Max legal interest rate?

[tranzformer]

Originally Posted by Dadhawk

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.

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 than buying a 6-7 year old car that is "outdated" in terms of features and safety.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.

[dsgerbc]

Originally Posted by Dadhawk

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.

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.

[Dadhawk]

Originally Posted by tranzformer

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.

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.

[Dadhawk]

Originally Posted by dsgerbc

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.

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.

[tranzformer]

Originally Posted by Dadhawk

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.

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.

[Dadhawk]

Originally Posted by tranzformer

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.

All good points and worth considering.

Originally Posted by tranzformer

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.

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.

[tranzformer]

Originally Posted by Dadhawk

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.

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.

[Dadhawk]

Originally Posted by tranzformer

..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...

[Draco-REX]

Originally Posted by Dadhawk

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.

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.)

[Dave-ROR]

Originally Posted by powertrip

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.

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.

[tranzformer]

Originally Posted by Dave-ROR

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.

[Dave-ROR]

Originally Posted by Dadhawk

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.

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..

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'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..

[Dave-ROR]

Originally Posted by Dadhawk

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.

As he stated, credit scores matter for more than just loans.

I'd agree though, buying a car to fix credit isn't the best way IMO. It depends on his situation of course but you can usually return a credit score to 720+ (on the equifax model - which is all you really need) without adding a substantial installment record. If it's low for non-payments/late-payments than simply waiting for them to fall off will do it (and really even just keeping up with payments for a few years can have a massive impact). If it's a high debt ratio than pay off the debts before adding 25k more, etc..