Trying to Finance a Car for the First Time

First.. apologies if this topic has been beaten to death, but I've gone through the FAQs and searched and while I have found some topics that are similar to my own situation, none really touch on what my core problem here is.

I'm 21 and have never financed anything before. I'm trying to get an auto loan for $5,000 (to combine with $4k cash as my down payment).

I went to a credit union last week and was approved at a rate of 3.9% with the condition that I must have a co-signer. I did not anticipate this being a problem as my boyfriend had offered to do it if they wanted one. He called the next morning to have himself added onto the loan, then I got a call saying he wouldn't qualify based on his credit. He has student loans and a car loan but no other debt, so I assume they denied him because of the combination of loans and limited history.

I don't have anyone else who can co-sign; father is deceased, older brother is deceased, other older brother (24) is pretty irresponsible and I know has terrible credit and debt, mother is mentally ill and not in my life. No extended family. TMI, perhaps, but I want to drive the point home that there is -literally- no one who can co-sign aside from my boyfriend.

This leaves me in a bind. My question (and core problem) is, can a first time car buyer get approved for a loan without a co-signer? Or rather, is anyone aware of a reputable program (or bank, credit union, whatever) that can help?

I have owned two cars already - one I bought with cash for $2k when I was 16 that turned out to be a lemon, and another I bought with cash for $3k when I was 17 (the car I have now).

I order a free credit report from one of the three bureaus every four months (January - Transunion, May - Equifax, September - Experian) and there is nothing questionable, so I do monitor my credit.

The credit union that required a co-signer said so because I have limited credit. I know I have good credit, it's just the issue of not having a whole lot of it. This frustrates me endlessly as I have no negative credit, I've supported myself since I was 15, moved out at 16, was emancipated at 17, been working full time since 17, have NEVER paid a bill or rent late, etc. I know the credit union doesn't care about any of this and that I will be judged based on quantity rather than quality to protect themselves, but this doesn't lessen my frustration... I know I'm not a typical 21 year old and I know I'm not going to screw this up.

So what does someone do in my situation? I've done everything I know how to build my credit so far... I have two savings accounts - one long term, one short term. I have a credit card that I've had since I was 19 (that like I said earlier, I have never paid late and I've never carried a balance), I have a checking account, I have worked at the same employer since I was 18 and make pretty good money. I don't know what else I can do other than wait and keep doing what I'm doing... but how long does it take to build credit on what I already have to where I'm not a risk for lenders?

Maybe it's possible I could get a loan without a co-signer if I try other lenders, but I'm afraid of shopping around since it will ding my credit.. I'd like some advice before I move forward. I'm sort of scared a dealer will try to screw me over, and I want to avoid insanely high rates. Maybe I'm trying to have my cake and eat it too, but I don't know. I don't feel sure enough of myself or knowledge to move forward.. googling hasn't really helped because as far as I know most things are hokey or scams. I was referred to lendingtree.com by a friend but I read some concerning online reviews. Help?

Why don't you take the 4K you have in cash and find a nice used car?

turtlebug said: Why don't you take the 4K you have in cash and find a nice used car?

I'm not in an utterly dire situation where if I don't find a car I'll lose my job, for example - right now I'm using my boyfriend's car, which has been inconvenient and will not work as a long term solution, but it's ok for the time being.
The two previous cars I owned I WAS in a dire situation when I bought them (and strapped for cash), so I had to make a lot of compromises in terms of quality, miles, etc.. I don't want anything fancy, flashy, brand new, etc. but I do want something with relatively low miles (under, say 80k?), has a strong history of reliability, and will maintain resale value decently. So far I've not found something under $3,500 (since the other $500 will nearly be eaten by taxes, title and license fees).

I'm trying to "invest" in a car right now, basically - one I will own and be driving for a long time.

Antimatter85 said: What is your credit score, and do you have a long credit history (student loans, credit cards, etc)? I don't see why they would require a co-signer for you unless they saw some red flags during the credit check.

Also, did you try any other credit unions or local banks?

I don't know my number credit score, I just monitor my credit from the free credit reports. I explained my credit history in my original post - I'm 21, so clearly I can't have a long credit history just based on age, but I have a credit card I've never carried a balance on or paid late, two savings accounts, a checking account, etc... no student loans though. I've been told by other places (my bank, my insurance company, etc.) that I have excellent credit - it's just that I don't have a lot of it.

I have not tried other credit unions or local banks. Like I said in my original post, I'm hesitant to start shopping around since it is my understanding that my credit gets dinged every time I apply for a loan.

That's good news! Thank you. I'll see what happens.

Meganap said: That's good news! Thank you. I'll see what happens.

Did you try PenFed?

kloakndaggers said: Also go sign up at creditkarma.com . While it isn't exactly your credit scores...itz pretty damn close and should give you a good estimate of what it is but considering you are only 21 I doubt you have too much of a credit history.

In my experience creditkarma is pretty far divorced from reality. I'd pay for a real credit score if I were in the OP's place.

kloakndaggers said: guess different for each situation. Mine have been pretty much on the dot against TU not so much with exp and equi

I've seen 80 point differences in mine.

I'm sure your local stealership can set you up with any loan that you need.

Meganap said: in terms of quality, miles, etc.. I don't want anything fancy, flashy, brand new, etc. but I do want something with relatively low miles (under, say 80k?), has a strong history of reliability, and will maintain resale value decently. So far I've not found something under $3,500 (since the other $500 will nearly be eaten by taxes, title and license fees).
Megan, you are doing many of the right things. You really should avoid, if you can, paying interest to fund purchases of things you consume - including cars.

You haven't said, but I really hope you are paying your credit cards in full each month.

Now, as to the car, if you can put it off until you have more money - do so. Otherwise your budget is your cash on hand. (And I do hope you also have a 6-8 month emergency fund)

I know this advice is not what you wanted, and it will be hard now, but you will be glad later

ceobeaver said:
PS. I agree with the other poster that you should just try to find something for under 4K. Hondas can go 200K miles if they are well taken care of, so don't be afraid of a honda civic or accord with 95K miles on it. Especially if its manual.

I'm a huge stickshift fanboy, but be careful if you buy a manual car with close to 100k miles on it. If the previous driver has been abusing the clutch you could soon be hit with an expensive bill for a new one. Ugh.

ilikebtmoney said: Xnarg said: Meganap said: ...I don't want anything fancy, flashy, brand new, etc. but I do want something with relatively low miles (under, say 80k?), has a strong history of reliability, and will maintain resale value decently. So far I've not found something under $3,500 (since the other $500 will nearly be eaten by taxes, title and license fees)...Sorry to be off-topic on this, but this is a great example of the negative effect of the cash for clunkers program.

Here's someone who is obviously making good choices in life and trying to be responsible but is being stung by a government program that has reduced the supply of vehicles that had many decent miles left in them for transportation purposes.FIL owns a used car business, he has no problem finding a slew of cars for $4K and under at the auctions, in decent shape. She must not know how to look.Are you saying that the cash/clunkers program had no effect on the supply of decent used vehicles? If so, then it was a failure, because one of the goals was to get "fuel-inefficient" vehicles off the road.

Also, consider that auto auctions are closed to individuals.

I did not say that the supply of such vehicles was completely dried up, just that it was reduced by the program. Do you agree?

Too, the effects of the program may be somewhat localized.

Just because one dealer says he has access to cars does not mean that everyone has that same access. I know an auto repair service that just went out of business and the owner says that the cash/clunkers program was the coup de grace. Starting around May, repair business dropped far more than normal for that time of year. So we have your FIL and a friend of mine whose experiences differ.

I'm sure it has some effect, a program of that scale definitely will.. but it won't be MASSIVE. Still understand many, many people with ~$4k car budgets aren't going to go drop $10K+ on a new car after rebates so it will definitely have a negative ripple effect throughout various industries, but not big enough to make much more than small dent. I'm in an area with plenty of clunkers, it's low cost of living so plenty are taking advantage of the program.. but plenty aren't just as well.

Hindustani said: Meganap said: That's good news! Thank you. I'll see what happens.

Did you try PenFed?

I have not. I'll check it out.

ceobeaver said: Try the dealer that you are buying from. They usually have lending programs for just about anyone, but be careful because they'll give you a crappy rate and maybe hit you with hidden fees. Read carefully and try to negotiate your %. You probably won't get 3.9 from a dealer for used, but even if you get 7% or so, that's not bad.

PS. I agree with the other poster that you should just try to find something for under 4K. Hondas can go 200K miles if they are well taken care of, so don't be afraid of a honda civic or accord with 95K miles on it. Especially if its manual.

PPS... This thread is useless without pics.

Funny that you mention a manual Civic because I refuse to drive automatics, and one of the two models I've been focusing on is the Civic. I know they're insanely reliable but I still hesitate to get an older one because like I said, I want to be able to put most of those miles on the car - I want to drive it for a long time... not get it at the last 1/4 of its life.

ellory said: [Megan, you are doing many of the right things. You really should avoid, if you can, paying interest to fund purchases of things you consume - including cars.

You haven't said, but I really hope you are paying your credit cards in full each month.

Now, as to the car, if you can put it off until you have more money - do so. Otherwise your budget is your cash on hand. (And I do hope you also have a 6-8 month emergency fund)

I know this advice is not what you wanted, and it will be hard now, but you will be glad later

I did say, twice I believe, that I have never carried a balance. So of course I pay it off in full every month..
I have considered putting it off, though technically I have for a couple years now... ever since I landed the job I have now, three years ago, I've been told to just suck it up and get a new (to me) car but I've been hesitant because up until now it seemed frivolous since the car I had was solid... it got me from A to B. The car is no longer in that category though... the last year has been downhill. I've been religious with maintenance but I got the car at 93k and I think the previous owners didn't entirely take care of it. For instance, right now? I have an emissions problem that was misdiagnosed for eight months, turns out it was leaking carbon monoxide into my cabin. Needless to say I am no longer hot on the car.

I have a 401k, and like I said, short term and long term savings. I have six months savings on hand (in the savings accounts).
Right now I make about $500 more a month than I actually need, so I am not concerned about a $150 car payment breaking my bank.
I'm interested in building my credit, so I would not mind taking out a car loan and paying the bit extra in interest (as opposed to if I bought an $8k car with cash) for that benefit.

ilikebtmoney said: Xnarg said: Meganap said: ...I don't want anything fancy, flashy, brand new, etc. but I do want something with relatively low miles (under, say 80k?), has a strong history of reliability, and will maintain resale value decently. So far I've not found something under $3,500 (since the other $500 will nearly be eaten by taxes, title and license fees)...Sorry to be off-topic on this, but this is a great example of the negative effect of the cash for clunkers program.

Here's someone who is obviously making good choices in life and trying to be responsible but is being stung by a government program that has reduced the supply of vehicles that had many decent miles left in them for transportation purposes.

FIL owns a used car business, he has no problem finding a slew of cars for $4K and under at the auctions, in decent shape. She must not know how to look.

Not know how to look? Then educate me, please. I've been checking my local newspaper's online classifieds, Craigslist, Auto Trader, Edmunds classifieds, Autos.MSN.com, KBB classifieds, Yahoo Autos, and local dealership websites every couple days.

ilikebtmoney said: OP, you're doing good, but don't make a dumb choice now. As the old saying goes, don't buy things you can't afford. If you have $4K and want a new car, go find a used car and pay cash for it.. then keep saving money. Paying high interest is dumb.. and btw you can't "invest" in a daily driver car. It's a purchase, plain and simple.

While I know a car is one of the worse investments a person can make due to depreciation, maintenance costs, etc, I do consider it a good investment in a way - buying a car that will hold a decent resale value should I need to sell it, as opposed to buying a POS that will be worth beans in a short period of time.

Do you know anyone in the used car business? If so they should be able to buy you the car you want, and within the budget you need. Some may even take you to the auction with them.

There are bad purchases, good purchases, and investments.. you're still just talking about a good purchase. An investment is purchased with the sole meaning of it being an appreciating asset, or to earn a return on the initial investment (price paid). A daily driver car, still, is always a depreciating asset. But I agree you're being smart and trying to choose a car that will last, and be worth the $$$ you do spend.. just don't fool yourself into thinking it's an investment as it never will be.

ppatin said: Meganap said:
Funny that you mention a manual Civic because I refuse to drive automatics


Yay, a fellow member of my cult

Meganap said:
and one of the two models I've been focusing on is the Civic. I know they're insanely reliable but I still hesitate to get an older one because like I said, I want to be able to put most of those miles on the car - I want to drive it for a long time... not get it at the last 1/4 of its life.


If you're looking for best value in used cars I actually don't think the Civic is the way to go. If you're buying new I'd have different advice, but I suggest you look at something like a Hyundai. People will snicker at this, but if you look at the evidence you'll see that Hyundais have become very reliable in the past decade, yet they still sell for much less than Hondas or Toyotas on the used market. It's irrational, but in many people's minds Hyundai is synonymous with garbage despite the fact that they're now some of the most reliable cars on the road.

I agree with the Hyundai. We had an Elantra as a business commuter car, my tech drove it into the ground for 60K miles in two years.. he's very very hard on cars and we sold it at that point for a very reasonable cost, and it never had a problem except for the new owner (happened to be a friend) learning to drive a manual on it and burnt out the clutch. Hyundai just replaced it for them under warranty. Gotta love it! You could find one of those in your price range and they drove very well for what they cost. I'm a bit of a vehicle snob but honestly I liked that thing, and would keep my Mercedes in the garage and drive that thing around sometimes when he wasn't using it. haha.

pics?

dawndelion said: I bought my first car at age 21 from the dealer with their financing (at 0%) with no cosigner and no problems. Have you tried talking to a new car dealer? How much is your income? I was making 29k at the time and it was no problem to get a $15k car. It might be more than you're willing to spend, but if you can get a 0% deal, it might be worth it. I feel like it was for me, and now the car is long paid off and I'm still driving it.A different time, different credit rules

cherry3m said: Does your current car qualify for CFC?Even if it does, she only has $5000. She is not buying a new car for $9500 including taxes and fees.

on the plus side, once you get your denial letter, you can get your credit report (not score) from whichever bureau was used as a basis of denial.

ellory said: You may be getting it in the last 1/4 of its life, but for 1/8 the cost.

Wait... You're saying buying a used Civic is an eighth of the cost of the $8,000 car I want to buy now? I know Civics exist for under $1,000 but they all (that I have found) have insanely high miles and body damage, broken stuff, etc. I don't find that to be much of an upgrade.

ellory said: You are not selling it, so maintaining its value has no meaning for you

Of course it does. I don't PLAN on selling my new car anytime soon but you never know what's going to happen.. I want to be in as best a situation as I reasonably can if I end up in a place where I'm forced to sell.

ellory said: Wait 10 months and you will have the $500. And yes, you should be concerned about the interest that you will pay. At $150 a month, you are talking about paying interest for at least 3 years

I'm aware of how much interest costs over the 36 month term I'm wanting. I already said I'm willing to do that to build some credit. I understand some have suggested I just get more credit cards (or something similar) instead, and I am considering this, but please don't tell me what I should be concerned about after I already explained my stance on it and stated that I understand what I'm looking at.

ellory said: Building credit takes time. A car loan won't somehow build you better credit than what you are doing. Keep paying your credit cards in full and on time perhaps apply for some more good rebate cards (PenFed gas, Associated Bank Rewards) - and your credit will take care of itself

I know building credit takes time. And while I don't expect an auto loan to be an instant fix and make my credit sparkly and irresistable to lenders, I know that if I keep up with payments it will improve how I look to them. I'm not saying that's the only way, I know it isn't, but again, please don't tell me it won't help me.

If you have decent credit and have $500 a month you "extra" why not open a credit card and do a balance transfer. 0% for a year on a new cards with 3% fee is not too hard to find. 5k loan + 3% fee could be paid off in less than a year with the $500 a month.

Finding a decent car at auction is not that difficult, I have seen numerous older but reliable cars on craigslist for less around $4k.(2003 altima, 2005 Hyundai etc)

Additionally, you could ask your credit union if they offer semi secured loans, some credit unions will give you 50% secured loan when you put $4k in a savings account and you are given a 8k loan.

Thirdly, try another credit union or see if you can get added as Authorized User to a old credit card.

Finally, If you cannot get a loan and end up getting a car for cash or waiting until you have the cash to pay for it, you should open a second credit card and a secured loan(say $1k deposit paid over 1 year) so in future you will not have a limited history. If you can get a card and secured loan with your credit union it will also establish a repayment history to the credit union as well as to your credit file which will cause you to be more likely to be able to get a loan from the credit union.(allthough in the 1 year you take to build a history you should be able to save enough to buy a decent car cash)