good income - bad credit - can I buy a car, and is now the time to buy?

March 27, 2009 2:26 PM

Young professional guy, late 20s - pretty terrible credit, decent income (~50k) - need a car - is now the time to buy, and if so, can I get financed, and if so, what terms should I expect/ask for? Am willing to buy American - GM etc...
posted by stenseng to work & money (11 comments total)

It is a fine time to buy. Why do you need to finance? If you can wait, can you save enough to but it outright? That will be an even better time to buy.
posted by bensherman at 2:35 PM on March 27

If you plan to get a car loan this year, you'll find a tale of two markets:

* Folks with untarnished credit will find good rates, eager lenders and some amazing deals as increasingly desperate car manufacturers try to revive sagging sales. There are deep, deep rebates.

* Folks with troubled credit will find higher rates, increased scrutiny and warier lenders, but they won't face anything like the trouble they'd experience if they were shopping for a mortgage.

Take a look at Car Buying Tips in Troubled Times, and see how it fits for you. Here's hoping it works out for you.
posted by netbros at 2:50 PM on March 27 [1 favorite has favorites]

Is your terrible credit related to debt management?

If so, there are plenty of used cars on the market at very low prices. Dropping $9k on a good used car makes clearing debt a lot easier than car payments for 5 years on a $18k car.
posted by munchingzombie at 3:18 PM on March 27

Don't constrain yourself to getting finance from a car dealer; get a quote for a preapproved loan from your bank and with online lenders to see what they're willing to offer before you go shopping. That'll give you some bargaining power when it comes down to discussing finance - remember that the dealer gets a cut if they can sell you finance, so there's room to haggle.

And seconding used cars; it's pretty universally agreed that they're a better deal.
posted by le morte de bea arthur at 3:21 PM on March 27

Buy used; it's a better investment.

Forget "buying American" or whatever. Research MPG and vehicle reliability.

Do NOT finance through the dealership. Talk to your bank, credit union, USAA, AARP, mom, whatever. Don't be afraid to shop for a better interest rate. Walk into the dealership like a blue-collar with excellent credit. Don't let them use poor economic times or your credit rating as leverage. If, for whatever bad reason, you finance through the dealer, don't get roped into negotiating the monthly car note. It's a trap. Negotiate the price of the car. Know what you want to pay, and be willing to walk away.

Good luck.
posted by dbgrady at 3:22 PM on March 27

Buy used.
posted by Happydaz at 3:52 PM on March 27

I used to buy used all the time, and then got tired of cars breaking down at unexpected times and hit with unexpected bills. And then in some cases breaking down so thoroughly that it is no longer justifiable to fix the car so I would then call the tow truck and get my $30 scrap money and go find another car. No more.

After owning American cars and being very disappointed, I am an unabashed cheerleader for asian cars in general and Hyundais in particular. They are inexpensive, frequently give awesome financing from their own internal financing, and the Accent I own gets an average of 35MPG which means despite a 30 mile commute (each way) I am still only spending 30CDN on gas per week.

As I mentioned above, I found Hyundai's financing to be much better than my bank. No bank can do 5 years at 0% after all, which is what I got from the dealership. It is a different climate and a different time of the year though, so whatever car you go with, line something up at your bank first and then see what the dealer offers and take the superior one. I see in the US, the Accent's being offered as a base model for about 10K. If you can snag a low interest rate on a purchase, that would translate into about $300 a month for 3 years then it's yours.
posted by barc0001 at 4:16 PM on March 27 [1 favorite has favorites]

Check out this recent post from The Simple Dollar. It explains how the author ended up buying new in these economic times when he had originally planned to buy used. Also check the "related links" at the bottom of the post for other posts he's done on the same topic. Hope you find it useful - good luck in your search!
posted by xiaolongbao at 4:25 PM on March 27

Do NOT finance through the dealership.

Depending on the dealership, I have to disagree with blindly following this advice. Certainly, shop around for loan rates, but the dealership can sometimes give a better rate. After all, they want that money from financing too.

/personal anecdote
I needed a new car last year and shopped around till I found the one I wanted. Before I went in, I had plenty of bank loans in line from local b&m, credit unions (which were higher than anything else in town), and online offers. When I sat down for financing, they told me their rate, I told them I was offered 'x' rate (and had proof). After about 10 minutes on the phone, she came back with an offer .25 lower than my other lowest offer.

Of course, this isn't always the case and you may certainly be screwed by dealership financing. A friend was recently shopping around for used cars, and the first dealership offered her like 23% so obviously didn't go with them.

Just keep your options open.
posted by jmd82 at 5:16 PM on March 27

Here's some thoughts:

1. Get your credit report. You can get it for free at annualcreditreport.com.

2. Get your loan pre-approved. Try a local credit union for the best shot. If you have bad credit, you may need a co-signer. Talk to your parents. According to bankrate.com, it looks like rates are in the 7% range.

3. Avoid bells and whistles on the loan at the credit union. For example, GAP insurance or life insurance to pay off your auto loan. Your work probably gives you more than enough life insurance to cover your car loan. If you have a good emergency fund and decent auto insurance, GAP insurance shouldn't be necessary. (You do have an emergency fund, right?)

4. Research the car you want to buy. I like edmunds.com.

5. Be prepared to negotiate. Check out this youtube video from Rob Gruhl.

This is a great time to buy a car. The dealerships are hurting. Squeeze them till they bleed. They'd do the same for you if you were in there position.

Best of luck.
posted by davidamann at 5:21 PM on March 27 [1 favorite has favorites]

Save up. Buy a used Japanese car that has been treated right, and treat it right. You'll be happy.
posted by tapesonthefloor at 8:00 PM on March 27