My situation at the moment is that I am going to be purchasing a car within the next 2 weeks, at about $15,000. I have the $15,000 to make this purchase, so I wouldn't need to finance at all. However, I am still sort of young credit wise (22yrs old), and my highest dollar amount on my credit is a private student loan for around $6000. Would there be any advantage or rather, would I see a sizeable credit score gain, if I financed this purchased and paid it off in a few months? Sorry if this is a dumb question, but please respond if you ahve any advice! Thanks!
if you qualify for 0% financing, get a loan and invest your $15k, otherwise pay cash also learn to haggle, visit edmunds.com or search the forums ref buying a car
it has been noted that the prior auto loan was a qualifying event to preferred financing rates by my CU. They mentioned that i should have about 40% prior loan of auto installment type on credit record to achieve the highest new car loan rate possible. Fortunately I had just this.
YMMV. Showing you can pay off a large installment loan will influence future car financing and definitely have a positive advantage in mortgage.
if you can handle a 42K BMW 39month loan, suffice to say you can probably handle a mortgage quite well.
make sense?
bagofcrap
Senior Member
posted: Jul. 8, 2006 @ 9:11p
fat419 said: if you qualify for 0% financing, get a loan and invest your $15k, otherwise pay cash also learn to haggle, visit edmunds.com or search the forums ref buying a car
Then he won't get the rebate. Usually you get either 0% OR Rebate of 2-3k.
fat419 said: if you qualify for 0% financing, get a loan and invest your $15k, otherwise pay cash also learn to haggle, visit edmunds.com or search the forums ref buying a car Actually use opportunity cost analysis on this one. If you can finance at less than the going rate for risk-free investment minus taxes, etc..then finance it! So if you can get a 3% loan for instance, take it and invest the money. Makes you credit better too!
Good, yet conflicting advice. I guess I should've put more info. My credit score is average (670 Trans and Equi, 690 Experian), so I doubt i'd get a great financing rate. There are no rebates or incentives with the car though, so i'm not losing any money by financing. With this NEW information, should I stick with the advice given, or is there anything different I should know? Thanks again everyone for your help!
redsox9547
Senior Member
posted: Jul. 10, 2006 @ 9:08a
If you pay cash for the car and the car gets stolen/totalled you will take a loss. Insurance only covers the ACV (actual cash value) of the car. If you can get a loan that offers some kind of GAP protection (guaranteed asset protection) for free (from like USAA FSB) and the car gets stolen/totalled you will have the amount you haven't paid still in cash and the car will be paid off (minus deductible)...so for that reason, I'd say finance in addition to the fact it builds your credit and you can do other stuff with the cash.
hurricanedarby said: Good, yet conflicting advice. I guess I should've put more info. My credit score is average (670 Trans and Equi, 690 Experian), so I doubt i'd get a great financing rate. There are no rebates or incentives with the car though, so i'm not losing any money by financing. With this NEW information, should I stick with the advice given, or is there anything different I should know? Thanks again everyone for your help!dont do it.
Youre paying for a positive tradeline, not necessary.
Well do you anticipate needing the money for anything else? Are you thinking of grad school, traveling, or renting your own place? How much money do you have saved up? Is 15k your entire life savings (impressive for a 22 year old) or do you have a lot more?
animedj
New Member
posted: Jul. 10, 2006 @ 9:50a
Well, if you are going to buy it cash, why don't you use a CC that has some kind of CashBack, so that way, atleast you get something back.
I bought my last car via finance. A lot of times dealers get kickback from the finance institution which you can negotiate into the bottom price of the car. Also, at the time, the savings Interest rates were at mid 3% (ING) and my interest rate on the car was 1.9%, so it made more sense to use their money.
Pay the student loan and buy a used vehicle with low miles and kill 2 birds with one stone.
DietWater
Ancient Member
posted: Jul. 10, 2006 @ 11:34a
Welcome back, SiS.
SUCKISSTAPLES said: hurricanedarby said: Good, yet conflicting advice. I guess I should've put more info. My credit score is average (670 Trans and Equi, 690 Experian), so I doubt i'd get a great financing rate. There are no rebates or incentives with the car though, so i'm not losing any money by financing. With this NEW information, should I stick with the advice given, or is there anything different I should know? Thanks again everyone for your help!dont do it.
Youre paying for a positive tradeline, not necessary.
pay off your student loan, buy a $9k used honda or toyota. it will be 5 years old, still running great, but property taxes and insurance are cheaper. with no loan on the car, you can get liability only or whatever your state's minimum requirements are.
zzyzzx
Senior Member - 3K
posted: Jul. 10, 2006 @ 3:39p
Squeezer99 said: pay off your student loan, buy a $9k used honda or toyota. it will be 5 years old, still running great, but property taxes and insurance are cheaper. with no loan on the car, you can get liability only or whatever your state's minimum requirements are.
I agree except advise buying a beater instead of the $9000 car.
He has been here the whole time - just under a different ID.
Anyways, back to OPs question - given your score, I highly doubt you will get a good deal on financing. I think cash is going to be better. It also may give you some bargaining power.
addy2000
Member
posted: Jul. 10, 2006 @ 4:59p
I was just in this situation last week... I'm 23 and just bought an $19,000 car which I could have paid for 100% in cash. My original plan was to pay for the car in cash, but I ended up financing it 100%. Why? The car company in question was offering 1.9% financing for 3 years (and NO rebate offer as an alternative), and the dealership agreed to let me put my downpayment of $1,500 entirely on my credit card. This means that I'm making $21 Cash Back right away (1.4% Cash Back from Emigrant Direct credit card) plus my profits on investing the other $17,500 at 5%+ (currently have Citibank eSavings, thinking about getting some 5.5% CDs from them as well) for 3 years. That's in addition to the financial flexiblity I get from having that money sitting in a bank account instead of in my car.
So my short answer to OP's question? If you can get financing below or even near the rate you can invest at, get financing. Otherwise, it's a better idea to pay in cash. Don't worry about applying for a good loan - my credit scores right now are around the same range as yours are (mid-high 600s) due to some recent balance transfer activity, and I got approved for the loan with no problems based on my reported income, employment, and savings. Also, don't forget that if you can't qualify for the best loan yourself, you can probably ask your parents to co-sign (that was my plan B, and it turned out to be unnecessary).
SeattleNative
Senior Member - 1K
posted: Jul. 10, 2006 @ 5:31p
hurricanedarby: I agree strongly with SIS' advice. By NOT having a vehicle loan on your debt-to-income ratio, you will be in a much better position when you decide to take out a real estate loan.
Taking out a loan to purchase real estate (an asset with possible APPRECIATION) makes better business sense than a loan to buy a car.
hurricanedarby
Member
posted: Jul. 10, 2006 @ 7:32p
Even MORE advice! I've decided to just stick to paying cash. I don't need the extra cash for anything else right now, and the difference between investing the money in an online savings or CD versus financing will at best be about $300 a year. I do appreciate everyone's great advice! Thanks again all!
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