Hey guys, so I m 21 years old and I want to finance a car that I am in desperate need for. Unfortunately I do not live with my parents so they cannot co sign and I have yet to build up my credit. If I put a down of $2,500 will that be enough for the dealership to let me finance the car?
Probably. You can also talk to your own bank or credit union if you have been a customer for a while they will have more info on your finances and wont have to rely completely on a credit report.
Not having a good credit rating may mean you end up with a more expensive interest rate. This doesn't matter too much if the loan is small and you can pay it off quickly. But don't take out a long term loan on an expensive car, that will cost you a LOT of interest payments.
But a 20% deposit is sensible, and you can buy a pretty good car for $10K.
In my opinion you need to look for a private sale basic vehicle, that has been owned by the seller for at least 1 year, the more years the better, has some recent repairs evidence by new parts or receipts.
The seller must allow you to take it to a mechanic for inspection.
Consider buying a car with manual transmission, they have lower demand which means a lower price.
DO NOT buy from a scammer, out of state seller, flipper, or curbstoner.
You must see a copy of the title on the fist look at the car. If the person says they don't have it, or they are selling it for a friend/relative then pass on that car.
If you do your homework and focus on what I said, you can find a basic transportation.
My opinion: If you buy from a buy here pay here lot you are getting a high risk car, you will overpay by a few thousand, have 25% interest rates, and these lenders find ways to tack on late fees, etc.
So you will end up paying like $6000 for a car worth $3000.
Best of luck
I.d use that to buy a car, i bought a 02 suv for 1500 it is the best car i have ever bought 177,000 miles had 130,000 when i bought it Not a single problem just new tires and oil changes ever 3 months.bought it 2 years ago. i will easily make over 200,000 miles I did change all the hoses and belts and the timing belt, and brake pads when i bought it ,cost me very little, buying a used car this needs to be done, then you good to go, done this many times,, I never buy new or spend more than i need too.
Some lenders will still let them cosign. Ask around.
The problem with anyone that would finance you is they overcharge massively.
For instance, about 6 months ago, I bought a car for around $9000. At the time, the cheapest similar low mileage car from Carmax or Carvana was about $12,500.
However, nether of them will be able to get you financed at 21.
They have subprime lenders for that.
What they do is find a car like mine but instead of low miles, they get one with 115k miles. And they still try to charge around $13,900 for it. You might say, well, that's only $1400 more than the other places. Not quite. They also charge interest at 15-29% which jacks the price up even more.
So the difference between my car with 47k miles and one with 115k is about $3000.
Maybe more 6 months ago. My car has lost about $1200 in value in just 6 months. I expected depreciation, but I expected closer to $500-600 in 6 months. I was wrong.
Now, lets suppose you could get a car identical to mine except it has 115k on it for say $12,500. You put $2500 down. They will probably force you to buy an extended warranty or some kind of job loss insurance policy or something for about $2000.
Then you have the interest to deal with. Lets assume they are really cool and can get you just a 15% rate. (I think it would be more like 21-25%)
But lets go with 15%.
So… $12,500+ $2000 for an extended warranty or job loss insurance= $14,500. Add tax, title, fees and you are at $15,500. You put $2500 down so your amount financed is $13,000. You will pay $309 a month for 60 months. Or $21,040. For a car worth maybe $5000 at wholesale.
So that's the bad news. The good news is, with $2500 down and a full time job, you can probably get approved.
Now, your car has 115k so its likely you will need some repairs & maintenance going forward. Your extended warranty probably only cover the drivetrain ONLY and probably has a $500 deductible. And it probably only lasts for 2 years or something.
So 3 years from now, you still owe $7400 on it assuming you were never late. Except its probably got 160k miles. If the motor or transmission goes out, sorry, the extended warranty only covers the lender. Or it only lasted 2 years or you cant prove every oil change was made on time for the last 3 years so its void.
Then you have a car that doesn't run and its worth maybe $500 except you owe $7400.
Welcome to the world of subprime financing.
Like I said, you might be approved with $2500 down. Do you really think its a good idea ? Lets go a step further and say, hey, you bought a mazda3 and they make good cars. Maybe the motor or transmission don't go out.
You still paid $21,000 for a car you could get from a private party for probably $6000 in cash.
If your dad is anything like me, he can get a signature loan at 9.99%. That's $161 a month for 2 years. $6000 less $2500=$3500.
Its still a bad deal because its 10% but its $6364 versus $21,000+.
So, do you really want to finance a car on your own ? Because with $2500 down, you probably can.
The $6364 didn't include tax & title which would be probably another $185-320 when you register it.
I paid cash for my car. $9095. I put $1595 down and financed $7500 for 30 months at 2%. I pay $257 a month. Except I pay it to myself. Because I paid cash for the car.
That way, in 30 months, I will have a new $7500 to use toward my next car. Which I wont be buying for at least 7.5 years. (I kept my last car 12 years so I'm thinking 8 years for this one now that I spoiled myself with an 18 year newer car)
And in 30 months, I will keep paying myself about $100 a month, so 8 years from when I bought it, I will have $7500+6600=$14,100+ my old car which will probably be worth $3500 to sell to a private party. (low miles) You can bet I wont spend $17,600 on my next car. Given that I will be 61, I probably will just keep my old car forever or for another 4-5 years at which time I might go with a buddy to a dealer auction and pick one up for $4000-6000.
Too many unknowns. Do you have any credit? How much money do you make? What is the price of the car you are looking at?
Without credit or a cosigner you will find it hard to get a loan. And if you find one you will get raped on the interest rate. Best to keep saving money towards trying to pay cash.
The fact that you don't live with your parents should not prevent them from co-signing, if they will.