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Should I pay off my car loan or save that money for down payment for home?

zavulon — Tue, 23 Jun 2009 07:54:48 -0800

Should I pay off my car loan before getting a mortgage, or use that money for down payment? I'm currently shopping for a home and saving for a down payment. I have ~ 16K left on my car loan. I can either pay it off quicker, saving money on the interest... or save that money for the downpayment.

What should I do? The interest rate on the car loan is higher than the mortgage I would get.. so theoretically, I would save money by paying it off earlier - BUT the money that would go toward paying off the car loan is the money that will not go towards my downpayment.

Any help would be appreciated.
Thanks!!!

Prepare me for applying for an auto loan!

thatbrunette — Sun, 01 Mar 2009 13:00:34 -0800

I'm a student, looking to take out a first time auto loan for a car. I want a used car, and would like to spend no more than $3,000. My credit is alright, not stellar, and I have student loans. What can I expect in this process, and how can I better my chances of getting a loan? I'm going to apply through USAA. One thing to note is that I bank through USAA for the most part; however they don't have any local branches. Therefore I deposit my work checks in a Wells Fargo branch (I have an account with them as well), then transfer the money to my USAA account. So that balance fluctuates pretty heavily. Will this impact me negatively? For example, the current balance in my USAA account is very small, about $100, but I have a little more than 2.5k in my Wells Fargo account. Or is all of this negligible and they only base loans on credit score? I really need a car, and I'm hoping this works out.

GAP Insurance Problem - Help!

etherealclarity — Mon, 29 Dec 2008 08:45:34 -0800

My boyfriend Brett recently ran into a problem with GAP insurance that he purchased, and we are looking for a little direction to see where he can go from here. It looks as though he was defrauded by the car dealership that he purchased his car from, as well as potentially by the GAP provider, but the car dealership is now in bankruptcy, no one will return our calls, and he is stuck with $3200 in debt that he can't afford. Here's the detailed story. In April 2007, Brett purchased a car from a used car dealership in Spokane, WA called Town and Country Auto, Inc. He didn't have money for a down payment, but really needed a more flexible mode of transportation (other than walking or the bus) as he was picking up a second job and planned on moving away from the area in the next several months. Brett realized that GAP insurance (to cover the difference should something happen to the car while he was upside down on the loan) would be a good idea for him since he was rolling everything (down payment, taxes, warranty, etc) into the loan for the car. The total came to around $8,000, which he financed with Wells Fargo.

A few months later he moved to Maryland. In November 2008, Brett got into an accident with the car. Though the damage wasn't huge, the insurance company decided the car wasn't worth enough to repair it and declared it totaled. At this point the loan was down to $5500, and they declared the value of the car to be $2700 with a $500 deductible, leaving Brett with a total of $3300 to pay off to Wells Fargo. Once things settled down, Brett called Wells Fargo to inquire about how the GAP payoff should work, and they told him to call the GAP insurer to file a claim.

This is where it got strange.

Brett calls Beacon Industries, Inc and tries to file a claim. They ask him for a policy number, which he can't find anywhere in his paperwork (though he does have a copy of the GAP form that was typed up with Beacon's logo on it, as well as the receipt from the dealership that shows he paid $400 for GAP). They then attempt to search under first the VIN, then his name, but cannot find him in their system. At this point they tell him to consult the dealership. In the meantime, Brett calls Wells Fargo and asks them to fax a copy of the contract directly to Beacon, which shows both the GAP form and the itemized receipt from the dealership.

Brett calls Town and Country Auto, only to find that they've filed for bankruptcy. After many calls and an in-person inquiry at the office (during a well-timed visit back to WA for the holidays), it sounds as though Town and Country Auto never sent in the GAP paperwork to Beacon. The man we spoke with identified himself as Don Hess (who claimed on the phone not to have anything to do with Town and Country Auto, then claimed in person to be a contractor hired by the company, but is clearly listed by the BBB as the VP of Town and Country Auto). Don attempted to convince us to take Beacon to small claims court, since Brett would be unlikely to get anything from Town and Country Auto in bankruptcy. Don said that Town and Country Auto could be considered an authorized "agent" of Beacon and thus Beacon would still be responsible for Brett's GAP claim (and would have to go to Town And Country Auto for the $400 they never received). We were also able to get the number for the lawyer who is supposedly handling the bankruptcy, who we called and have yet to receive a call back from.

I did a little research on Town and Country Auto and called the Eastern District of Washington's Bankruptcy Court office. They couldn't find any record of Town and Country filing for bankruptcy. The person at the court office suggested that they might have filed under a different company name since they are incorporated, but when I inquired over the phone at the Town and Country Auto office, they refused to tell me what name it was filed under. When I had the opportunity to inquire in person, they said it should be filed under their own name (no incorporation).

Doing a little more research, it seems that Beacon Industries Inc. is not without its own problems. It has an F rating with the BBB and (according to the internet) a history of ignoring, losing, and underpaying claims with GAP. See this article. This information is troubling, and seems to reflect our situation. After Wells Fargo faxed Beacon copies of Brett's paperwork, Brett has called Beacon to follow up numerous times, but no one will return his calls.

So, Brett still owes $3200 to Wells Fargo, is already pretty strapped financially (and recently started college again in order to fix that problem for the longer term but will have to cut back on working hours in the meantime), and everyone is pointing the finger at someone else. In the short term we've been carpooling, but due to work and school schedules he will most likely have to get another car in the next few months, and since he doesn't want to take on more debt, his plan is to have at least a little money saved and hopefully pay for a cheap-ish "beater" car in cash. However, with this additional debt and his lessened hours at work, this will be extremely difficult.

It seems pretty clearly that the fault of the non-filed GAP paperwork lies with Town and Country, but if they are truly in bankruptcy (can this be verified somehow?) then the chance of Brett getting any money is extremely small. Beacon could potentially be held accountable as Don Hess claimed, but they won't return any more phone calls and clearly have a pretty shady reputation.

What should we do? Is there any government agency to turn to? Call a lawyer? Sue someone in small claims? Try to get the debt rolled up in Town and Country's bankruptcy (assuming we can finally get in touch with their lawyer)? The worst thing Brett has done in this situation is trust the wrong people, and this is debt he truly can't afford.

She just wants to pay cash for a new car.

ScarletPumpernickel — Wed, 22 Aug 2007 21:41:56 -0800

Please help -- How do you buy a new car in California for cash? Dealer has agreed to a cash deal, but at 11th hour, insists on signing a loan agreement?!? Help my cuz get this guy to close a cash deal. My cousin has saved up to buy a new car for cash in
SoCalifornia. She got the deal she wanted, and they knew
from the start that she was paying cash. So they should've
gotten a deal they can live with, too.

She pays by cashier's check, signs over the trade-in, signs
all the papers, then finally comes the sales agreement...

...and it's a loan agreement.

She declines, they insist. She reads, and the contract
says:

(a) customer can choose to pay cash. Sign this form, and
you're choosing to pay by credit;

(b) oral amendments are not binding, mutual written consent
only.

She declines, they insist, complete with lies and tactics.
Around and around they go. Finally, she leaves. She has a
paper trail on everything she's given them, so she feels she
can get it back with just some hassle. Most importantly,
she'd like to buy that car -- in cash.

What tactic/consumer law/shibboleth/ninja-finger-sign can
she use to get the deal closed without a loan?

P.S. -- In between claiming that it was State Law that she
sign a loan agreement, one of them offered to make it a
"zero-dollar loan." WTF?

Thanks in advance for prompt suggestions. Clock is ticking.

Using a 0% interest credit card to pay the difference between our trade-in and a used car?

saucy — Wed, 18 Jul 2007 05:18:32 -0800

Using a 0% interest credit card to pay the difference between our trade-in and a used car? I've been entertaining the idea of paying the difference between our trade-in and a used car (about $2400) with a 0% interest credit card and paying it off by making monthly payments of $200 for the first 12 months (0% rate lasts 15 months.)

I know about the risk of the interest rate going up if we are late on any payments, but I am confident that will not happen--we have auto draft on all of our bills and carry no other credit card balances. I am pretty organized and stay on top of our finances--I don't make late payments.

The car we are considering has fairly high mileage which means the interest rate we would get on a car loan would be pretty high.

Am I missing any red flags as to why this might be a bad idea?

How do I restore my credit in 2.5 years?

The Deej — Sat, 07 Jul 2007 11:12:09 -0800

Beyond the obvious (Google and MeFi searches have been done), what can I do to restore my credit over the next 2 and half years? I am recently divorced. My ex-wife had numerous health problems, not the least of which was hypochondria. Add to that her gambling problem, and her lack of desire to work, and, even after insurance paid their cut, I was left with more medical debt than I could keep up with. This resulted in scores of medical bills being turned over for collection. The bills will soon be totally retired, but meanwhile my credit is worse than bad. (Hint: I couldn't even qualify for a high-interest credit card that HSBC kept pestering me to apply for!) For the next 2.5 years, I am paying spousal-maintenance (don't get me started on the fairness of that), so I will have to get by with my current car for now (1992 Saab). At the end of the maintenance payments, I want to buy a nicer car, which will require getting a loan. So I want to take steps now to be ready to reward myself with a nice car in February 2010.

Random data: My salary is a little above average, plus I have additional income from freelance design work. My teenage daughter lives with me full time, and I receive no child support. I have no credit cards, car loans, or other loans. I rent an apartment (and have no interest in buying another house any time soon). 100% of my debt issues are medically related. No consumer debt. In the past, I have owned several homes. The medical debt was nearly all on behalf of my ex, even though I am the responsible party, if that matters.

So, I am looking for "beyond the obvious" insight, particularly your own tales of credit rehabilitation, or if you work in the credit industry. Any little-known hints, tips, tricks that can maximize my efforts? Thanks in advance.

Is the car dealer talking out of his hat?

Rc — Mon, 02 Oct 2006 06:42:50 -0800

So I finally bought my first car (not counting the 20 year old brown volvo I part owned for 3 months in Canada). During the 'chat' with the finance person at the dealership he was adamant about two things that puzzled me 1) Consolidating your car loan and home loan is a bad idea, it does not help to repay the debt quicker. The only time people should consider cosolidating debt is when they are struggling with repayments.

2) He advises people that it is better not to repay their car loan early because a car is a depreciating asset.

When I asked him he could not really clarify either of these points. It had been a long day for me so I let it go; but now it is niggling at me.

Yes he is biased; he makes his living getting people to take loans through him. Am I missing something though? I can;t see how they can be true (unless the car is bought by a business and the interest is a tax deduction).

If you can put this to rest for me I would be grateful.