Can I buy my first car with zero or little down?

April 11, 2009 2:43 PM

Can I buy my first car with zero down and sub $300 payments?

To be frank, I'm not even sure this is within the realm of possibilities.

I just moved across the country from California to Wisconsin for a job. Within about a month I will need to buy a car. I'll have a little bit of money by that point (likely a little over a grand), but not enough to drop much in the way of a down payment. This is coupled with needing to get car insurance for the first time. I'm 23, but I only got my license a year ago.

I've seen some ads for zero down (or very little), but I don't know much about cars, much less buying one. Is this sort of thing possible for someone with my history? My employer has offered to write a letter stating I am a new hire and my job is secure; they are also well known around these parts. I am most definitely not looking for anything fancy. I can manage monthly payments of around $300 or so.

Auxiliary queries: if it is possible, what sort of fees would I pay at purchase? What price range would insurance be?

Thanks for your help, MeFi. I have a sort of unique situation and my searches haven't lead to much.

posted by HonorShadow to travel & transportation (23 comments total)

Does the $300 include insurance?
posted by mkb at 2:54 PM on April 11

Zero down is usually for 'well qualified buyers', but many dealerships have first-time buyer programs as well, be sure to ask about them if you're shopping around.

I have absolutely rotten credit (medical bills, and credit cards that were used to cover some of those bills, amongst other things), and got a used car for $1000 down with no difficulty, and could have probably negotiated that away if I had been so inclined. This was before the current fiscal issues, so things are probably better still for people in your situation.
posted by Rendus at 2:55 PM on April 11

Not sure about insurance, but you can easily buy a reliable car with $0 down. With no real credit history, you might pay higher interest, but a decent ride is well within your budget.
posted by Crotalus at 2:59 PM on April 11

Sorry, for clarification I meant $300 not including insurance. I figure to pay an additional $100-200 for insurance...which I am also not sure is realistic or not.
posted by HonorShadow at 3:00 PM on April 11

Sure -- don't buy new. Call your bank and ask about getting a car loan. They'll tell you what kind of rate they can give you along, with how much of a loan is possible. Then you can figure out your monthly payments. Now you know how much you can afford. When you have an idea of what kind of car you want, call up and insurance company and get a quote. Now you have a rough idea of how much car + insurance you can afford. Slide the scale around a bit to bring the price of gas and repairs into the mix.

Hit up Craigslist and see what's out there. Avoid going to a dealership; buy local from an individual, and you'll find a much better deal. It takes more work, but is worth it -- especially if you're concerned with staying in a budget.

For reference, a $12,000 loan, with no money down at 4 years, at 10% interest rate, will cost you just over $300 a month according to this calculator.
posted by nitsuj at 3:05 PM on April 11 [1 favorite]

Car makers are hurting for sales -- historically it's basically never been this bad -- so now is a good time to buy.

A detailed answer to your question depends on your FICO score. The higher the score the better the offers you'll qualify for.

If you are a recent college grad you might get $500 factory cash offer, too.

Go to manufacturer's websites now an browse their product and offers. Ford has a zero percent plan going now but not sure the length of the loan. $300/mo at zero percent for 60 months is $18,000, so that's basically going to be your limit for a new car.

Car insurance will probably run somewhere under $100/mo for you.

Subaru's got a 2.9% interest offer up to 60 months if your FICO is 700+. That's not bad.

First-time buyers are how dealers make their money so hopefully other people can advise you how to learn up on dealing with dealers. As a general rule you should be able to get an "out the door" price -- tax title & everything -- for the dealer's MSRP. That's just for starters as far as dickering goes.
posted by mrt at 3:05 PM on April 11

Actually going used is probably pretty good advice. I bought my first car new in 2000 (on the theory that I'd treat it good and have no problems for a while) but this year had to put a $6000 factory-new engine in it. Coulda bought a 1996 in 2000 and replaced the engine in 2006 for the same ownership joy and saved around $10,000.
posted by mrt at 3:08 PM on April 11

I did but that was about 5 years ago. I was prepared to put down a grand but the finance said don't bother, because each grand down only shaved like 10 bucks off a payment. Plus I got a low interest rate because I had good credit. So if you have good or great credit and the finance person is amenable, and you buy a cheap car (all together mine cost less than 15,000) I think you can do it. Also, I bought a new car, so if you get something used you can increase your chances.
posted by nooneyouknow at 3:09 PM on April 11

Can I buy my first car with zero down and sub $300 payments?

Sure. My first car cost me a dollar. True, it was a 14-year-old Pinto wagon, but it certainly was cheap.
posted by The corpse in the library at 4:01 PM on April 11

I second not buying a new car. For my first car, I purchased a 2003 Subaru station wagon (in 2008) and my monthly car payments + insurance are around $300.

I also strongly suggest joining a credit union that offers low interest rates for auto loans (if you have military connections, that will be helpful in joining one of the credit unions for service members). I think you need to have excellent credit to qualify for the best interest rates.

(Finally, please don't sign up for an auto loan with a life of more than 48 months. Hopefully less if you can handle the payments).
posted by val5a at 4:09 PM on April 11

The MSRP on a new Hyundai Accent is somewhere around $12-13k, which would come in sub $300 for a 4 year loan at 8% interest (which is really high these days.) So yeah, definitely possible, depending on whether you can get financing.

I bought a 3 year old Honda Accord for $10k with no money down through a credit union a few years ago and my payments were $230. So yeah, definitely possible, you just have to secure financing.
posted by electroboy at 4:20 PM on April 11

If you do elect to go with a new car, you can absolutely do this. I put $3000 down on the Versa I'm driving now, which is about fully-loaded ($17,000 out the door + tax/title/license) and my payment is $274. If I'd bought a low-options model, and got out the door for $14,000 (easy to do if you know what you're doing) my payment would have been the same without the money down. That gives you $26 a month for the not-quite-as-low financing rate you'll get in your situation.

So, find someone who buys new cars on a regular basis and knows how to go about it, and you'll do fine. Just make sure you find out how much the insurance will cost up front, and budget for it. FWIW, my Versa is among the cheapest-to-insure new cars out there as well.
posted by davejay at 4:22 PM on April 11

I bought straight out of college, very little credit history, no cosigner, though a Honda Financial Corp. program for graduates. I had to put 700 down, but my payments are only 250.
(This was 5 years ago, and I bought new, but at the end of the year when the new models had already come in, so they were getting rid of the old. And it was the most basic 2-door Civic. Overall, I think I got a really good car for a really reasonable price. It's got 70,000 miles on it now, and haven't had to anything other than routine maintenance on it.)
posted by Green Eyed Monster at 4:54 PM on April 11

They might also try to sell you insurance - I forget its name - to cover the difference between the amount of your loan and the immediate drop in the cars value.
posted by R. Mutt at 5:00 PM on April 11

If you go into a car dealership and tell them that you have a budget of $300 - the will get you the worst car they can give you, or the longest term loan with the highest interest rate at $300 per month. As mentioned by others - a better strategy may be to go to a bank (or even better a credit union), and figure out a loan that suits you (or get the best amount possible) at $300 per month repayments.

When you are negotiating with a bank about a loan you are dealing with a tangible and non-abstract thing - i.e. a sum of money, or a number. When you are negotiating with a car dealership you have all these abstract variables such as the actual value of the car you are buying , the finance charges, the term of the loan, the interest, etc. and trying to do all of this in one go.

If you take these out of the equation, you are going into the dealership with a sum of money from the bank, and are negotiating to get the best car you can get with the money you have in hand. The other advantage you have is that you can research and compare cars based on the fixed total price, you cannot compare cars beforehand with a $300 per month payment. Last advantage is that if you are looking based on the price - you can decide on a car and research the insurance payment before buying.
posted by clarkie666 at 5:03 PM on April 11 [1 favorite]

Yes, but do not negotiate with payments as your primary concern or you will be screwed. A dealer will happily sell you a car at a rip-off price for $300/month nothing down, because you'll end up paying thousands more in the long run.

You could also try to get your own financing from your bank or (better) credit union, at a decent rate, then you'll know what the total value of the car is that you can buy for $300/m payments, and you can negotiate on price at the dealer.

But even if you're getting financing at the dealer, negotiate on total price, and on APR, etc, not on payments - let that also factor in, and it can break the deal, but it's not your main concern. If you come in with your primary concern being to keep payments under a certain level per month, you're easy prey.
posted by -harlequin- at 5:07 PM on April 11

If you buy a new car, which is maybe not the best idea if you want a cheap car, here's some advice I've gleaned from my father's accounts of selling Hondas:
-No one pays the MSRP. Look around online and find the invoice price, which is what the dealership payed for the car (in theory). You can probably get the price down to around that much.
-In reality, Honda or whoever gives the dealership quite a bit off the publicly researchable invoice price, in the form of incentives and what not for selling a new car. You probably can't get the price down that far, as the dealership still needs to get their profit.
-Your salesperson is pretty much an intermediary between you and the person in the dealership who decides how much of a deal they can give you. They also don't make much money per sale, FWIW.
-Don't be afraid to be a jerk if you really want that good deal. I mean, being a jerk is never good, but threatening to walk out/actually making moves to do so does work. Or so I hear.
-Obviously, don't buy the dealer add-ons- the weather coating, paint protection, whatever. If it's a tangible feature you really want, sure, go for it, but in all likelihood, the dealership is selling these for a huge markup. This is also where the dealership makes their money on the deal, and where your actual salesperson makes their money.
-It's going to take like 3 or 4 hours, most likely.
posted by MadamM at 5:17 PM on April 11

Bought a 2009 Mazda 3 last month for invoice. We both have FICO around 750-780, we got 0 down and 2.9% APR over 5 years. Payment comes in under $300.

I read Confessions of a Car Salesman and it was very helpful. We researched the invoice price for the make/model/option package we wanted and printed that out. We dodged all the usual questions - the "How much do you want to spend for a monthly payment?" the "what colors did you like?" and the "Do you have a trade in?" We parked our trade in around the corner in a supermarket parking lot and walked the half block to the car lot so they didn't even see the car and start factoring that in just in case. We didn't present the trade in until we got the price down to where we wanted it and then surprise, now we have a trade in. I think the salesman threw up in his mouth.

Passed on ALL of the options much to the dismay of the Business Manager or Financial Manager or whatever his title was. Cut out the middle man (the dealership) -- if you want a remote starter, alarm, extended warranty, go get them yourself.
posted by jerseygirl at 6:56 PM on April 11 [2 favorites]

I know you didn't ask about this, but if you have any way to get a USAA insurance policy, get it. My husband and I pay about $50.00 a month for amazing coverage on a five year old car. That extra $50 could help you get you in your quest for a car.I don't work for them
posted by lizjohn at 7:56 PM on April 11

What about leasing a car? I was in a similar situation about 8 years ago where I was fresh out of college with absolutely no money and needed a car to commute to a job. I ended up leasing a Pontiac Grand Am for 3 years for about $250 a month. Sure, leasing isn't the best long term deal but if you're just looking for a decent car to drive in the short term while you build up some cash, it's not a horrible idea. You also don't have to worry about buying used and having to hope there aren't any impending breakdowns from the wear and tear.

After leasing that car, I ended up buying my next car when I was in a position to put down a large down payment and pay upwards of $450 a month (and that was for 5 years at 0% APR).

Anyway, something to at least consider and nobody else has mentioned it.
posted by cali59 at 8:35 PM on April 11 [1 favorite]

If you do look into leasing: SwapLease might help you find something.

I haven't used it, but I've heard of people getting into leases with no money down. You usually have the option of buying at the end of the lease.
posted by The Deej at 10:21 PM on April 11

If you have a go at used, I long ago learned the hard way that it is soooooooooo worth spending $75 or so to have a reputable mechanic take about an hour to check everything. There's a sweet spot something like 2-3 years old where it's taken the big depreciation hit, is in great shape, might have some warranty left.

But maybe the gap has narrowed because dealers are hot hot hot to sell new cars, more people are looking for the good used ones? Dunno. When in doubt, research!! I just saw an article in a UK newspaper relating that there are some (deisrable) new cars within an eyelash of the same make and model that's a couple years old.

(Even with a relatively young used car, it's worth doing the check; if it's due for brakes or close, that's a good negotiating point. In some cases, the mechanic can tell if routine maintenance--notably oil changes--has been ignored.)
posted by ambient2 at 11:32 PM on April 11

bought a "certified pre-owned" car from saturn 7 years ago. it's a 99 chevy malibu. nothing down (just enough to cover taxes and the like) and my payments were 260/month
posted by nadawi at 9:30 AM on April 12