Buying a Vehicle with Not-So-Good Credit? (long) (1 Viewer)

[Brian Mansure]

Ok fellow HTF members...

I have a situation that I would like your advice and suggestions on.

I currently drive a 1992 Chevy Cavalier with 113,000+ miles on it. It's been a great car that I bought 8 years ago and have actually owned for the past 5. The problem is...

my cavalier is pretty much beat to heck and probably not going to make it through inspection this coming July without costing me more than what the car is worth.

I used the Kelly Blue Book website and the car's trade-in value was estimated around $600 max. Probably more realistically I figure only getting $300 - $500 for it as a trade-in.

The car really has been great for me over the years but with a growing family (2 adults, 2kids) we've been talking about getting a minivan for the past 2 years.

We have put this off for the longest time because of pretty crappy credit (more on that later) and we have always had my car, not pretty but paid for, to use.

Our philosophy has been since the car is paid off, run it until it just can't go anymore. Well, it might still run but I just don't see the car passing inspection without $500+ worth of work, so we've revisited the idea of buying a used minivan again.

Here comes the crappy credit part...

Both my wife and I have a "not-so-perfect" credit history.

We don't fool ourselves anymore about that fact and have just recently taken the beginning steps to re-establish our credit ratings. The problem being, we really need the car now for the reasons stated above.

So given the info above, is it wise for us to attempt to buy a vehicle right now or find another way to deal with our situation?

Has anyone had experience getting a loan from one of those "Second Chance" car loan places?

I'd really like to finance a vehicle outright but should we consider leasing?

I appreciate all your help and suggestions.

Thanks,

Brian

 

[Howard Williams]

There are many finanical experts in this forum. Many times I've gotten excellent strategies for dealing with money matters here. I am not one of those expert but let me throw this out. Usually people with "not so good credit" can still get a car loan, they just have to put more down and/or pay a higher interest rate. Figure out what you can afford and then take it from there. Don't be afraid to ask. All they can do is say "No".

I'm a firm believer in "drive it (no matter how bad it looks, as long as it's safe) until the repairs cost more than the car is worth. I've got a 90 Maxima and a salvage 91 Honda Civic. Both have more than 220k miles each. Both are going strong and are very safe. I have no intentions of letting them go for practically nothing in the near future.

 

[Brian Mansure]

Thanks Howard.

Yup, you're right about the people here on the HTF for sure, that's why I decided to post.

For the most part I believe my Cavalier is safe but little things like the emergency brake lever completely broken off the frame of the car, the steering column becoming more loose and just recently I can smell fuel from inside and outside of the car.

Those things aren't good and probably signs that the car is on it's "last leg" so-to-speak, so we wanted to start researching on what we can do to improve our chances of getting a fair car loan.

Brian

 

[AjayM]

In a non-perfect credit situation it's all about down payment. I don't know how bad your particular credit is, but the worse it is the more money you need to put down. You may be able to walk in with 20-25% down and be able to drive out with a semi-livable interest rate (which are going to be high).

I've helped two people get cars that had less than perfect credit, one of them was a couple of years ago (before the rates dropped WAY down), it was on a brand new $27k SUV and she was $3k upside down on her trade in, so with $3k down she walked out with a ridiculous 20+% interest rate tied to a 6yr loan, this was perfect to start (a high ticket item is always good on the credit report) and we were able to refinance it a year later through a credit union as a used car for 8% for 5 years (dropped the payment $100 or so a month!).

For the second car/person, we were looking for used in the $10-13k range, we found a year old Honda Civic EX with the negotiated price down to $13k and change, she put down the max amount she could and still finance (I think it was $5-6k) to meet the minimum load amount, and I believe the interest rate was around 9-10% (again this was before the rates dropped by a huge amount).

Leasing may look attractive, but with a bad credit history it's going to cost a fortune. A lease, in very simple terms, is just a loan to pay for the amount of time that you will have the car. So there is interest in there, it's just built into the lease payment, and the laws regarding it's disclosure are different than a regular loan (by law the leasing company has to tell you the interest rate). And to spend all that money and having nothing to show for it after a few years is kind of silly if you have to pay a lot in interest charges.

Also if you are the type to buy a car and keep it for the long haul, then leasing is not a good option for you.

Andrew

 

[Brian Mansure]

Thanks for replying Andrew.

Yeah, I kinda figured leasing wasn't the way to go. I've only owned 2 cars since I started driving in 1990 so I prefer to purchase a car and drive it for the long haul.

I would love to get a newer pre-owned Mazda MPV or even better, a newer pre-owned Honda Odyssey but figured it would even be harder getting a loan with a "doable" interest rate with our credit history. Both of those vehicles sell into the mid $20's new and pretty much stay in that range for at least 2 years from good resale value.

In the next few weeks before July we can probably scrounge up $3000.00 dollars for a downpayment which isn't peanuts but probably won't be enough to get us a monthly payment we can live with on a decent sized car loan needed to purchase a newer vehicle.

We figured that was all out of our league and started looking at earlier year minivans in the $5,000 to $12,000 range.

Just don't want to be locked into a outrageously high monthly payment for many years and no way to get out.

I'm more concerned with getting a reliable minivan than a flashy, feature-saturated, overpriced, "soccer mom shuttle".

IMO, it's going to be at least a year until our credit is decent enough to refinance any loan.

We do have some encouraging news... my mother-in-law, whom has outstanding credit, said she would be willing to co-sign a loan with us.

How much can that help with getting a fair interest rate?

When you say interest rates will be high, how high ya talking... 9% , 12%, 16%, higher?!?

Thanks again,

Brian

 

[Pamela]

After grad school, my credit was less than perfect (late pays). I went to buy a car and couldn't get interest under 18%. Ouch. Thankfully, a relative lent me the money.
You can't get a car lease without good credit. They're real up front about that.
P.S. I'm happy to say my credit is now reformed!
P.P.S. How are things in Harrisburg? Grew up real close to there (E-town). Worked at Hershey Park for 5 years! I still visit a couple of times a year.

 

[StephenK]

Brian,

First, I would suggest keeping the car rather than selling/trade in. Kelley BB, Edmunds, et al are useless when determining trade in value. The only number that counts is what's in the Galves Book. You'll never get anything higher, and if you do, they're taking more on the price of the car. Unfortunately, Galves is a subcription only service on line and only dealers/wholesalers are allowed to buy the actual paper version. but most dealers will basically show you the book to prove they're not "ripping you off".

If you don't think think it'll pass inspection, why not trying to "make friends" with a garage that also does inspections.

Secondly, bad credit will kill you on the loans and/or lease. As mentioned above, a lease is just a car loan on the amount that the car depreciates during the life of the lease. However, because it's not legally a loan, they're not bound by certain laws that regulate loans. For example, if a car, brand new costs 20,000, and its a 4 year lease, they compute the residual value of the car after the 4 years are up, lets say 7,000. That means the lease is essentially you borrowing 13,000 over 4 years. They "finance" this loan to you at something they call the "money factor" or "money index" (changes from dealer to dealer). This is the REAL rate you're borrowing at. They don't even have to disclose this rate to you in most states. And a lot of used car leases, especially those to people with bad credit can get as high as 30%!!! If you're going to go with a lease make sure you get this number. A used car loan from a credit union is better, as their rates are generally lower to members. Lastly, if you have equity in a home, you may be able to get a home equity loan for a lower rate than a used car loan.

Unfortunately, establishing or repairing a bad credit history is a long process and may take up to a year. There was another thread around recently that gave a lot of good advice on establishing a good credit history, take a search or just reply if you want more info on that subject.

Good luck!

edit. missed the bit about the mother in law. That will defintely help on any loan and may even allow you to lease at a reasonable rate.

 

[Brad_V]

Brian, you write about how not-so-good your credit is, but you didn't write that you have even applied for any loans to see what happens. My friend and his wife, both around 26 at the time and not-so-good credit, LOTS of missed and late credit card payments, unpaid dentist bills, etc... they applied for a loan at the dealer on a brand-new 2000 Pontiac Grand Am and got it. Fortunately, I talked them out of that and got them to at least by a one-year-old one instead for seven grand less.

Anyway, go look at those minivans, apply for a loan, and see what they say. There's no sense in worrying about being turned down if it may not even happen. And forget leasing. bleh.

 

[Stephen L]

I would love to get a newer pre-owned Mazda MPV or even better, a newer pre-owned Honda Odyssey but figured it would even be harder getting a loan with a "doable" interest rate with our credit history. Both of those vehicles sell into the mid $20's new and pretty much stay in that range for at least 2 years from good resale value.

Going through Honda Finance for the Odyssey will be tough.Honda has strict guidelines for approvals.Mazda on the other hand would be much more flexible.You should be able to get a Ford Credit loan for the MPV, Ford will finance almost anybody.Mazda still has a lot of new 2001 MPV stock on the market.The 2001 had a weaker engine but I've seen some good prices advertised for them.Be patient and look around , there will be opportunities for you. My brother had credit problems from his wife having a serious illness, just bought a Saturn L 200 wagon , very nice car , ended up getting a 12.9% loan.Still high but a far cry from a lot of secondary places that will give you 20%. BTW do you know your FICO score?

 

[AjayM]

A few more things, they do offer leases for people with bad credit, but they are scary numbers when you break them down (as another poster mentioned with some incredibly high interest rates).

Also, sometimes it's easier to get a loan on a new car than a used car, you also have the benefit of having being able to stretch out a loan for a longer term (lots of downsides to that) to get a lower payment to help you out until you can get to a point till you can re-finance.

There's also a number of websites online that will pre-approve you for a car loan, so you can know now if you can qualify for something. I believe Household finance is one of them, and I believe there are a few others around. This will give you the benefit of knowing exactly what you can do and what you can afford before you walk in the door. It also give's you options (if you qualify easily with them, you can try out some of the dealers alternatives).

Andrew

 

[Aurel Savin]

Brian:
My suggestion is to check where your current FICO Score is and get your latest Credit Report from Equifax ... you might be surprised what you see!
Here is a link:
https://www.econsumer.equifax.com/we...sumerProducts?^start=&orderSource=EHW&PP=P4
I did this last week as I am possibly looking to get a new car myself and now I pretty much know where I stand.
Get the $12.95 Option from their site ... the one titled Score Power. This gives you your Credit Report plus FICO Score (which is what lenders look at).

 

[Drew Bethel]

You may also want to try www.freecreditreport.com

 

[Eric Kahn]

Stay away from any lease right now, you will lose in the long run big time, with all the cars that have come back in off lease because people bought new cars when their lease ran out, the dealers have a lot of 2 and 3 year old cars to move so you might be suprised at what the dealers factory financing will work out for you

This obviously applies to Domestic car lines and not ''imports'' like honda who really won't have any deals

and stay away from Kia no matter how goods the deal is, my friends can't even get warrenty work on theirs

 

[Brian Mansure]

Wow.
Thanks very much for all the replies.
Ok, so the lease option is off the table completely.
Both my wife and I are going to pull our credit reports from Equifax, Trans Union and TRW to review our current status. Our credit union has a free credit report service every 30 days which showed a few descrepencies (sp?) on our reports. We're probably going to have to fight "tooth and nail" to have them taken off but it should defenitly improve our overall rating.
Thanks again for all the suggestions and help, keep it coming.
Brian

 

[JJR512]

I hate sites like that free credit report site that say they offer something for free, but require a credit card to get it. If I could actually get a credit card, I wouldn't be worried about what's on my credit report!

 

[Mike H]

If you find errors on your credit report try the following:

1) Call up the person who put it on your credit report. Try to resolve it with them before filing a complaint with the credit bureau. If you file a complaint, they may be less willing to deal with you.

2) If #1 doesn't work, file the complaint, talk the Better Business Bureau for your community, and other places.

3) Get proof of your side of the story, and submit it to both the creditor and credit reporting agency.

Try those. It worked for me when I had to deal with JCPenny.

mike

 

[ken thompson]

Let me chime in here. Just be cause your car isn't worth $500 doesn't mean you shouldn't put $500 in it to repair it. That view is wrong. The only way you should be thingking about things is cost. Puting $500 buck in your current car is the best way to go. It'll likely get you another year out of it. Then as you say your credit should show better. Think of $500 as a $42/month car payment for a year. compare that to $200-$400 a month on a new one. Just fix what you have. Like you said. You wnat to drive the car til it dies. Well, its not dead yet. Buy a new one next year.

 

[Brian Mansure]

Thanks for the suggestions Mike H.

We have already begun disputing a particular "bad mark" and will take you advice trying to clear it up with the creditor first.

Ken,

Your are right and believe me it's still a consideration but there are other factors that have swayed me to try and purchase another vehicle.

I've been getting that car repaired for the past 3 years which have gotten more and more expensive each year hoping it will last one more year. I just believe with a growing family and the car starting to nickel and dime me, it's better taking that $500.00 and use it toward a down payment on a vehicle that can better suit our needs. My Cav has pulled it's duty over and over again, I couldn't have spent a better $7000 on a vehicle 8 years ago.

Thanks for everyone's suggestions and advice.

Keep it comin'

Brian

 

[StephenK]

Brian,

Don't overdo the credit report thing. It actually matters when you request your credit rating as it counts as if you're looking for financing. All credit rating inquiries are added to your record. For ex, your FICO score will actually drop 3-5 points every time you request it!

note. many companies will do credit checks in order to "pre-qualify" you for certain offers and directed marketing, these don't count against you.

Good luck

Steve

 

[Kevin P]

Stephen, are you sure about that? I don't think requesting your own credit report counts like it does when a creditor requests it to approve credit.

It counts when a potential creditor pulls it so that creditors know if you've applied for credit recently, to prevent you from overextending your credit. But if you get a copy for yourself, it shouldn't count in this regard.

KJP