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Author: IslandFoolin One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 308782  
Subject: My First Auto Loan Date: 3/2/2009 1:33 PM
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For the past two years I have been without a car thanks to my city's top notch public transportation system. I now find myself in a new city that I love even more than the last but requires one to have a car. The move was unexpected and I have not saved up for an auto purchase. I've been hemming and hawing on making a purchase but the time has come to buy.

I do not own a home and have never taken a line of credit other than student loans and well managed credit cards. I have no idea what my FICO score is but I have a clean credit report. My "mandatory" debt to income ratio is 25% (25% of monthly income must go to contracted expenses) and I enjoy this. I understand that purchasing a car via loan will require certain insurance premiums and with this in mind I would like to keep my monthly auto loan & insurance expenses under $250/month, $200/month would be even better, however I feel this is asking too much.

I have been shopping for vehicles costing $8,000 or less and would prefer to purchase from a private seller. How do I go about inquiring what type of loan terms I can expect without adding a bunch of lines to my credit report? I bank with WaMu and Chase and have the option of joining a federal credit union through my employer.

Thanks!
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Author: SRenaeP Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 285628 of 308782
Subject: Re: My First Auto Loan Date: 3/2/2009 1:43 PM
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For the past two years I have been without a car thanks to my city's top notch public transportation system. I now find myself in a new city that I love even more than the last but requires one to have a car. The move was unexpected and I have not saved up for an auto purchase. I've been hemming and hawing on making a purchase but the time has come to buy.

I do not own a home and have never taken a line of credit other than student loans and well managed credit cards. I have no idea what my FICO score is but I have a clean credit report. My "mandatory" debt to income ratio is 25% (25% of monthly income must go to contracted expenses) and I enjoy this. I understand that purchasing a car via loan will require certain insurance premiums and with this in mind I would like to keep my monthly auto loan & insurance expenses under $250/month, $200/month would be even better, however I feel this is asking too much.

I have been shopping for vehicles costing $8,000 or less and would prefer to purchase from a private seller. How do I go about inquiring what type of loan terms I can expect without adding a bunch of lines to my credit report? I bank with WaMu and Chase and have the option of joining a federal credit union through my employer.

Thanks!


I would join the credit union (they typically have better rates) then ask them. It might be helpful to sign up for one of those credit reporting trials (cancel before the free trial is up, of course) so that you'll know your credit score without having a hard inquiry.

If you tell the credit union your credit score and the amount of the loan you want, they should be able to tell you a rate. We did this for the last two cars we bought. For one car, the dealer offered a better rate so we went with them. But for the other, we used the credit union.

-Steph

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Author: dswing Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 285629 of 308782
Subject: Re: My First Auto Loan Date: 3/2/2009 2:00 PM
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I second the suggestion to go the credit union route. They (usually) have better rates.

You might narrow your search to a couple of different models and then call an insurer for a quote comparison. The insurance costs for say, a VW Jetta vs. a Ford pickup will be quite different.

One year ago I was carrying a ton of debts, but the bank still cleared me to borrow up to $36K or some crazy number. $8K should be very doable for most incomes, and if your credit is decent.

~dswing

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Author: Fuskie Big funky green star, 20000 posts Top Favorite Fools Old School Fool Ticker Guide SC1 Red Winner of the 2010 Rule Breakers Challenge Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 285631 of 308782
Subject: Re: My First Auto Loan Date: 3/2/2009 3:11 PM
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Definitely join your credit union regardless of whether you get your loan there or even operate a checking account there. Open a share, put the minimum in and let them compete for your banking business. You will probably find that in most areas they offer you better deals, while many credit unions are solid all around, some credit unions often are more competitive in some areas.

Second, register with CreditKarma.com where you can get a free credit score. You can even revisit the site and plot your score over time to see how various actions like consistent payment, shopping for insurance, shopping for an auto loan affects your score. You can also look at Quizzle.com as a free site (both are Clark Howard approved) that will rate your overall personal finance situation as well as provide you with a free credit score.

Speaking of insurance, your credit union as well as membership in a wholesale club such as Costco, Sam's Club or BJ's will give you access to discounts with local dealerships as well as auto insurance. Once you narrow down what kind of cars you might choose from, check out what the insurance costs will be and be sure to check the reliability of the vehicle with Consumer Reports Used Report Guide. Also be sure to have the car checked out with an independent mechanic, even if buying from a reputable POD (Previously Owned Dealer).

Note that cars about 3 years old depreciate slower having had most of their value drop during the initial years of ownership.

Fuskie
Who notes that auto dealers are so desperate to sell cars these days that if you do have the financing lined up, you can probably go into a new car dealership and negotiate a great deal on a new model car...

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Author: Yesbabe Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 285633 of 308782
Subject: Re: My First Auto Loan Date: 3/2/2009 5:52 PM
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I would definitely sign up with the credit union and check their rates. I just bought my first car through a credit union, and I got a rate that was at least 2% less than anywhere else was offering.

I also learned that the best rate at my particular credit union would be 1/2% less if I had an account open with them for more than 30 days, and another 1/2% less if I did the car loan with an automatic payment from my credit union account. So if this might be an option, you might want to open the account sooner rather than later in case they have a special discount for having the account open a longer period of time.

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Author: IslandFoolin One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 285634 of 308782
Subject: Re: My First Auto Loan Date: 3/2/2009 8:16 PM
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I've found the vehicle I will be purchasing from a private seller so it's onto the loan.

The unanimity of credit union suggestions didn't go unnoticed. Western Credit Union is offering a base rate of 5.49% for 48 months with no prepayment penalties. The curiosity of my personal rate is killing me. I'm not holding my breath for the 5.49%.

I've checked BankRate.com and there are no listing for my area and Chase is offering a rate of 6.51% with loan origination fees. Has anyone found better rates?

Thanks again for all the tips.

-KP

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Author: IslandFoolin One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 285635 of 308782
Subject: Re: My First Auto Loan Date: 3/2/2009 8:24 PM
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Thank you Fuskie for the CreditKarma website. I've found out that my credit score is... well let's just say I'm happy with it. Thanks again!

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Author: sturne012 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 285761 of 308782
Subject: Re: My First Auto Loan Date: 3/7/2009 7:35 AM
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Islandfooln:

Welcome to the world where everyone has a vehicle. Take a look a the most recent Consumers Magazine, their auto issue. First, look toward purchasing a used vehicle. Cars depreciate as you drive them off the lot. They are not an investment.

Having said that, look toward a Honda or Toyota in your price range. If taken care of they run for ever. You should be able to go to 200,000 miles easily on either vehicle with just normal maintenance and repair.

That's the good news; now the bad. Both vehicle flavors maintain good to excellent resale value. You will be paying more initially, even for used vehicles, but in the long run they will be cheaper than purchase of a new vehicle.

For a 2001 Honda Accord with all of the whistles and bells, the resale suggested by consumars guide was 6,000 to 8,000.

Now ask me how I know? My wife upgraded to an Odyssey and we have this wonderful Honda Accord for sale. Original owner, 140K, 6 with leather, moon roof, and all of the whistles and bells.

Great car.

Now back under my rock,

Spence, who would like to sell her car

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Author: IslandFoolin One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 285762 of 308782
Subject: Re: My First Auto Loan Date: 3/7/2009 10:44 AM
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Thanks for the suggestions Spence but I've already secured my loan and found the car I will be purchasing (once the owner I and both return from our respective travels), a 2004 Mazda 3. I'm psyched!

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