Expected APR% w/ Co Signer - Used Auto Loan

[TaylorM0192]

Hello - I will try to keep this as concise as possible.

After browsing and test driving numerous cars, I have settled on a 2006 Nissan Maxima SL used with 29,000 miles from CarMax.

[Me]
Age: 19
Income: $3,099/mo. Gross
Employment Term: 13 Months @ Wells Fargo Finance
Credit Score: 428 (1 Repossession 10/2/08, 2 charged off credit accounts)

[Co Signer]
Age: 52
Relation: Parent
Income: $3,500/mo. Gross
Employment Term: 3 years @ Social Services
Credit Score: 750 (Damaged credit years ago - rebuilt over last 8 years)

[Vehicle]
Make: Nissan
Type: Maxima SL
Year: 2006
Milage: 29,000
Condition: Excellent
Fully Insured: Yes
Total Cost w/ Taxes & Fess: $20,986
Down Payment: $4,000
Total Financed: $16,986

MY QUESTIONS:

1. Can I expect to get a used car loan as the primary signer w/ these facts?

2. If so, what type of interest rate can I expect and on what term loan (60-72 months preferred)?

3. From your wisdom, is this a good vehicle purcahse (taking into account the vehicle itself, depreciation, value, longevity, etc.)?

4. And finally, regardless of this specific situation - Is the interest rate offerred based exclusively off the co-signer (or signer) with the best credit score? Or does the lender evaluate both signers and give an interest rate based off the "average" or composite of each signers' scores?

Final Note: Please don't ridicule me for attempting to purcahse a vehicle after a recent repossession - The reposession itself occurred well over a year ago, it was just simply reported on 10/2/08 unfortunately. Finally, I purchased the reposessed vehicle right after I turned 18 while working a seasonal job at Old Navy - HUGE mistake that I absolutely regret now - I have worked hard this last year and made sure that I have a solid income, reliable job, decent sized down payment, and a sizable safety net should anything go wrong, such as getting laid off. I also receive substantial financial aid grants that I don't need for tuition to enhance my safety net, so repayment will not be an issue for concern.

[Seeker]

Hello - I will try to keep this as concise as possible.

After browsing and test driving numerous cars, I have settled on a 2006 Nissan Maxima SL used with 29,000 miles from CarMax.

[Me]
Age: 19
Income: $3,099/mo. Gross
Employment Term: 13 Months @ Wells Fargo Finance
Credit Score: 428 (1 Repossession 10/2/08, 2 charged off credit accounts)

[Co Signer]
Age: 52
Relation: Parent
Income: $3,500/mo. Gross
Employment Term: 3 years @ Social Services
Credit Score: 750 (Damaged credit years ago - rebuilt over last 8 years)

[Vehicle]
Make: Nissan
Type: Maxima SL
Year: 2006
Milage: 29,000
Condition: Excellent
Fully Insured: Yes
Total Cost w/ Taxes & Fess: $20,986
Down Payment: $4,000
Total Financed: $16,986

MY QUESTIONS:

1. Can I expect to get a used car loan as the primary signer w/ these facts?

2. If so, what type of interest rate can I expect and on what term loan (60-72 months preferred)?

3. From your wisdom, is this a good vehicle purcahse (taking into account the vehicle itself, depreciation, value, longevity, etc.)?

4. And finally, regardless of this specific situation - Is the interest rate offerred based exclusively off the co-signer (or signer) with the best credit score? Or does the lender evaluate both signers and give an interest rate based off the "average" or composite of each signers' scores?

Final Note: Please don't ridicule me for attempting to purcahse a vehicle after a recent repossession - The reposession itself occurred well over a year ago, it was just simply reported on 10/2/08 unfortunately. Finally, I purchased the reposessed vehicle right after I turned 18 while working a seasonal job at Old Navy - HUGE mistake that I absolutely regret now - I have worked hard this last year and made sure that I have a solid income, reliable job, decent sized down payment, and a sizable safety net should anything go wrong, such as getting laid off. I also receive substantial financial aid grants that I don't need for tuition to enhance my safety net, so repayment will not be an issue for concern.

Starting from the bottom and working my way up:

1) If you do lose the job, how large is that safety net? If not enough to cover all your expenses for 6 months, then it's not enough to cover the car loan.

2) Response to #4 above. Depends on the lender. Usually (in my experience), the lender will choose the person with the higher credit score to be primary. In your case that would be, your parent.

3) When I was 19 years old I had a 8 year old auto that was essentially a hand-me-down. I had been working for two years full time at one place; I am female and insurance was high due to a lack of a driving record of any type at that point. If you are male and 19, do you know what your insurance rates will be for this auto? Can you afford them for this car?
If I were you, I'd be looking at older auto that was not so expensive. Milage and age of the car should not be that important; all you need is something that gets you to wherever you are going in the cheapest way possible.

4) Preferred loan time for an auto is never more than 36 months. The longer the term, the more interest you pay over the life of the loan.

Any car is a depreciating consumable.... it's not an asset. It can be demolished in an instant by anyone or anything.

5) And in answer to number 1.... no. The only type of offers with a 450 FICO that you will get, are the "lease" offers (do not choose any kind of "lease to own" either) or a huge interest rate for this loan.

This is not meant to discourage you. Given the info you provided (which is not enough IMO), you probably should not buy this auto.

The 13 months, is that time remaining, or the history of how long you've worked there?

The income you listed.... but no outgo. What are your other expenses? Without a total outlook of savings, income and expenses (inclusive of auto insrance), IMO this used car is too expensive with just the info you provided.

[kork13]

I agree, the car seems awful expensive.... Back in 2006, what was that car valued at? In '07, I bought my car brand new for the same $20k.... Different model car, I know, but all I'm saying is that there are many other very good, though less expensive options.

I would probably look at finding a less expensive car. It would decrease your payments, and also make it more realistic that you'll actually get financing. In the end, a car is a car, and all you really need it for is getting from A to B. Right now, I think you need to worry more about that than having the best car you can.

[wincrasher]

1. I think they are asking way too much for this car. At the end of summer it will be a 4 year old car. Should be in the range of 45-50% of the original price. This is a buyer's market after all.

2. Buying a car this expensive is not a prudent move for you at your age and the current economy. If you need a car now, buy a beater you can pay cash for. Keep building your nest egg. A repo a year ago may seem like a long time ago for you, but in reality it is not. Having a secure, stable job for a year is also not a long time either. Security is illusion that we all make up. Try asking a school teacher who is getting laid off right now about job security. Also, what do you think your insurance will cost on a car such as this?

3. If rebuilding your credit is your goal now, do it with a much smaller amount, and do it on your own if possible. I'd focus on getting a credit card with a small limit and using it for your regular monthly expenses, paying it off each month. Revolving accounts build your credit score faster. Big fixed payment accounts do not. You may have to start with a secured card.

[Joan.of.the.Arch]

I don't think you should rely on the student aid grants for your safety net or anything else. If you are reporting to FAFSA that you have $3,099 income, I imagine your aid package for the coming school year will be $0.

Please look at a much cheaper car. Maybe you can get one for no more than the downpayment you were planning to put down on this one.

Make sure to contact an insurance company before you buy. Tell then the exact vehicle you plant to buy and all your pertinent info so that that can tell you how much it will cost to insure. At your age and with that credit score, I think your insurance payments will be large. Certainly larger than before your credit was wrecked.

I'm not sure you could even get financing anyway. Have you already tried?

Can your parent really afford to make payments for you? If they cannot afford that, they should not sign for you. Really, I think you should not involve a parent in buying a car. Just take your $4000 and buy some basic transportation.

[disneysteve]

Age: 19
Income: $3,099/mo. Gross

Total Cost w/ Taxes & Fess: $20,986
Down Payment: $4,000
Total Financed: $16,986

MY QUESTIONS:

3. From your wisdom, is this a good vehicle purcahse

Question 3 is really the only one that needs an answer here.

You are 19 and earn 36K. You can't afford to spend $20,000 on a car. Period. End of story.

If you need a car, you need to be looking for a used car that you can buy for cash. You've got $4,000 for a down payment. That $4,000 should be able to get you a perfectly functional car. I wouldn't spend a penny more in your situation.

[TaylorM0192]

Some replies...

- Yes, I applied personally for the loan, and I qualified for a loan and received an offer for 19% APR for $11,000 financed - with that said, I assumed I could get the loan for the additional $5,000 financed using a co-signer and also get a lower rate. My question, is what kind of rate can I expect to pay the loan on and for what term of time?

- The vehicle is over $21,500 bluebook with its options packages/condition (under dealer option - it's only about $16-$17k trade-in value). Also, remember the price I put includes taxes & fees. The dealership is selling it for $18,998 (19k). I live in California, so sales tax and DMV fees are quite high (and just in fact went up significantly this year, again...).

- My financial aid package is based off of my 08 tax return & my Dad's financial situation to determine EFC (social security income only), and has already been awarded.

- I have already checked my auto insurance rate from my agent, and under my Mom's account my rates are very affordable (about $175/mo.).

- Finally, I also have the option to convert the auto loan debt to a deferred and interest fixed (5.4%) / subsidized (Fed. pays interest) FFELP student loan (non-credit based) during the 09-10 school year and promptly pay that off while in school, without the stress of a property lien from the lender, high interest rates, possibility of late payment, etc. in addition to relieving my co-signer of responsibility as the debt is effectively transferred to my name. Part of working full-time is paying off the loan, so I will not be the idiot who decides, oh this is deferred so I don't have to pay it now. But I suspect I would only do this in case of emergencies (such as losing my job - but I have gone to great steps and worked hard to ensure my job security and attained several assurances that I will be fine - I work in the education finance division of Wells Fargo and we're *always* busy year-round and continue to grow).

[Seeker]

Did someone state that they could lower the interest rate from 19% to some lower value with an additional 5k downpayment? Generally interest rate paid is determined by FICO score -- but only the lender will be able to make the deals with you.

Auto loan calculator, car loan payment calculator by Bankrate

11k for 36 months = 403.22/month -- you'll pay 14,515
11k for 48 months = 328.90/month -- you'll pay 15,787
11k for 60 months = 285.35/month -- you'll pay 17,121

You're the one that determines the length of time you will payback the loan at. Not the lender. The lender will always go for the longest term -- because that's where they make the most money.

In addition to the above payment you'll have 175/month added for insurance.

In addition: rent? utilities? food? gasoline? education costs?

Throwing everything into student debt (if you lose your job) can also be a mistake. Student debt is not "eraseable" -- no one knows what the future holds for themself.

Why not take the 4k or 9k you've saved for a down payment and buy something outright? 5 years down the line, out of college and with more of a financial history (hopefully a FICO somewhere in the 700+ range), you can buy a brand new car outright or have an interest rate that is not in the "highway robbery" range (19% wow).

[maat55]

I think you are using the same financial sense that got you the credit score you have now.

Like Steve said, you should pay cash. This would allow you to start building a good emergency fund while allowing your credit to heal.

Your co-signer should have his head examined.

[sandrark]

When I was 19, I drove a scooter, because it was what I could afford (and yes, I bought it new and paid cash).

I didn't have my first car until I was 21. It was a Chevette, with 50K miles on it, one owner. I hated it, but it was reliable. It cost $1500, when I was making ~ $13K per year. And I paid cash.

By that ratio, you should be looking for something in the $4200 range. Add in inflation, and a reasonable cost would be about $7000.

I didn't have my first auto loan until I'd been done with college for 3 years, and had a stable job history. Neither of which you have.

You are absolutely nuts if you go through with this - it seems like you expected to come here and get lots of advice on how to do this REGARDLESS of the actual advisability of the plan. Sorry.

Sandi

[autoxer]

- Yes, I applied personally for the loan, and I qualified for a loan and received an offer for 19% APR for $11,000 financed - with that said, I assumed I could get the loan for the additional $5,000 financed using a co-signer and also get a lower rate. My question, is what kind of rate can I expect to pay the loan on and for what term of time?

19% Those are terrible terms. Screw the loan and just buy a car that you can afford with cash. You have saved up a considerable amount for the downpayment. Just use that to buy something that is more reasonable.

- I have already checked my auto insurance rate from my agent, and under my Mom's account my rates are very affordable (about $175/mo.).

You think $2,100 per year for insurance is affordable. Last year I paid less than $35 per month. If you bought a cheap car, then you wouldn't need full coverage, and the insurance costs would be considerably cheaper.

- Finally, I also have the option to convert the auto loan debt to a deferred and interest fixed (5.4%) / subsidized (Fed. pays interest) FFELP student loan (non-credit based) during the 09-10 school year and promptly pay that off while in school, without the stress of a property lien from the lender, high interest rates, possibility of late payment, etc. in addition to relieving my co-signer of responsibility as the debt is effectively transferred to my name.

So you want the government to subsidize your auto loan to relieve the co-signer?

[Seeker]

19% Those are terrible terms. Screw the loan and just buy a car that you can afford with cash. You have saved up a considerable amount for the downpayment. Just use that to buy something that is more reasonable.



You think $2,100 per year for insurance is affordable. Last year I paid less than $35 per month. If you bought a cheap car, then you wouldn't need full coverage, and the insurance costs would be considerably cheaper.

Actually for California and 19 years old, $175/month is a GOOD insurance rate.

I pay $50/month but that's with a 30+ years of driving experience, no issues, high deductable, and a 10 year old auto (actually SUV - though a small one).

Insurance rates are very much dependant on areas and age (or more specifically history or the lack of any), but his FICO won't help him with insurance rates either.

A cheaper car will not have to be insured as heavily as one with a loan tied to it. Agree 100% with the first paragraph.

[Joan.of.the.Arch]

I have no idea what APR you can get on financing. Do you really even care? If 19% is acceptable to you, what would be unacceptable to you? I think you should be looking for nothing over 6%.

I'm wondering whether working for Wells Fargo Finance has affected your idea of what is a do-able amount of debt compared to income. Do you work with a lot of customers who cannot afford their home loans or something? Perhaps you have begun to think of pathological levels of debt as normal.

In bringing up your financial aid grants, I meant for the year after that in which this expected money is to be awarded. With this income of $3099 a month you are not going to be eligible. I doubt that your Dad will be able to claim you as a dependent either, as he probably will not be providing you more than half your income. If he will provide more than half, that means you will have a earned income + father's support equalling $74,000! That is not a tuition grant level of income. I do not think that $37,000 for one person is eligible for grants, either. You do have to re-apply for these grants every year.

At either level of income ($74K vs $37K) , I still think you need to leave your parents out of buying your car. You have enough cash to buy a car without any financing.

Do you have plans to pay the charged off debts? That might need to be higher priority than a nice car. I know some people may see that as a separate issue, but I think they are joined.

[boosami]

My question, is what kind of rate can I expect to pay the loan on and for what term of time?

You can select your term, typically between 36 months to 60 months. The creditor will give you options. In general, the longer the term the lower the monthly payments (and slightly lower the APR). However, you pay more interest on the longer rates, and are stuck paying off your depreciating car for a long time. Personally, if I financed a car for some reason I would not do it for more than 36 months, and try to pay it off early. Since cars go down in value over time, it's easy to get upside down where you owe more than your car is worth. Not a good situation.

Rate is based of the FICO score of you and your cosigner. Current APRs (from the FICO web site) are around 5.9% for excellent credit up to 16%+ for poor credit. So expect your rate to be inside that range.

[wincrasher]

I guess I'm behind the times - don't understand how you can convert an auto loan into a student loan.

FWIW, I think it's asking alot to ask your dad to help you out in this situation. You may think there is no way you could default and stick him with it, but things have a way of happening.

Also, no matter how hard you work at repairing your credit, you will have to address the charge-offs if you want to see an improvement.