personally started using mint this year and tracking expenses closely. I was amazed how much our food bill was. Having money hit savings before checking account and doing simple things like rarely if ever eating out helps a lot. I am sure most people don't realize how costly their eating out is. Or $5 fraps at Starbucks. It seriously adds up and mint can let you search all your purchases.


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## NoPooPool (Aug 18, 2017)

negeorgia said:


> There are those that talk tax deductible interest (payments), credit scores (payments), and MPG (with car payments). Then there are those that talk running a business debt free and making an emergency fund a priority. People have temporary losses of income from time to time. Those with less monthly bills and cash on hand tend to panic less during the low income months than those with no wiggle room budgets.
> 
> I believe the OP is NYC.


Thanks!


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## Cableguynoe (Feb 14, 2017)

ShinyAndChrome said:


> I am sure most people don't realize how costly their eating out is. Or $5 fraps at Starbucks.


Sure, but we're living the dream!


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## pacifico (May 13, 2017)

Cableguynoe said:


> Sure, but we're living the dream!


Or the future nightmare


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## EcoboostMKS (Nov 6, 2015)

negeorgia said:


> As with most issues, perspective and mindset are at the root. Listening to the Dave Ramsey show callers changed my point of view. When people admitted doing dumber things than I had done with their money. Had more debt than I had. Had a smaller income than I had. Then they were able to get debt free and save an emergency fund. I started to believe I could too. So did I have 11k lying around 7 years ago? No. Do I today? Yes. I changed what I believed and that changed what I did. Those changes in what I am doing, changed my financial world (not drastically, but no longer paycheck to paycheck and paying cash for used cars). So if $1000 will change your life, then get $1000 and change your life. Easiest way to get $1000? Work a little more, spend a little less until you have $100. Repeat 9 times.


I knew you listened to Dave or read his books. I was going to quote and ask you with an earlier post, but read this post and laughed.

Completely agree with everything you posted. If you can't afford the car, DON'T BUY THE CAR. Simple as that. Why go into $10k debt when you don't have to? It's a trap so many people fall into. Pay cash for everything (other than a mortgage) and you won't be a slave to anyone. Buy what you can afford now and save up for future purchases when you can actually afford them.



Cableguynoe said:


> Of course everyone knows that cash is the best way to buy things.
> Not disagreeing with anything you said. But banks and credit cards exist for a reason.
> People don't have the savings to buy what they want/need.


They're a business just like any other business. They exist to make money.


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## Wildkhan (Sep 6, 2017)

JoeClark said:


> Hello,
> 
> I found a car which I want to buy for $11k. I was at the dealer today to get it and I chose to finance it. I wanted to put a $2000 down payment and pay tax upfront. They gave me an option of paying 295/mo for 60 months which gives a number of $17700...the interest rate that they got me for is 7.8% which is to high in my opinion. My credit score is 740 but I never had any loan or mortgage, they said that its that high because of that. Even with 7.8% interest it doesnt add up. Its my first loan so I dont really how it works.
> I said that I am going to get a loan myself and come back with cash. I also went through Auto Loan Video for help but did not find any help.
> ...


Hi! I'm in the same situation. cocouple days ago I went to Toyota Camry shop and asked about Camry 2017, which coast $18.000. I apllied to finance, bank managers said me I'll be able to pay 50%downpayment. and they don't promise 3.5%interest rate. It's everything because I'm going to put this car to TLC plates. it means bank has risks. Did t you have same? Thank you!


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## Iwade (May 10, 2016)

LAuberX said:


> a 740 credit score should get you a rate of LESS than 4%. how much is the car worth on KBB?
> 
> the fact you have a credit score of 740 means you pay your bills, you deserve a MUCH better rate.
> 
> join a credit union, best rates in most cases, or look at the used car site "Carvana" and see what rate they would give you.


This is a great idea. Carvana's rates are quite competitive, and they are a great way to buy a car. Additionally, they WILL accept your Uber/Lyft income, without question. It is my only source of income and the rate is directly tied to one's credit score.


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## mikes424 (May 22, 2016)

Another option. Talk to your bank. They may be able to pre approve you for a loan as long as the vehicle meets their loan to value ratio and is within their limits of age. Then you can go car shopping.


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## EaglesFan (Mar 10, 2015)

Not to derail this thread but I'm curious if he increased his down payment to say 25% or 30% would that change his rates very much. Mainly asking cause I've always bought cars cash in the past but am probably going to take a car loan soon myself so may be in the same situation.


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