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Who offers the best sub prime auto loan?

pinchshopper 414 March 27, 2012 at 11:12 PM in Autos
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My gf filed a chapter 7 last year because of divorce. Everything but the mortgage was discharged last Sept, leaving her with only the mortgage. There were no auto loans involved, only cc and medical debt.

She is about to change jobs and will be traveling daily for work, so we are considering buying a new more economical car for her to drive for work. Probably a Subaru Impreza, Hyundai Elantra, Hyundai Veloster or Mazda3 Skyactiv.

I'm thinking that we'll have to take a sub prime loan for a short time til her credit score builds and we can refinance, but I'd rather have my own financing source instead of going through a dealer. Her present Equifax score is 593, but Transunion is 623 or 625, I can't remember. She has great income and a very low debt/income ratio.

What's the best source for sub prime auto loans presently?

Has anyone seen a deal on either of the above mentioned models?

Thanks

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#2
Quote from pinchshopper View Post :
My gf filed a chapter 7 last year because of divorce. Everything but the mortgage was discharged last Sept, leaving her with only the mortgage. There were no auto loans involved, only cc and medical debt.

She is about to change jobs and will be traveling daily for work, so we are considering buying a new more economical car for her to drive for work. Probably a Subaru Impreza, Hyundai Elantra, Hyundai Veloster or Mazda3 Skyactiv.

I'm thinking that we'll have to take a sub prime loan for a short time til her credit score builds and we can refinance, but I'd rather have my own financing source instead of going through a dealer. Her present Equifax score is 593, but Transunion is 623 or 625, I can't remember. She has great income and a very low debt/income ratio.

What's the best source for sub prime auto loans presently?

Has anyone seen a deal on either of the above mentioned models?

Thanks
call this CU & explain your situation. emphasize that you have a high income, a large down payment (25%+) & an interest in establishing a long-term relationship (checking w/DD, savings, auto loan, credit cards, etc.)

http://www.dcu.org
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#3
Does your GF have a car at the moment?

If you need that subprime loan, it might be a better idea to buy a used car (say 3k or so) and driving that or a year or so and then buying that better car when her credit improves and she can make a larger down payment. You will otherwise be paying much more to borrow initially for the car if you could avoid that loan in the first place.
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#4
Quote from greensam88 View Post :
Does your GF have a car at the moment?

If you need that subprime loan, it might be a better idea to buy a used car (say 3k or so) and driving that or a year or so and then buying that better car when her credit improves and she can make a larger down payment. You will otherwise be paying much more to borrow initially for the car if you could avoid that loan in the first place.
Truth +1
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#5
trust me i work in collections for subprime auto loans and you have to be a moron to sign a contract that says you will pay almost twice what the car costs over the life of the loan. my fiancee got a 01 galant w/ 85k miles for $3,400 off craigslist and its in great shape and she loves it.
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#6
You may also want to see if you know anyone who has some money in a 1% CD that would like to make 6% money on a car loan
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#7
Quote from komondor View Post :
You may also want to see if you know anyone who has some money in a 1% CD that would like to make 6% money on a car loan
That probably seems like a good idea, but in reality it would be a horrible one for whomever is making the loan (unless of course it would be the GF's parent or somebody else who has personal ties enough to forgive the loan if things got tough).

If the GF defaults, there is little way for the person making that loan to get the property back properly, no effective method of collection of late debt, etc.
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#8
you repo the car
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#9
Always buy used! Just because they will loan you the money doesn't mean you should borrow it.

New cars are a retarded investment. You buy the thing and it drops 10-15% as you drive it off the lot. And with a sub-prime loan you will be paying out the nose to do that. Its a sucker move man

Save a few months and buy her a reliable used car...don't let her feminine wiles get you to do otherwise. Then, if she still desires a new car, once her credit is built up, she gets to consumer out and buy herself a new one (at a low rate, or 0% if at all possible). Just another opinion though
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#10
That’s true, my father tried it too and after five years his car is still as good as new.
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L4: Apprentice
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Original Poster
#11
Thanks for the input guys. You all have valid points. Normally I would go the used route, but we already have a 2000 tundra with 225k and a 2002 4runner with 160k, so we really need a low mileage fuel efficient car for trips. She also needs to make a good impression with her job, and we need to get her credit repaired back to the pre BK level.

We found what I think is good deal considering our scenario. I found a loaded 2013 Elantra for 18K financed at 8% with no money down. We sold a 3rd car that we have yesterday, and plan on hopefully getting an even better rate using the $2K as a down payment.

We'd be buying a '13 for less than the '12 are selling for, and not much more than the used '11 with 20k miles are selling for. It's amazing how well these cars are holding their value.

The mileage reimbursement plus the savings on gas (up to 47mpg) will more than cover the amount of the payment.

Our plan is to secure the loan on the '13 Elantra and pay $1000/mo. We will also get a credit card after getting the car. We should be able to be in a position to refinance at a better rate within a fairly short period of time. We plan on continuing to make the $1000/mo payments even after a refi to a lower rate. Our goal is to pay the car off within 2 years.

We're having a hard time with the thought of going into debt, but I think that we've put together a good plan, and shouldn't have any problems paying off the car within 2 years. I think that 8% is a great rate considering the present perceived risk that her current credit score suggests, especially with no money down. I think that with the $2k down, we can do even better on the rate. Her credit score should rise fairly quickly too with the car payment and the credit card that we plan to get. We plan on keeping this car and using it for her job until it becomes unreliable, which we hope will be 8-10 years.

Are we crazy, or does this seem like a good plan?
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#12
Your future self is very unreliable - don't count on such an extreme plan going off without a hitch.
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L4: Apprentice
414 Reputation
Original Poster
#13
Quote from Jabbit View Post :
Your future self is very unreliable - don't count on such an extreme plan going off without a hitch.
I hear what you are saying and we have the same concerns, but even if we are unable to refi the loan, we should be able to pay off the car within 2 years at the 8% interest rate. We were also going to get a 72 month loan in order to keep the required payment amount as low as possible just in case something happens within the next 2 years with her job. I know that this plan requires a lot of discipline in order to make the $1000 payment each month instead of the minimum amount, but we don't live a lavish lifestyle, and this shouldn't be an issue for us. Her new position brings with it a minimum $1000/mo increase in salary. Also, this plan does not take my income into consideration at all, so we have a safety net there.
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#14
Quote from pinchshopper View Post :
I hear what you are saying and we have the same concerns, but even if we are unable to refi the loan, we should be able to pay off the car within 2 years at the 8% interest rate. We were also going to get a 72 month loan in order to keep the required payment amount as low as possible just in case something happens within the next 2 years with her job. I know that this plan requires a lot of discipline in order to make the $1000 payment each month instead of the minimum amount, but we don't live a lavish lifestyle, and this shouldn't be an issue for us. Her new position brings with it a minimum $1000/mo increase in salary. Also, this plan does not take my income into consideration at all, so we have a safety net there.
If you have such a healthy income, why not save for a few months and buy a quality used car? Them, make the $1k monthly payments to yourself and buy a brand new car in 18 months.

Also, I am always concerned when someone "needs" a car to make some sort of impression at work. I know many people who make 6 figures, and they drive anything from beater cars to 10 y/o pickups to sports cars and everything in between.
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L4: Apprentice
414 Reputation
Original Poster
#15
Quote from Jabbit View Post :
If you have such a healthy income, why not save for a few months and buy a quality used car? Them, make the $1k monthly payments to yourself and buy a brand new car in 18 months.

Also, I am always concerned when someone "needs" a car to make some sort of impression at work. I know many people who make 6 figures, and they drive anything from beater cars to 10 y/o pickups to sports cars and everything in between.
First, let me clarify about making an impression at work. We're not high society folks. We don't see autos as a status symbol, and couldn't care less about what people think about the cars that we drive. What I meant is that my gf is a nurse and with her new job, she will be visiting patients in their homes. I'm sure that her new employer wouldn't want her rolling up to a customer's house in a beater. It doesn't make a very positive reflection on the company in my opinion, even though the only thing that really matters is the quality of care that the patient receives.

Since gas prices are so high, used cars with good mpgs are fetching a premium, so finding a deal on a cream puff is a little challenging. Plus the inherent risks associated with buying used, and the maintenance costs that might be required to make it dependable and safe.

I understand your logic, and I am in total agreement with your approach. However, the more I ponder on it, I tend to lean more towards the new car as the smarter route to take.

The new car will be paid for in 19 months. The interest we will pay is approximately $1400 over the term of the loan, even less if we are able to refinance fairly early into the 19 months. This seems like a bargain since this repairs her credit, and we get to realize the gas savings from the beginning, which is a substantial amount with 17 mpg compared to up to 47 when driving up to 500 miles a week. The gas savings alone is over $200/mo, which is 20 % of our $1000 monthly payment, and that's using a conservative mpg of 34 for the new car. Plus, the mileage reimbursement for 500 miles/wk would be $200/mo. Throw in the 100k warranty, 5 yr FREE roadside assistance, Bluetooth and audio controls on the steering wheel for safety, the positive reflection on the company, and the excellent resale value of the elantra and that adds up to a lot of pros.

I keep trying to convince myself that I need to stick with my usual logic, which is very similar to yours, but when I crunch the numbers, and weigh the pros and cons, the new car seems like a smarter business decision. The $4 price of gas really factors into the equation when you start crunching the numbers.
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