Are You Really Ready To Buy A Car?

How to tell if you're really ready to buy a car

 You may want to buy a car, but are you truly ready to make the leap?

If the thought of financing a car makes your heart race and your palms sweat, you have good reason to feel that way: buying a car is one of the most significant purchases you’ll ever make.

Whether you’re new to the whole car ownership/adulting thing or if you’ve been around awhile, it helps to know the key benchmarks that help determine if you’re truly ready for the leap into car ownership.

Calculate your debt to income (DTI) ratio: Lenders rely on this figure when determining the level of risk involved in extending a loan. You can calculate your DTI ratio here. The lower your DTI ratio, the better your loan terms and interest rate will be.

Here is a breakdown of the DTI ratio ranges that most lending institutions and dealers rely on in deciding whether or not to grant a loan or extend any other offer of credit:

  • 36% DTI ratio is ideal. You stand a better chance of getting the best loan amount, term, and interest rate for you.
  • 37-42% DTI: Borderline high. You may end up with a higher interest rate or a  lower loan amount.
  • 43-49% DTI: High risk of default. Very few lenders would grant a loan to someone in this range. Expect to be saddled with a double-digit interest rate, and/or a high downpayment requirement if you’re granted a loan at all. Not worth it.
  • >50% DTI: This is the “nope” zone for any lender.

Credit counts, too

Check your credit report: Another factor in determining overall creditworthiness is your credit profile and your credit scores. The three credit bureaus (TransUnion, Equifax, and Experian) will offer a free credit report to consumers through their websites.

In some cases, you’ll run into membership fees for extras such as credit monitoring, but unless you’ve been a victim of identity theft, come for the free credit report and stay for the FICO score (available at cost). Your credit score is one of the determining factors for a car loan.

Review your credit report and confirm that all of the information is correct, including the monthly payments on any active debt such as student loans. If you have any recent past due payments, collections, or public records, your chances of getting a decent car loan are slim.

If you notice any errors on your credit report, follow the procedure offered by the credit  agency website. Expect to wait anywhere from 30-90 days for resolution depending on the nature of the error.

Insurance matters

If your DTI ratio is good and if your credit is even better, get insurance quotes on the cars you’re interested in buying.You’ll avoid sticker shock and can factor the payments into your budget.

For example, I was floored to find it would cost me more to insure an 8 year-old Toyota Camry than it would to insure a 4 year-old Hyundai Elantra, mostly due to risk of theft in my community.

Insurance laws vary by state, so make sure you’re covered before taking your car off the lot. Investopedia has a great explanation of car insurance policies if this is an entirely new area for you.

Buying a car is a significant step whether you’re a first-time car buyer or an established car owner re-entering the market. By understanding the key components of buying a car, you’ll know whether or not you’re truly ready to take the leap into car financing and ownership.

 

 

Don’t Let Student Loans Torpedo Your Chances Of Car Ownership

Student loan debt

Your student loans could be why you’ve been turned down for a car loan…but not for the reasons you’d expect.

If you’ve attended college at any point during the past 20 years, chances are you’ve got some student loan debt. According to the popular website Student Loan Hero, 43 million college graduates are carrying some form of student loan debt. The average college grad is about $37,000 in debt by the time they leave school.

When it comes to car loans, however, it may not be the student loan balance that stands between you and a car loan. It could very well be the student loan payment itself. An inaccurately reported student loan payment could  wrongfully land your car loan application in the digital “no” pile (while this applies to all forms of debt, I’m just sticking with auto loans for now).

Right loan, wrong payment

Suppose you’re enrolled in an Income Driven Repayment plan. These programs were instituted so student loan borrowers could make their payments and avoid living in a box at the same time.

In this case, not all federal student loan servicing companies report the IDR amount to the credit reporting agencies. What shows up instead on your credit report instead could be the standard payment amount which is typically much higher.

In other words, instead of your credit report reflecting your $20.00 per month loan payment under an IDR plan, it may show a much higher monthly payment amount calculated under the Standard Repayment plan.

What this means for you as a prospective car owner is this: any time you apply for a car loan, the lender (bank, credit union, automotive finance company) calculates your debt-to- income ratio, or the percentage of your income that is applied toward monthly debt payment.

If this debt percentage falls outside of the lender’s guidelines, your application is either torpedoed altogether, or you could end up getting reamed by an interest rate that’s needlessly high. Both scenarios may be avoidable with some persistence on your part.

Don’t panic. Take action.

If your auto loan application was declined, the lender will issue you an email notice (for online applications) first, followed by a written explanation via snail mail. If your notice indicates “excessive debt load” or similar phrasing, there’s your tip-off.

  • Contact the lender and request a secondary review. Ask which figure was used to calculate your student loan payment. If they used the standard payment as shown on your credit report, offer to send them copies of your Income Driven Repayment plan paperwork showing the correct payment amount.
  • The updated information may or may not save your bacon in terms of finally gaining loan approval or a better rate, but if an inaccurate student loan payment amount was all that stood between you and loan approval, you could be in luck.

Taking out an auto loan, especially for the first time, is a big step. If your loan is declined for excessive debt load, it could be an inaccurately reported student loan payment amount. Don’t let that stand between you and a new or new-to-you ride.

 

Close, But No Car…Again

I was at a neighbor’s house the other day, tossing a Frisbee with her 9 year-old grandson. Each time one of us accidentally hurled the disc into a wall or other obstacle, the other would yell, “UGH, WHAT?! DENIED!” following by gusts of laughter. It was all good-natured ribbing as boys are wont to do.

Nothing like play at full volume to shake off a busy workday and car-shopping nerves.

Close, but no car…again

lol-denied1

I have a feeling the local credit union underwriters did the same thing with my auto loan request because “UGH…WHAT?! DENIED!” This time no gusts of laughter followed. Only ass-kicking disappointment.

“There’s nothing wrong at all with your credit score–in fact, it’s excellent–the problem is you don’t meet our credit guidelines. There’s no long-term credit useage,” the underwriter told me over the phone.

Duh. Go through a blast furnace of a recession and those credit cards get stashed away with a quickness.  I started using them again once I landed my day job last January. I pay the balance in full each month and on time.

“What really came into play, though, was your debt-to-income ratio. It’s outside of our guidelines. In other words, you don’t earn enough to take on that kind of debt.”

Savage.

I’ve been without a car for a year and a half. I’m impatient as hell. Blame it on the health crisis I had three years ago: spend any length of time in the back of an ambulance followed by an inpatient stay in the hospital, and it will change your perspective and sense of time.  It sure did for me.

I feel a sense of urgency to do the things I’ve wanted to do once I had a car. I’ve had it with life standing still.  Life can and will change in a second. Seriously, if the Fates can flip me the middle finger once, they can do it again. At least they can let me have a fucking car this time around before the other shoe drops. Kidding! Sort of.

Odd girl out

I’m definitely an anomaly in my rapidly gentrifying community. People around here now think nothing of dropping $20-30 grand in cash on a car for Princess or Junior as a birthday gift. My next door neighbor bought a 2016 Prius for cash because he was “curious about what all the talk was about.”

(Dude, I could have saved you the money. It’s the strangest-looking car I’ve ever seen, and I’m not sure if that means I like it  or if it means I hate it).

I’ll admit, this recent setback is a blow to my ego. As a Generation X-er, the benchmarks for adulthood included supporting ourselves, having our own place, and buying a car on our own. I feel like I’ve somehow failed at one key aspect of this adult thing.

I called the car’s sellers, a well-heeled couple who lived nearby and explained the deal was a no-go. I’m sure the fact that someone got declined for a small car loan blew their minds, as they paid cash for the Camry when it was a year old.

I’ll be re-grouping in the coming days. Time–and a new car–waits for no one.

In Which a Nervous Car Gal Dips Her Toe Into The Water, Part 2-The Test Drive

The  2008 Toyota Camry  LE goes from snark fodder to a downright respectable choice for this car shopper.

I never thought much of Toyota Camrys. As a long-time favorite of the much older drivers in my neck of the woods, I never gave the Camry  a second glance. Plain. Boring. Stodgy. Frumpy.

And popular. The Camry is one of Toyota’s best sellers and a leading contender in the busy mid-size sedan segment, so they can’t suck that much. I mean, really.

My neighbor’s son-in-law has his 2008 Camry LE up for sale and I’m feeling my way back into the car market.

What did I have to lose? I made arrangements for a test drive.

My community is the perfect test chamber for a car: the streets serve up a combination of wide open stretches, hills, speed bumps, crappy conditions, cul-de-sacs, and even a roundabout thrown in for good measure.

While the car lurched a bit during initial acceleration (red flag #1) it had no trouble darting up the winding roads on my way to a hilltop housing tract where most of my testing would take place.

The 2.4 liter, 158 hp 4-cylinder engine handled the uphill haul well with little to no fuss.

The Camry was nimble as I worked my way up the curving road. I love cars that offer a smooth ride while being agile and  sure-footed at the same time. Good road manners do count.

While the cabin wasn’t as quiet as I had hoped, it was still bearable.

Once I reached the top of the hill, I headed for a cul-de-sac. Front wheel drive cars are prone to CV boot issues, and I wanted to rule that out from the beginning. After a few tight turns in a circle left and right, with radio off and windows down, there was nary a peep. Sweet. Onward.

The steering was tight, and this car has an excellent turning radius, something I missed from my Volvo-owning days. Braking was another story as the brakes were grabby (red flag #2).

The car had a distinctive pull to the left (red flag #3) as I drove a straight line with hands off the wheel. Low tire? Crappy alignment? A future million-dollar fix? Hard to tell without a thorough  pre-sale workup.

Vanilla interior, thy name is Camry

The interior was dutiful and bland, but holy moly, was it spacious. I could easily seat two tall adults in the back seat with plenty of head and leg room, sloping roofline be damned. The driver’s seat was a perfect fit. I had plenty of head and leg room.

The plain interior has an upside: it serves as a canvas for some personalized touches. I could easily make this car mine with some simple tweaks.

Controls in the center stack were well-placed and ridiculously easy for me to use. I popped in a Strauss CD and the sound quality was glorious.

However, visibility in this car isn’t just bad, it’s terrible. Had I not been as vigilant as I was, I easily could have sheared a fender or two while backing out of a parking stall. Rear visibility is just awful. I would need lots of road hours to get used to it.

I deeply and sincerely hope to hell subsequent Camrys have better visibility. Thankfully, backup cameras are now standard as of this year.

Aside from the car’s drawbacks, I found it to be a likable, potentially viable option for a driver like me. Of course, the thought of shouldering both repair bills and a loan payment made me sick to my stomach; over 93000 miles on the odometer, so an eventual big-ticket fix isn’t that far-fetched. Eep.

Stay tuned, as the seller and I will be arranging for a pre-sale workup and I’ll be digging into the maintenance records.

In Which a Nervous Car Gal Dips Her Toe Into The Water, Part 1

I’m not gonna lie. The thought of financing a car makes my stomach churn.

As someone who’s had the bottom fall out three times in the past ten years, there’s a reason for the sweaty palms, dry mouth, and upset stomach.

Like most Americans, I got hit hard in the recession. First with a job loss and the subsequent financial disaster (raiding my 401k so I didn’t end up on the streets. Same for my savings),and then the loss of my car when a 16 year-old totaled it while chatting on her cell phone.

A health crisis three years ago wiped me out physically and financially. To this day, I think I got through the 2013 L.A. Auto Show on sheer will. No way was this Cinderella going to miss the ball.

I rebounded in early 2014 and picked up a social media gig with a local business owner. She abruptly changed course in January 2015, shuttering her practice and leaving me jobless.

Lightening struck not once, but three times. And people wonder why the thought of financing a car makes me hyperventilate and become nauseated.

Back on my feet

Currently, I’m what lenders would consider a “good risk” for a modest car loan.

In other words, I have the “right stuff” to make the leap: income from a stable source, a stellar credit rating, and a gig that isn’t likely to disappear anytime soon.

My solid credit score will put me out of reach of predatory sub-prime lenders and their shenanigans.

The bad news? I’d qualify to finance an used car under 10K because of my modest income.  Good cars in that range are few and far between; most of them that I’ve looked at have mechanical issues or have been treated badly. A loan payment and repair bills?

GodNo.gif

I test-drove a car yesterday that is a possible strong candidate. A cash transaction would be ideal (I could flip the car a few months down the road and use the proceeds as a down payment) but not realistic. It would take years to save up; I’m not 16 anymore.

I need my life back. There are friends to visit, classes to take, appointments to tend to, and additional income opportunities to pursue.  My current method of getting to work involves playing Transit Roulette with a crumbling small city bus system that frequently runs late, or not at all.

I want to be part of a volunteer cadre of drivers for a local non-profit, giving rides to their clients as they go to job interviews, attend classes, and look for work.  I’d like to return to the city college that gave me my start as a lifelong learner, this time as an outreach and tutoring volunteer.

I want to take some time for myself and take a drive along the coast, or along the winding Ortega Highway. My best ideas come to me from behind the wheel of a car.

I really wish I could talk this over with my dad, who had a clear-headed view of life’s tougher choices. I wish he could see me as I take this significant leap.

Join me for the ride in the coming days as I check out the different financing options available to me. In the meantime, could someone pass me the saltines? I feel queasy.

 

Weekly Round-up

In which I source great content so I won’t have to write a post.

I can’t think of a better thing to do than test-drive cars I can’t afford. Ten minutes of pure escapism so wonderful I ignore the yammering salesperson next to me. Seems that a woman in VA had the same idea, except she was a little too eager to peel out of the dealership and took a few extra cars with her. Brings a whole new meaning to “I flip cars as a hobby.” (H/T Autoblog)

A Chevy dealer in Peltier, TX had 48 wheels and tires swiped from their cars this week. Nothing worse than showing up for work and seeing half your inventory up on blocks. Try explaining that shit to management. (H/T Jalopnik)

Trucksonblocks

Photo: Detective Gary King, East Texas Auto Theft Task Force

On the flip side, some lighter fare…

First up, what does your car color say about you? Mine essentially said “I’m broke as hell.” Oh, wait.That was the condition of the paint, not the color itself. If anything, feast your eyes on the excellent cars pics in the article. A little eye candy never hurt anyone.

Rumor has it that any color of BMW says, “I’m an asshole who doesn’t use their blinker,” but your didn’t hear that from me.

Bored at work? Need something to pass the time while on break, lunch or in the fifth meeting of the week? Check out this excellent Tumblr. The older the car, the more amazing it is to see their auto bud.

Holy crap…who would do that to a car?! According to reddit’s Shitty Car Mods forum, a lot of people. Comic relief during a tough week, or a tragic commentary on misplaced priorities. Your call.

Why

H/T litzergl (reddit)

And finally…

MazdaSmile

 

Close, But No Car

beggars can't be choosers when it comes to old cars

This  Elantra is pretty damn close to the one I was offered, but in much better shape.

In which my search for safety, economy and reliability come up short

I turned down a car that was offered to me.  If you’ve been hanging out in my ramshackle corner of the Internet for awhile, you’ve known how much I need to get a car.

My neighbor at the end of my street has two college-age sons. They shared the old family car when they were in high school. Now entering their second and third years of college respectively, both kids have decided to pass on car ownership for the time being. The aging Hyundai Elantra GLS has been idle for months.

The kids’ dad  offered it to me last week. I could buy it for next to nothing. “Just get it off my hands. It can’t sit in the drive because we just don’t have the room and I want it gone.”

I wish I could say it was a perfect match. Based on  what I’ve observed over the years, I knew better. They never really took care of their cars. I looked the car over. It had been washed and prepped for sale. The radio didn’t work well, and the window motors were iffy. It squeaked by smog testing earlier this year. Barely.

Service records were scarce. Understandable from a busy family with two kids and not a clue about cars.

This Beggar Needs To Be  a Chooser

Still, I need wheels. Beggars aren’t supposed to be choosers, right?

One of my friends is a tech over at the local Shell station, so I ran the car over there for a pre-sale inspection.  I hovered while he checked it out and rode shotgun while he drove it. Too many knocks, creaks, and squeals for my blood. I knew that from my short drive to the station.

The rear bearings were shot to hell to add insult to injury. I also worried that it would burst into flames just when I needed it most.

“You could go back and counter-offer him about a grand less, because that’s how much you’re looking at to get it really road-worthy.”

NOPE. I’ve been down this road before. No sooner will I sink a grand (which I don’t have in the first place) than I will have to sink yet another grand into the next crisis that pops up. I remember driving an aging car. I lived in crisis mode the last three years of that car’s life.

I can’t and won’t do it again. Call me crazy, because I don’t have a lot of options here,  but I have neither the nerve or the resources to take on another elderly car. I don’t have the tools or the space to fix it myself. I sure as hell don’t have the cash.

It was sold two days later, most likely to someone with the emotional and financial wherewithal to take on an aging car that needs serious work. More power to ’em.

For the sake of my sanity and finances, this beggar is gonna be a chooser.

 

Avoid This Parking Lot Hustle

A chump and their change are soon parted. Don’t be a chump. Avoid this parking lot hustle.

Avoid the parking lot hustle of low-cost bumper repairs.

Your car has been sporting a bruised or busted bumper for a few months now, but who has time to fix it? Or maybe you don’t want the insurance company expense, especially if the busted fender was of your doing.

Still, that bruised and busted bumper haunts you every time you see your car. After all, you don’t want to end up with a beater.

You’re walking into work or school one morning when it happens. An earnest and clean-cut guy approaches you and offers to fix your fender for cash. His services include paint-matching, bumper repair, and even taking care of any small dents.

Sweet.  He’ll work  on your car while you’re at work or in class, and you can’t beat the price. You know if you go through a body shop, you could be without a car for a week or longer.

Who needs that crap when you have a job or three and need your car to get you to and from?

Besides, it’s only a couple of hundred bucks vs. a couple thousand a body shop would charge. What’s the harm anyway?

Don’t fall for it. Not for a minute.

One of the most popular parking lot hustles involves shady folks who pose as auto body repair techs eager to separate a gullible person from their hard-earned cash. Nobody wants to be caught driving a beater, and these crooks play on that fear.

They watch for people with busted or chipped bumpers, and then they close in.

They may say they’re just starting out in the auto body business and they’ll fix your car for a cheap price as a means of getting started. They may tell you anything.

Maybe they lost their job and are doing auto body work on the side.  A sob story or five…anything to get your cash.

One such hustler had his grandmother in tow, who assured targets that her grandson  was a “good boy.” That good boy was later talking with the cops after a potential victim filed a police report.

Here’s what you do instead:

If you are approached in a parking lot with an offer for auto body work, either say “no” flat out or ask for a business card.

Tell the person thanks, you’ll be in touch; and then Google the crap out of the business listed on the card.

Cross-check them under the Better Business Bureau website. Check Google and Yelp for any reviews.

If nothing checks out, toss the card. No harm done.

If there is no business card in the first place, you just saved yourself from getting played.

If you’re feeling particularly civic-minded, you can file a police report for attempted fraud. Only do this if you have enough information for the police to follow up with.

In short: never take a stranger’s offer of cheap bumper repair.

Your work hard for your money. Don’t be so quick to part with it.

 

 

Five Things You Need To Know About CarMax

When it comes right down to it, CarMax is just like any other used car dealer

A few weeks ago, I headed out to my local CarMax to test drive a 2012 Nissan Leaf. I chose CarMax because of its low-hassle test drive policy and supposed low-pressure sales/business model.I was even thinking of buying from them when the time came. Now, not so much.  Here are a few things I found out during my visit.

Carmax, home of no-haggle pricing

 

If you place a car on hold via their website, they assume you’re going to buy it no matter what you tell them. Not a huge hassle in the long run, but I no sooner finished reserving the car online than I received a call from a “sales associate” who agreed to meet me the next day.

I emphasized to him that I was in no position to buy, just heading out there to test drive and to either add or delete the Leaf from my short list. Period. “Got it.” he said. “No worries.”

They assumed I was going to buy it anyway, as evidenced by the sales associate’s upbeat attitude and the giant “hold for sale” pricetag on the windshield, and the sales song and dance I got.

Anyway:

Their CA salespeople are on commission, so if you’re a CA shopper and are expecting low-pressure tactics, think again. While the price of the vehicle is in fact their no-haggle take-it-or-leave it price, they will still try to chase a higher commission, which can get old quickly.

Gods know the sales associate tried to talk me out of the Leaf. He tried, he really did. He cited battery life statistics that were inaccurate, downplayed the overall awesomeness of the car, and really pushed the CarMax extended warranty and service plans.

I did my homework in advance and knew he was full of shit.

All in pursuit of a higher commission, no doubt.

They will sell you on their on their MaxCare program. Hard. My opinion? Think long and carefully about this one. You’ll be limited to CarMax service facilities. Based on the local user reviews, I’d run like hell.

If you already have a reliable automotive tech lined up, stick with them.  If you don’t yet have one, get recommendations from friends or by checking on Yelp.

Don’t take CarmMax’s word for it on their “125-point inspection.” CarMax, like any other dealer, is in the sales business, not the servicing business. It’s their goal to move inventory–lots of it–quickly.

The second you sign for your car, take it to an automotive shop that is familiar with the make and model of your car, just like you would with any other used car.

You may end up having to shell out for an outside inspection, but it could save you thousands of dollars if your new-to-you car is a potential money pit. By getting the inspection done soon after buying the car, you have the opportunity to return it within the 5-day trial period.

Despite their no-haggle pricing model, Carmax is in business for the same reason other dealerships are in business: to make money.  Think twice about add-ons such as their MaxCare plan. Obtain your own outside financing or come in with cash. Have your car inspected by your own mechanic during the trial period (5 days in CA).

I’m not sure what all the hype is about since CarMax really is no different from any other used car dealer.

Do your research, know what to expect, think twice about add-ons, and you could drive away in a great car that will be your sidekick for years to come.

 

2012 Nissan Leaf: A Delightful Mutant Catches My Attention

I’d been researching used cars online for months now, but I hadn’t really narrowed down my list. It’s times like this when I really miss my dad more than I usually do.

“Look. Just ask your dad what kind of car you should get,” a friend told me. She, too, had lost her dad recently and talks with him all the time. “He’ll give you a sign. He really will.”

I no sooner said, “Dad, I’m really hitting the wall on this car thing. Too many to choose from. Could you help me out here?”

Immediately afterward I saw it. A blue Nissan Leaf, parked by itself near one of the local shops. I shit you not. The normally jammed parking strip was nearly empty, save for the car and two others.

fullshot

2012 Nissan Leaf SV sunning itself in captivity at my local CarMax. Identical to the one I saw on the street immediately after asking my dad for a little sign.

Well played, Dad.

Indeed. I’d been snubbing alt. fuel cars for the past few years. Ugly. Gutless. Too expensive. Driven by smug greenies.

My dad, on the other hand, loved alt-fuel technology, and swore up and down 25 years ago that alt. fuel engines would be the norm.

I headed to my local CarMax pronto for a no-hassle test drive, and walked away a true believer.

In which a jaded car gal eats her words

I got into the Leaf and pressed a button. It clicked, hummed and chimed itself to life. The dashboard was easy to read and provided readouts of battery power, usage, and mph, and mpg equivalent, among other things.

I was surprised at how solid this little car was. High-quality materials, controls within easy reach, and the oddest egg-shaped gear selector I’d ever seen. A push of a button puts it in “Park.” and a nudge puts it in drive.

I put the car through its paces, fully expecting it to be gutless and unenthusiastic. I was dead wrong. While it certainly won’t blow the lane markers off the highway, I was impressed with its power, finesse, and composure.

There was no engine noise, just a quiet whirring sound as the Leaf idled, and a silent, silky smooth ride while driving. I fell in love with this little mutant quickly.

I was impressed with the NHTSA safety ratings, it strong reliability record, and its overall handling.

Face

Take me to your leader…er, garage.

An EV the Rest of Us can afford

The price range for a used 2012 Nissan Leaf SV (the model I tested) hovers around the $9,000-$10,000 range. That’s a fairly steep depreciation from the MSRP of $34,000 new, so that gave me pause.

Time for a little further research.

Still, I could buy a much smaller, cheaply-made car for the price of a used Leaf, and get a lot less car for the buck, and be disappointed in the long run.

The Leaf comes with its own charging kit, and it plugs in to any 120v outlet. Overnight charging takes about 12-17 hours. Battery range varies, depending on the terrain driven, and whether or not I’d run the heat or A/C.

Range anxiety really is a thing, according to a neighbor who drives a Fiat 500e.

I think I can make that adjustment.