Daughter ready to buy car on her own. Decent fico, not long history, pre-approval rate is high.

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comehither2k18
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Daughter ready to buy car on her own. Decent fico, not long history, pre-approval rate is high.

Post by comehither2k18 »

Daughter , recent college grad, working full time around 50k year, very low living expenses, no cc debt fico around 690. Not much of credit history other than a small student loan she's been paying on.

Looking at buying used mazda 2 -3 years old for around 13k. She'll be putting around 8k down so loan will be 5k.
Going for 36 months just on pre-approval app with navy fcu, rate comes in at 11.59. I get the whole not much history, but does that seem high?

She plans on paying 200/month to knock it out faster.

We both agreed it's better I don't cosign, so she hold loan herself even though I know her rate will be way way better with my credit history and score. It's time for her to start adulting.

I would think a dealer would be able to shop around and get a better rate, but it would have been nice to go in with something more attractive.
Any suggestions?
Hyperchicken
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Re: Daughter ready to buy car on her own. Decent fico, not long history, pre-approval rate is high.

Post by Hyperchicken »

11.59% interest rate is insane, right in the credit card range.

The standard advise would be something along the lines, can she buy a $8k car instead? That, or save $5k more.
e5116
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Re: Daughter ready to buy car on her own. Decent fico, not long history, pre-approval rate is high.

Post by e5116 »

I don't have anything concrete, but that rate sounds ridiculous in this environment. I wonder if used car loan rates are higher than new cars? When I graduated college, I purchased a new Mazda and signed the loan by myself and got a 0.9% rate, when savings accounts were paying 4-5% at the time....They usually run promos. I will say that they had a similar comment on my credit right as I graduated college that I had a good score, but not much in the way of history/loans, and they asked me to provide my employment offer (as I hadn't gotten my first paycheck yet). That seemed to do the trick and they were able to offer me the loan, and I put down something like $5k of a $17k car. I would shop around, even perhaps looking to get the car from a place that can offer you a more reasonable rate.
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Re: Daughter ready to buy car on her own. Decent fico, not long history, pre-approval rate is high.

Post by niceguy7376 »

5k loan for 36 months at that interest rate will be $165 per month and total interest will be $943.
How about after 4 to 5 months of loan (so that it gets onto her credit history), you give her the remaining balance amount to pay off the loan and then she repays you at zero %?

She gets the credit history built up but also doesnt pay much interest.

If she is going to pay extra $200 per month, the loan itself would be less than year and half.
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8foot7
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Re: Daughter ready to buy car on her own. Decent fico, not long history, pre-approval rate is high.

Post by 8foot7 »

A 5k car loan held for less than 24 months will not improve one’s credit enough to make taking an 11%+ note worthwhile.
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galawdawg
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Re: Daughter ready to buy car on her own. Decent fico, not long history, pre-approval rate is high.

Post by galawdawg »

While ordinarily purchasing a preowned two or three year old reliable vehicle is usually the wisest car buying approach, your daughter may wish to look into Mazda recent graduate incentives. While I don't know what they currently offer, those programs typically offer a rebate and special financing rates. With the loan rate that she is being offered by NFCU, she may be better off (in this particular case) purchasing a new vehicle.
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MrBobcat
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Re: Daughter ready to buy car on her own. Decent fico, not long history, pre-approval rate is high.

Post by MrBobcat »

I'd shop but IDK how much it matters in the end if she's going to pay it off relatively quickly.

$5K loan @ 11.59% at 200/month = approx $5749.02 total paid.

$5k loan @ 6% at 200/month = approx $5353.92 total paid.

Total diff spread over a couple of years = $395.10.
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Re: Daughter ready to buy car on her own. Decent fico, not long history, pre-approval rate is high.

Post by h82goslw »

Save up the extra 5K and pay cash. If she doesn’t already, tell her to get credit card and pay it off each month. That will do more to raise score, that hopefully she won’t need to use until it comes mortgage time.
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Re: Daughter ready to buy car on her own. Decent fico, not long history, pre-approval rate is high.

Post by Jack FFR1846 »

My son graduated this past May and started his ft job in July. Similar background to your daughter, except he's an authorized user on 2 of my credit cards, so his fico is 750. I cosigned to get a better rate with DCU on a $22k car (2004). He's paying around 2.25%.

For you.....make DD an authorized user. That raises the score. And cosign the loan. I know Bogleheads says to never cosign but she's your daughter, not a nephew drug dealer dropout.
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fizxman
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Re: Daughter ready to buy car on her own. Decent fico, not long history, pre-approval rate is high.

Post by fizxman »

Jack FFR1846 wrote: Thu Nov 12, 2020 12:28 pm My son graduated this past May and started his ft job in July. Similar background to your daughter, except he's an authorized user on 2 of my credit cards, so his fico is 750. I cosigned to get a better rate with DCU on a $22k car (2004). He's paying around 2.25%.

For you.....make DD an authorized user. That raises the score. And cosign the loan. I know Bogleheads says to never cosign but she's your daughter, not a nephew drug dealer dropout.
$22k on a 16-year-old car?
stungerz
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Re: Daughter ready to buy car on her own. Decent fico, not long history, pre-approval rate is high.

Post by stungerz »

What experience are you trying to give her from this:
1. Being an adult without a safety net? If that is the case, and you don't co-sign and she gets into trouble are you really not going to help her out?
2. Improve credit history. My understanding is that even if you co-sign her credit would improve from the loan

Using MrBobCat's math, is $400 worth not co-signing?
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Re: Daughter ready to buy car on her own. Decent fico, not long history, pre-approval rate is high.

Post by Nate79 »

Buy a car she can afford, with the cash she has and not depleting her emergency fund. There is no reason to live like a broke person.
Afty
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Re: Daughter ready to buy car on her own. Decent fico, not long history, pre-approval rate is high.

Post by Afty »

I would also cosign.
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hand
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Re: Daughter ready to buy car on her own. Decent fico, not long history, pre-approval rate is high.

Post by hand »

Sounds like an arbitrage opportunity, you believe she's credit worthy, banks don't (or perhaps don't believe the car is worth $5k?).

Loan her the $5k and charge her nominal interest. (Consider gifting her the interest paid when she repays the loan in full.)
Alternately, let her make the adult decision between buying a cheaper car or paying high interest.
mw1739
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Re: Daughter ready to buy car on her own. Decent fico, not long history, pre-approval rate is high.

Post by mw1739 »

Just a few suggestions to consider:
- many banks offer lower rates on higher loan amounts. She may get a better rate by borrowing $10k and immediately paying the loan down to $5k.
- her credit score of 690 may be just below a cutoff rate (perhaps 700) that would offer better pricing. Maybe inquire with Navy Federal about that and see if she can raise the score over a couple months.
- look at other lenders such as Lightstream or perhaps a local credit union.
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comehither2k18
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Re: Daughter ready to buy car on her own. Decent fico, not long history, pre-approval rate is high.

Post by comehither2k18 »

Good suggestions.
As far as her saving, we , or shall I say am looking for peace of mind having her drive something reliable. She lives out of state, and a breakdown will be costly and could levaee her without a way to to get back and forth to work.

I'm against getting an 8k car, because Ive seen what's out there and since I'm not around to do maintenance and repairs, it will be costly. I've heard what people are paying for a brake job and just shake my head.

With hardly any living expenses right now, she may as well spend a little, as well enjoy what she drives. 6 years of driving a junker is long enough, sometime you got to live a little.

We thought about the idea of checking out brand new, but within the next near she might be in Boston, Ma has excise tax based on age. But it's still something we'll look into since there is also recent college grad. Plus less than than 5k of car debt at that age is alot less stress.

I still may cosign, but I assumed she can build her credit rating higher on her own. Plus in spring, I plan on getting something else for myself. My fico was around 790 so she should get alot better rate, but I don't want to take the hit myself. Plus it's just a whole psychological thing for her to have her own loan, her responsibility. If all hell breaks loose, I could pay it off, but I really think it just helps make her more responsible.

For myself, every time I've bought a car that needed financing, I came in with a rate the dealer couldn't beat.
Any suggestions on where to get something better?

I had her join Navy CU because I've heard they had great rates, but it doesn't seem like that's the case for her
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Re: Daughter ready to buy car on her own. Decent fico, not long history, pre-approval rate is high.

Post by Jack FFR1846 »

fizxman wrote: Thu Nov 12, 2020 12:35 pm
Jack FFR1846 wrote: Thu Nov 12, 2020 12:28 pm My son graduated this past May and started his ft job in July. Similar background to your daughter, except he's an authorized user on 2 of my credit cards, so his fico is 750. I cosigned to get a better rate with DCU on a $22k car (2004). He's paying around 2.25%.

For you.....make DD an authorized user. That raises the score. And cosign the loan. I know Bogleheads says to never cosign but she's your daughter, not a nephew drug dealer dropout.
$22k on a 16-year-old car?
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FelixTheCat
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Re: Daughter ready to buy car on her own. Decent fico, not long history, pre-approval rate is high.

Post by FelixTheCat »

comehither2k18 wrote: Thu Nov 12, 2020 11:58 am Going for 36 months just on pre-approval app with navy fcu, rate comes in at 11.59.
That rate can't be right. My local credit union is around 1.3% https://www.calcoastcu.org/auto-loans/
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WhiteMaxima
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Re: Daughter ready to buy car on her own. Decent fico, not long history, pre-approval rate is high.

Post by WhiteMaxima »

Buy a $8k used Mazda. problem solved.
bearwithbear
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Re: Daughter ready to buy car on her own. Decent fico, not long history, pre-approval rate is high.

Post by bearwithbear »

OP,
Try Digital Federal Credit Union
Dcu.com
Rates are good.
If not in area can join a non profit from their list for short money.

Best,
Bear
bearwithbear
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Re: Daughter ready to buy car on her own. Decent fico, not long history, pre-approval rate is high.

Post by bearwithbear »

OP,
Try Digital Federal Credit Union
Dcu.com
Rates are good.
If not in area can join a non profit from their list for short money.

Best,
Bear
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Re: Daughter ready to buy car on her own. Decent fico, not long history, pre-approval rate is high.

Post by LittleMaggieMae »

Is this a private sale? Wouldn't buying from a dealership offer a better interest rate?

Way back when in the dark ages - when I bought a used car it was from a dealership. I had a "down payment" about 1/2 the cost of the car and they gave a 24 month loan. I think I had had my first real full time job for about 3 months. I do remember having talked to my bank about a car loan - and their interest rate was way higher than what the dealership offered me.

I know there's a "Dealerships/car places are evil and will take every penny they can from you! Don't use them for financing" rule of thumb (atleast with my friends) so who knows.

I don't have kids. But, I'd probably let the kid finance the car on their own.
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comehither2k18
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Re: Daughter ready to buy car on her own. Decent fico, not long history, pre-approval rate is high.

Post by comehither2k18 »

WhiteMaxima wrote: Thu Nov 12, 2020 1:45 pm Buy a $8k used Mazda. problem solved.
Haven't gone used car shopping lately have ya..8k buys you an impending costly headache unless you can do your own repairs. Being in different state, I'm not there to do a brake job or anything else. Anything saved gets handed over to the mechanic. There is a point when a car nickels and dimes you to death..no thanks
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comehither2k18
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Re: Daughter ready to buy car on her own. Decent fico, not long history, pre-approval rate is high.

Post by comehither2k18 »

LittleMaggieMae wrote: Thu Nov 12, 2020 1:57 pm Is this a private sale? Wouldn't buying from a dealership offer a better interest rate?

Way back when in the dark ages - when I bought a used car it was from a dealership. I had a "down payment" about 1/2 the cost of the car and they gave a 24 month loan. I think I had had my first real full time job for about 3 months. I do remember having talked to my bank about a car loan - and their interest rate was way higher than what the dealership offered me.

I know there's a "Dealerships/car places are evil and will take every penny they can from you! Don't use them for financing" rule of thumb (atleast with my friends) so who knows.

I don't have kids. But, I'd probably let the kid finance the car on their own.
It will be a dealership so they should have a better rate, it's just I always prefer to go in knowing the best I can get, and see if it can be beat.
I like to know all my numbers before I put in my offers. Fortunately there are at least 8 to 10 cars in this range at different dealers.
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comehither2k18
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Re: Daughter ready to buy car on her own. Decent fico, not long history, pre-approval rate is high.

Post by comehither2k18 »

bearwithbear wrote: Thu Nov 12, 2020 1:48 pm OP,
Try Digital Federal Credit Union
Dcu.com
Rates are good.
If not in area can join a non profit from their list for short money.

Best,
Bear
Will check them out..thanks.👍
flyfishers83
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Re: Daughter ready to buy car on her own. Decent fico, not long history, pre-approval rate is high.

Post by flyfishers83 »

There's no profit on a 5k loan. See what rates you can get by financing the entire purchase and then make a lump sum payment.
unstartable
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Re: Daughter ready to buy car on her own. Decent fico, not long history, pre-approval rate is high.

Post by unstartable »

Bank of America has auto loan rates if you buy from a dealer in the neighborhood of 2.89% for 5 years for a used car. This isn't rock bottom, but if she's not successful at the credit unions, try a national bank. I once had a very good offer from Capital One as well.
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Re: Daughter ready to buy car on her own. Decent fico, not long history, pre-approval rate is high.

Post by sjt »

comehither2k18 wrote: Thu Nov 12, 2020 2:02 pm
WhiteMaxima wrote: Thu Nov 12, 2020 1:45 pm Buy a $8k used Mazda. problem solved.
Haven't gone used car shopping lately have ya..8k buys you an impending costly headache unless you can do your own repairs. Being in different state, I'm not there to do a brake job or anything else. Anything saved gets handed over to the mechanic. There is a point when a car nickels and dimes you to death..no thanks
I drive a 2010 Mazda3 with about 110k miles. They seem to be reliable in general. A quick look at my local craigslist shows a similar car, only a couple years newer, with a clean title for under $8k. I don't consider regular maintenance like brakes as being "nickel and dimed to death"... Now if you needed to replace the alternator one month, timing belt and water pump the next, transmission, then thats another story, but most modern cars can see 200k miles without any major problems.
https://raleigh.craigslist.org/ctd/d/so ... 72201.html
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cchrissyy
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Re: Daughter ready to buy car on her own. Decent fico, not long history, pre-approval rate is high.

Post by cchrissyy »

did they accidentally quote her the rate for a personal loan instead?

my credit union's website says the rate for personal lines of credit is 10.9% and personal loans are 6.9%

in contrast, their page for auto loans says

Used Auto Loans
Up to 72 months
2013-2019
2.93% APR
Minimum loan $5,000; Proof of insurance required. Loan payment example: $15.16 per month for each $1,000 borrowed at 2.93% APR for 72 months.
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Re: Daughter ready to buy car on her own. Decent fico, not long history, pre-approval rate is high.

Post by cshell2 »

comehither2k18 wrote: Thu Nov 12, 2020 2:02 pm
WhiteMaxima wrote: Thu Nov 12, 2020 1:45 pm Buy a $8k used Mazda. problem solved.
Haven't gone used car shopping lately have ya..8k buys you an impending costly headache unless you can do your own repairs. Being in different state, I'm not there to do a brake job or anything else. Anything saved gets handed over to the mechanic. There is a point when a car nickels and dimes you to death..no thanks
Really? I drive a 13 year old Odyssey I paid 5K for a couple years ago. Besides the normal oil changes and tires it's just had to have the alternator replaced in that time. I bought my son a 97 Camry two years ago when he started driving. Cost me $500 and 200 bales of hay. :D We've had the brakes replaced and also the alternator. About $1000 in two years, but not bad. Thing still drives great. I use it as my daily driver now that he's away at college to save on the "new" van that only has 160K miles. LOL

I think if you stick with the reliable makes and models and know the history (I got a stack of paperwork from the prior owners for each one documenting everything done), they don't have to be money sucks.
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Re: Daughter ready to buy car on her own. Decent fico, not long history, pre-approval rate is high.

Post by Nate79 »

$8k EASILY buys a car that is very reliable. Buy a car that she can afford (aka not borrow money). You either live below your means or not.
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Re: Daughter ready to buy car on her own. Decent fico, not long history, pre-approval rate is high.

Post by tomd37 »

Comehither - I don't understand your cited interest rate. I just went on NFCU website and looked at used car rates. They start at 3.79% for 2018 or older model or any model with over 30,000 miles. Granted individual situations differ, but your quote of 11.59% appears very high. Are you a member of NFCU and have you called them to discuss various options?
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Re: Daughter ready to buy car on her own. Decent fico, not long history, pre-approval rate is high.

Post by WhiteMaxima »

I bought a 07 Mazda 3 hatchback for $5k from an old lady in 2018 for my college daughter. It only has 68K mileage on it and in perfect shape. Just change oil and tires. Mazda is a fun driving car. Zoom Zoom Zoom.
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Re: Daughter ready to buy car on her own. Decent fico, not long history, pre-approval rate is high.

Post by Watty »

comehither2k18 wrote: Thu Nov 12, 2020 11:58 am Looking at buying used mazda 2 -3 years old for around 13k. She'll be putting around 8k down so loan will be 5k.
Going for 36 months just on pre-approval app with navy fcu, rate comes in at 11.59. I get the whole not much history, but does that seem high?
She is running into a couple of things because of the low loan amount;

1) A $5K car loan costs as much to administer as a $20K car loan so lenders would rather make one $20K loan instead of four $5K loans. It will have a higher interest rate to make up for that.

2) In roughly 18 months or so the loan balance will be $2,500. When the loan gets that low many people will pay it off. The ones that don't pay it off likely have money problems so there is more risk.

I don't know just what would be a fair interest rate would be but it makes sense that a $5K car loan would be a lot higher.
comehither2k18 wrote: Thu Nov 12, 2020 11:58 am Looking at buying used mazda 2 -3 years old....
I don't follow Mazda but a lot of manufactures have added a lot of advanced safety features in the last few years. A new car might not cost all that much more and it might come with more safety features and a full warranty.
comehither2k18 wrote: Thu Nov 12, 2020 11:58 am It's time for her to start adulting.
She might want to post her own questions here to figure out what car to get and how to finance it.
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Re: Daughter ready to buy car on her own. Decent fico, not long history, pre-approval rate is high.

Post by Brianmcg321 »

Mazda has some of the worst automatic transmissions. I’d swear clear of a used one.

Tell her to buy something for $8k and she won’t have to worry about any loan. Or just save up for another year for something nicer.
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Re: Daughter ready to buy car on her own. Decent fico, not long history, pre-approval rate is high.

Post by LittleMaggieMae »

comehither2k18 wrote: Thu Nov 12, 2020 2:07 pm
LittleMaggieMae wrote: Thu Nov 12, 2020 1:57 pm Is this a private sale? Wouldn't buying from a dealership offer a better interest rate?

Way back when in the dark ages - when I bought a used car it was from a dealership. I had a "down payment" about 1/2 the cost of the car and they gave a 24 month loan. I think I had had my first real full time job for about 3 months. I do remember having talked to my bank about a car loan - and their interest rate was way higher than what the dealership offered me.

I know there's a "Dealerships/car places are evil and will take every penny they can from you! Don't use them for financing" rule of thumb (atleast with my friends) so who knows.

I don't have kids. But, I'd probably let the kid finance the car on their own.
It will be a dealership so they should have a better rate, it's just I always prefer to go in knowing the best I can get, and see if it can be beat.
I like to know all my numbers before I put in my offers. Fortunately there are at least 8 to 10 cars in this range at different dealers.
The thing is... the dealership probably isn't gonna haggle on the interest rate for the loan. You MIGHT be able to haggle something other than a 5 year loan. I would go at this with your daughter as a "what's the cheapest way to Buy Money and how does that effect her ability to SAVE - as in taking advantage of "match" from her employer or for some other long term savings (like friend's weddings and babies and vacations and such). " As in it might feel like it "hurts" to pay $800 in interest on 10K at 3% for 5 years (with a monthly payment of say $180) But the steady low expense MIGHT fit well with her spending plan that includes saving for retirement and maybe moving out. Sometimes it's easier to budget (make financial decisions) when you HAVE money to reliably allocate/save for future expenses. I'd maybe let her know that not all debt is "bad and evil" - and that there are some "good" consequences to buying money at low costs IF it fits with her overall goals and plans.

ADDED: I'd also make sure she's clear on the "never ending car" expense (be it loan, insurance, stickers/plates, maintenance, and the occassional parking ticket). Even once the car is paid off - she should try to keep a fixed amount from her monthly budget (above and beyond insurance, stickers/plates, maintenance) going to 'savings' (or a sinking fund). at some point she will have to replace the old car - and if you've already got some "base" amount accounted for in your budget - it's alot less drama and headache to deal with the expense of a new vehicle. That's kind of why, taking a smallish car loan with a manageable payment NOW isn't such a bad idea. If she goes with a $180 payment - when the loan is done - she just keeps allocating that $180 (or $200) to 'savings' for a future car. Her spending plan doesn't change. Maybe plan to up that amount to $250 after a few years... and bam - she'll have a big downpayment AND a car payment already built into her "spending plan" when she needs the next car. No need to feel deprived or have to say no to fun things with her friends or worry about how she'll afford the car AND her existing monthly bills.
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Re: Daughter ready to buy car on her own. Decent fico, not long history, pre-approval rate is high.

Post by mirror »

comehither2k18 wrote: Thu Nov 12, 2020 11:58 am Daughter , recent college grad, working full time around 50k year, very low living expenses, no cc debt fico around 690. Not much of credit history other than a small student loan she's been paying on.

Looking at buying used mazda 2 -3 years old for around 13k. She'll be putting around 8k down so loan will be 5k.
Going for 36 months just on pre-approval app with navy fcu, rate comes in at 11.59. I get the whole not much history, but does that seem high?

She plans on paying 200/month to knock it out faster.

We both agreed it's better I don't cosign, so she hold loan herself even though I know her rate will be way way better with my credit history and score. It's time for her to start adulting.

I would think a dealer would be able to shop around and get a better rate, but it would have been nice to go in with something more attractive.
Any suggestions?
My suggestion would be to buy an $8k car now free and clear and save what would have been the monthly payment($165) +$200/month extra she was going to pay and buy a $12-13k car in a year. Even if there are some repairs along the way an $8k car shouldn't have $4k in repairs in a year unless its an old Benz, or a complete lemon. 12 months isn't that long to be in "only" an $8k car. She already has student loan why add more debt?
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Re: Daughter ready to buy car on her own. Decent fico, not long history, pre-approval rate is high.

Post by geerhardusvos »

Nate79 wrote: Thu Nov 12, 2020 12:38 pm Buy a car she can afford, with the cash she has and not depleting her emergency fund. There is no reason to live like a broke person.
+1

There is no better answer here than what Nate provided... not unless grandma is going to come through
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Re: Daughter ready to buy car on her own. Decent fico, not long history, pre-approval rate is high.

Post by WhiteMaxima »

A used TOYOTA Corolla would be better than any Mazda in quality wise. Save the money into Roth IRA.
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Re: Daughter ready to buy car on her own. Decent fico, not long history, pre-approval rate is high.

Post by Valuethinker »

comehither2k18 wrote: Thu Nov 12, 2020 11:58 am Daughter , recent college grad, working full time around 50k year, very low living expenses, no cc debt fico around 690. Not much of credit history other than a small student loan she's been paying on.

Looking at buying used mazda 2 -3 years old for around 13k. She'll be putting around 8k down so loan will be 5k.
Going for 36 months just on pre-approval app with navy fcu, rate comes in at 11.59. I get the whole not much history, but does that seem high?

She plans on paying 200/month to knock it out faster.

We both agreed it's better I don't cosign, so she hold loan herself even though I know her rate will be way way better with my credit history and score. It's time for her to start adulting.

I would think a dealer would be able to shop around and get a better rate, but it would have been nice to go in with something more attractive.
Any suggestions?
The car is right and I don't think any of the advice here for older car etc. is useful. Assuming you have ruled out new (you have) then as her parent you've got the responsibility to ensure she drives a safe vehicle -- and I am sure that you will dispose of that responsibly. And you will have helped her find a reasonable car for the money. She stops being a child but you will never stop being her parent-- at least she is not being stubbornly independent about this.

(one of the most dangerous places is to have a broken down car is alongside a road - the number of collisions that happen in the paved shoulder, often lethal to the struck, not the striker..).

So. The loan looks wrong? Knowing what interest rates are. You can get unsecured personal loans at lower rates?

I understand the desire to get her credit rating up. Except for the Credit Score, you'd be better giving her the loan yourself, and then gifting her the interest at the end of the 3 years.
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Re: Daughter ready to buy car on her own. Decent fico, not long history, pre-approval rate is high.

Post by White Coat Investor »

comehither2k18 wrote: Thu Nov 12, 2020 11:58 am Daughter , recent college grad, working full time around 50k year, very low living expenses, no cc debt fico around 690. Not much of credit history other than a small student loan she's been paying on.

Looking at buying used mazda 2 -3 years old for around 13k. She'll be putting around 8k down so loan will be 5k.
Going for 36 months just on pre-approval app with navy fcu, rate comes in at 11.59. I get the whole not much history, but does that seem high?

She plans on paying 200/month to knock it out faster.

We both agreed it's better I don't cosign, so she hold loan herself even though I know her rate will be way way better with my credit history and score. It's time for her to start adulting.

I would think a dealer would be able to shop around and get a better rate, but it would have been nice to go in with something more attractive.
Any suggestions?
Why not buy an $8K Mazda 3? It's only a few years older and she can learn an important lesson about not buying stuff she can't afford. She'll have $200 more a month to build wealth with.

I once drove a $2K Mazda 6 for four years and sold it for what I paid for it.
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Re: Daughter ready to buy car on her own. Decent fico, not long history, pre-approval rate is high.

Post by rockstar »

That rate is really high, and this might be due to the loan size. Most lenders want you to put down $2k. Putting down any more doesn't really help you out. Also, some states have different lending related laws at different loan sizes, so some lenders will put a floor in how low they will lend. If the loan amount is too small, some lenders won't even offer financing. And since this is a used car, they will definitely charge more for financing. It's usually best to pay cash for used, rather than finance.

I'd go to a credit union and see what rates look like at different down payments.
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Re: Daughter ready to buy car on her own. Decent fico, not long history, pre-approval rate is high.

Post by pasadena »

White Coat Investor wrote: Sat Nov 14, 2020 1:22 pm
comehither2k18 wrote: Thu Nov 12, 2020 11:58 am Daughter , recent college grad, working full time around 50k year, very low living expenses, no cc debt fico around 690. Not much of credit history other than a small student loan she's been paying on.

Looking at buying used mazda 2 -3 years old for around 13k. She'll be putting around 8k down so loan will be 5k.
Going for 36 months just on pre-approval app with navy fcu, rate comes in at 11.59. I get the whole not much history, but does that seem high?

She plans on paying 200/month to knock it out faster.

We both agreed it's better I don't cosign, so she hold loan herself even though I know her rate will be way way better with my credit history and score. It's time for her to start adulting.

I would think a dealer would be able to shop around and get a better rate, but it would have been nice to go in with something more attractive.
Any suggestions?
Why not buy an $8K Mazda 3? It's only a few years older and she can learn an important lesson about not buying stuff she can't afford. She'll have $200 more a month to build wealth with.

I once drove a $2K Mazda 6 for four years and sold it for what I paid for it.
+1. A 5-8 years old car, well chosen, shouldn't be costly in terms of maintenance. My previous car (a VW golf) was 8 years old when I sold it in January, and only cost me a few hundreds $ every year for the annual check-up (and low registration fees). It was worth about $7k on the used market.

Asian cars are usually pretty solid. Going into debt just out of graduation isn't a good lesson in "adulting" imo.

A loan will also seriously lower her credit score for a couple of years, which may be a hindrance down the line, for example if she wants to move and rent a new place. For example, mine went from 790 (FICO8) to 705, and is now back to ~735 after 10 months and moving sideways. If you want to help her with that, you could add her as an authorized user on your credit card.

That said, to answer your question, I do agree with others that this rate seems unusually high. She should get back to the CU and make sure they didn't accidentally quote her a personal loan instead of a car loan, or didn't make a typo somewhere. I would also get a quote for a bigger loan, it might be a lot lower, and she can then bring it down immediately.
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Re: Daughter ready to buy car on her own. Decent fico, not long history, pre-approval rate is high.

Post by rooms222 »

I think the loan rate is high because NFCU knows what it is doing normally. It has put her in the same risk category as a new sailor with a similar credit profile who is truly independent, and may have no other available resources and a short credit history, but no bad credit history. There is a high degree of risk to such loans. If you truly want her to be independent, this may not be where she can get the best rate. The car dealer may be able to get her a better rate. She also could have a cosigner, and/or seek out a credit union or bank with lower rates. For NFCU, she is being put in that risk profile on her own.
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Re: Daughter ready to buy car on her own. Decent fico, not long history, pre-approval rate is high.

Post by tibbitts »

I would encourage her developing her credit, but not at that interest rate. It seems like she could get much better on a new car loan at a dealer with the same $8k down. If for whatever reason the $13k car is what you feel is the best way to go, without knowing more of the circumstances, I would probably just give her the $5k.
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Re: Daughter ready to buy car on her own. Decent fico, not long history, pre-approval rate is high.

Post by neverpanic »

From Average Used Auto Loan Rates in November 2020 just now:

600-699 - 11.06%

Based on the nationwide average, the quoted 11.59% does not seem that far off. But for just 60 FICO points more:

750 or higher - 5.01%

That's a significant savings. I'm hardcore against co-signing, but a big believer in setting up a responsible teenager or young adult as an authorized user on a low limit credit card.
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Re: Daughter ready to buy car on her own. Decent fico, not long history, pre-approval rate is high.

Post by Sandtrap »

comehither2k18 wrote: Thu Nov 12, 2020 11:58 am Daughter , recent college grad, working full time around 50k year, very low living expenses, no cc debt fico around 690. Not much of credit history other than a small student loan she's been paying on.

Looking at buying used mazda 2 -3 years old for around 13k. She'll be putting around 8k down so loan will be 5k.
Going for 36 months just on pre-approval app with navy fcu, rate comes in at 11.59. I get the whole not much history, but does that seem high?

She plans on paying 200/month to knock it out faster.

We both agreed it's better I don't cosign, so she hold loan herself even though I know her rate will be way way better with my credit history and score. It's time for her to start adulting.

I would think a dealer would be able to shop around and get a better rate, but it would have been nice to go in with something more attractive.
Any suggestions?
Used Toyota Corolla or Honda Civic, etc, in cash.

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There are alternatives to financing and monthly payments for things.

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Re: Daughter ready to buy car on her own. Decent fico, not long history, pre-approval rate is high.

Post by tibbitts »

I'd consider what the car will be used for. In a situation where it's used for daily commuting for work or some situation where high-availability is important, I'd probably suggest she get a new or nearly new car. New may be cheaper if you go for a brand like Toyota with a good reliability reputation, especially if financing is considered. If the car is for occasional jaunts on weekends and just sits around the rest of the time, maybe used would be fine.
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Re: Daughter ready to buy car on her own. Decent fico, not long history, pre-approval rate is high.

Post by Jack FFR1846 »

Used car prices have skyrocketed since the plant closings around the world due to Covid. I peruse prices for vehicles I might want to buy. Used Jeep Wrangler Rubicon (JK) Unlimiteds in particular. A 3 year old one has jumped at least 5k from what I saw 2 years ago.

So I have to caution that if you bought a used, 3 year old XYZ in 2018 for $10k, you're not going to find a 3 year old XYZ today for that price. You may not even find your now 5 year old XYZ for $10k. New is looking very good for a lot of vehicles these days.
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Re: Daughter ready to buy car on her own. Decent fico, not long history, pre-approval rate is high.

Post by bi0hazard »

New car is a no brainer. Chevy spark for example, is 11k brand new, with brand new warranty, and overall chevy reliability is better than honda (JD power). Personally, I would just help my kid with the $5k rather than finance.
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