Max legal interest rate?
 

As a First 86 winner, I have to get the car, no matter what. Sure, sure, I can pass it on and wait later but it wouldn't be the same for me. My credit score isn't the best since I damaged it badly when I was 18 (23 now) and I'm figuring I'll get the max level of finance rate possible. My question, after searching the google sea, is what IS the max rate legally allowed to be set? In my case, the legal rate in CA? I am curious to know other states as well. Thanks guys.

I pulled this from that same website

5 years is plenty enough time to rebuild your credit. You'd be amazed how fast your score can go up just by avoiding the things that drop your score. Assuming you learned your lesson years ago and corrected your behaviour then you might be surprised if you check your scores now.

do you know your credit score? if you have to ask that question i think the best option would be to buy a car you can pay cash for or maybe have a cosigner

Oh California and their ridiculous laws.

Check your score.

Max rate in CA for auto loans is 25.99%, otherwise it's considered loan-sharking.

Check your score. But likely, if you think you're going to get a bad rate, you will.

Assuming you have little to no credit history, here's my advice:
DO it if you are sure you can keep up with the payments. Do NOT do it if you aren't sure. The good reason to do it is BECAUSE of your bad credit. Loans do a real good job at improving your credit if you keep up with them. Even if your credit sucks, when you get your car loan, you'll get offers for credit cards in the mail.

Do NOT take any of those offers just yet. They'll have limits that are too low.

Get into some small, limited use cards like gas cards. Use them and pay them off every month. If you have to, set aside the money when you fill up and then use it to pay the cards off. Once you have established you're good at paying your loan and your small cards, look to see if you can get a big general-use card.

If you can get one, put one purchase on it at no more than 20% of the limit, and make slightly above minimum payments. When you pay it off, do it again. Having a card with a high limit ($7000+) gives creditors some reassurance that if you have a rough spot, you can still pay your loans.

To really get this to work for you, you'll have to have the big card for over 3 years, but it'll still help in a few months. Monitor your credit rating. Good credit rating sites will give your recommendations on how to improve your score.

Once you get your rating up to a good or better level, you can go to a bank (credit unions usually have great rates) and refinance your car loan at a lower rate.

Now, this will probably take 2-3 years of good behavior to work. But since you'll likely be on a 6 year loan, it will still save you a lot of money in the long run, and a ton more in the future.

Good luck. Just remember that, like exercise, some pain now will pay off in the future.

:word: this is all very good advice.

One more thing I would add is the site creditkarma.com is a great resource for knowing your credit score. They will break down exactly where your score comes from and how you can improve it, and you can even simulate what will happen to your score if you take certain actions, and it's all free. As far affording the car, it's up to you to determine what you can afford for a payment each month. If you can afford it and know that you will be able to afford it for the entire term of the loan, then go for it.

I hate exercise. :)

But yeah, 5 years may put you in a better spot than you think. If not Draco is right on the money.

:word:

If you sign up for it and end up defaulting, you'll be in MUCH worse shape than now. You're young, you have plenty of time for lots of different cars. Your patience will be rewarded.

Brett

Yeah you need to check your score to have any chance of knowing what your rates will be.

There are other factors as well but if it's something low like 550 I would not even bother trying to buy the car.

I'm not part of the first 86, but I'm assuming you don't have to finance through the dealership so there really is no reason you can't find out what your loan terms will be right now. If you use credit karma to find out an approximate score a credit union or bank should be able to tell you the terms, but be sure they don't run a hard credit check as this will lower your score when you actually apply for the loan.

He'd have to do a credit app to get an actual rate. Too many other factors are used to determine his credit worthiness, it's not just the score. They will be able to give him a range or a x.xx or higher type answer just based on the score though.

One or two inquiries won't hurt but for all we know he's already had 2 or 3 in the last 6 months.

It took me 1 year to go from 586 to low 700s.
If I were you I would simply refinance after 1 year
of purchasin the car, even if it takes you year and a half it's no big deal.

The issue is being denied credit (and thus delaying recovery of the credit score even further). Tough to evaluate the probability of that w/o knowing the current score &past credit issues (CC debt written off? Collection still outstanding? etc). So I'd recommend pulling a credit score off all 3 bureaus and going from there. D/k if the free once-a-year report let you see the score these days, but I'm sure there are ways to get those for cheap. In general, if one has a steady job with lots of income left over after necessities to comfortably afford a car payment and puts down a significant downpayment, interest rate shouldn't be too bad on a loan that's secured with collateral (car).

When you go to the dealership, look presentable, be honest, and try to get the salesman to want to sell to you. You will likely have to pay MSRP, but don't pay over. It's one thing to compromise, it's another to be taken.

Ok, so you've agreed on a price. You REALLY want this car and you REALLY hope the salesman can help you even though you have bad credit. Here's the thing. Most dealerships have connections with various loan companies. Among those, they'll have an "in". A good dealership CAN get you a loan with bad or no credit. You'll get a horrible rate. But you will get the loan. And that, is your opportunity to show that you are a worthwhile investment to future creditors.

Don't waste it, or don't sign the paper.

As a first 86 member he shouldn't have to worry about price. It will be upfront and no negotiating necessary. I'm sure it will be MSRP since that is the way pure price seems to usually work.

True. I'm from the BRZ side of the FT equation where there's more leeway with the price.

IIRC, the credit report companies let you run one check per year for free. So you can sign up to 3 companies to check each one annually.
Might sound a bit OTT, but it meets the cheap requirement.

Credit report, yes. Credit sore, sadly no :(

You can use creditkarma.com which will give you a free credit score.

Cool never used them. Which bureau owns them? Or are they independant (not sure that's even possible).

I just pay for them as needed/desired normally.

Looks like they use TransUnion.

"Credit Karma, a San Francisco-based website, is a company that provides free credit scores to consumers. Credit Karma provides the TransRisk credit score generated from national credit bureau TransUnion,[1] the VantageScore, and the TransUnion Auto Insurance Risk Score.[2]"

http://en.m.wikipedia.org/wiki/Credit_Karma


http://www.creditkarma.com/help/howitworks

if you're that worried about your score try leasing instead. a high teens or 2x % rate is bloody insane if you're planning to finance. shop it around. also to illustrate how silly accepting high rates like that are go over to bankrate and plug in the numbers, opt for a full amortization schedule and glance over how much interest you're paying.

as far as buying cars go, if you got at least >620 and DTI to afford the payment you will get approved. (DTI = Debt to income ratio). keep in mind the dealers finance guys are probably your best bet in getting a subprime loan, just keep in mind that the rate they initially sell you is NEGOTIABLE, everything at a dealer can be negotiated including the rates they can offer. they also have a lot of pull with the dealers financing company (toyota financing or whatever the inhouse is) and can sometimes pullin favors to get you approved.

Or, you could look at this in the long term and postpone purchasing a car now until you work your way up to being able to pay cash. It's painful in the short term but completely changes your financial picture in the long term.

Here's a good explanation of how it works....

I realize life isn't always that simple, but if you focus on it, it works and there is no better time to start than when you're young.

I agree. I don't like to be overly preachy but some measure of delayed gratitude in the face of a very, very poor financial decision can pay dividends (literally and figuratively) in your future. There is no time like the present to embrace positive change in your personal financial situation even if it involves some measure of sacrifice.

If the best interest rate you can get on an auto loan is around 10% or more, and you aren't paying the loan off early...you need to consider not getting the car. You are essentially paying $2,000 to 3,000 more for the car above sale price. Throw in high insurance rates, registration fees, and maitenance costs, and you are basically investing your life into the car.

Lots of good general info there. Still doesn't account for those of us who keep their cars for ~10 years and would prefer to buy a new car with a full warranty than keep buying used cars that are outside of their warranty period. Low interest loan w/ payback in ~4 years > than buying a 6-7 year old car that is "outdated" in terms of features and safety. Would rather keep my own car that I have taken care of and kept maintenance records for than have to hunt down and find a used car that I feel is still in good condition.

Interesting thing, with the cash for clunkers program, a lot of good used cars were taken off the road. Along with the disaster in Japan slowing down production, used car prices have been "artificially" inflated over the past 1-2yrs. Anyone look at the used prices recently for Civics/Camry/Accords? While good for selling your car in the future, it sucks when you are the buyer. 1-2 yr old Civics are going for close to the price of MSRP.

Not to mention rebates from the automaker, car buying services like AAA, Costco, zag.com, truecar.com and you should be able to buy a car for invoice or less. Throw in an auto loan <2% and you are basically borrowing free money. I just say keep your car longer than every 6 years. I have been keeping mine for +10 years and plan to continue to do so.

Except his credit history will still be in poor shape. These days credit profile matters for a lot more than buying cars/homes and getting credit cards. In many states employment prospects and car insurance rates depend on it. Buying a new car is a decent opportunity to improve one's credit history. It will involve getting a loan at a higher interest rate and refinancing in a couple of months.

CAUTION: All that follows is personal opinion and my warped way of seeing the world.

The money piece (loans/no loans) is a personal choice. I prefer no debt over all else. I don't buy that not paying interest is throwing away free money. For example, if I buy a car with 2012 dollars in 2012, I'm not saving anything with a <2% loan. I'm probably wrong, but that's how I see it.

As far as keeping cars +10 years, I agree. I've never had a daily driver that I've driven for less than 150K miles. My current one has 288K miles on it as of this morning. I plan to keep it even after I purchase the FR-S because 1) its a truck and I need the capacity on occasion and 2) I want to say I had a car with 300K miles on it where I drove 99% of the miles!

That experience tells me warranties on new cars are overrated and I woud never buy a new car just for the warranty. Its built into the price, we all know that, and is part of the reason cars drop in value the second you drive them off the lot. Of all the new cars I've ever owned, the only warranty service I had done was replacing some trim that came off.

Of all the cars I've driven over 100K miles, none of them have ever had what I would consider an unexpected repair until they were well over 150K miles.

Also, I usually buy used. I'm letting desire overtake me one this car because its in my "used car" price range.

I can't argue that point, I just don't personally worry about credit scores. I happen to have an excellent one, but I would be perfectly fine if mine was zero. For everything it saves you, it costs you somewhere else.

I think there are better ways to build it than going this far in debt to fix it. Again, just the advice I'd give my own kids.

For a new model I think a warranty could do a lot of good. Especially with the unknown. Toyota and Subaru are two of the top companies in regards to quality built cars and the number of their vehicles still on the road after X number of years. But for me, an extra bit of piece of mind with the warranty and knowing that the car was not abused/modded and returned to stock form prior to my purchase is worth it. Especially a car like this.

I can do much better than 2% return on my money with my investments. Doing well over 2% return. Think 4x that. So yes for me, <2% is basically free money and it frees up money for me. I would still have the money available to pay off the loan on the spot if something came up, but with money so cheap it only makes sense to borrow in the current market. YMMV. But I have no issue with borrowing money wisely. Also helps out the credit score. :thumbup:

All good points and worth considering.

I concide this in your situation. I'm not sure someone who already has credit issues would generally have the knowledge, patience or understanding to do this though. That may not apply to the original poster, but it does apply to many in this situation. The key word you used was "wisely".

It's all just different ways of looking at things. I just wanted to present a view I hadn't seen elsewhere in the thread.

I agree with you. Paying in cash is always the best, except when you can borrow money very cheaply. :thumbsup:

I would never borrow money unless I had the money sitting in my account ready to cover it. I use my credit cards the same way, always paying off the monthly balance every month.


To the OP, it seems like you might need to sit down and think long and hard about your current situation. Do you have a savings account with 6-9 months (more the better) of income in case you lose your job? Do you have rent/mortgage to worry about? Are you married with a spouse who also brings home a paycheck? To be honest, you came on a public forum to get opinions, if I was you I would hold off until I got my finances straightened out. Save up to get ~30% of a down payment (more is better). Pay off all of your other debt first (if you have any). Then after all of that, only then would I start looking at getting a FRS. You don't want to be that guy that has a new FRS, becomes unemployed for whatever reason, can't make rent/mortgage, can't make car payments and ends up losing the FRS. It can happen easily enough for someone living paycheck to paycheck.

Once again, I have no idea what your personal and financial situation is. But I wouldn't get a FRS if it would hurt me financially. It isn't like they will only build it for 1 year. You will have your chance again.

And that is the best advice that could be given... :w00t:

There definitely are. My method for improving credit is how I did it. But it certainly isn't the only way or the safest. When I started this, I had a car loan of 16%. My current car has a rate of 10% on the loan. But the BRZ will likely have about 3%.

A car loan is a great way to make big changes faster, because dealerships will often get a loan company to push through an application that normally would be rejected. But as I've said before, it has to be done right, or not at all. It's up to the person doing this to decide if they can handle the payments or not. And they need to be honest with themselves.

If a loan is too much risk, then they should start simple and work up to bigger commitments. There are many safer ways. (i.e. skipping the car loan and going to the gas card step and setting aside gas cash for the car payment at the end of the month.)

For me, if I can't qualify for the lowest rate I take it as a sign that I need to fix my finances before considering a major purchase like a vehicle.

>620 isn't all that good. IMO >720, DTI, living expenses under control, etc or don't buy.. but that's just my opinion.

:word::word::word:

What if your investments are returning 8-12% over the year? Mine are finally returning good numbers again, but we'll see how they perform for the rest of the year. I was originally going to liquidate some to pay cash but now I'm not planning on it..

I've bought new and used. Lately there haven't been any new cars that I've wanted so I've been buying used, but the BRZ/FR-S have changed that.

I'm not concerned with warranty and vehicle mileage myself either, my three cars are currently at 220k (and 6-7k of that is road racing miles), 152k and ~130k. None of them have had any major issues, the race car's engine was rebuilt ~2k ago but that was due to driver mistakes bending some valves..