Is there any easy way to do? I am looking to buy a car with a loan to start building credit. I bring home about $350 a week with no overtime. I have no other bills besides car insurance, which I would need full coverage.
So how do I figure out how much I can borrow before talking to the bank?
Thanks, Josh
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04:41 PM
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jaskispyder Member
Posts: 21510 From: Northern MI Registered: Jun 2002
well, is this a new car? If not, you will need to budget something like $100 a month for repairs, then add in insurance and car payment. Get the quote from the agent, as insurance can vary a lot.
So... $100 + $400 + $100.... $600 a month for a car (example). Add in gas... $200.... $800 a month for a car?? So, you bring home $1400 a month, half of that will go to a car payment. Are you putting money away for savings? How much do you spend a month vs savings?
Can you wait to buy a car, until you have enough cash and buy a good used car ($8K or so)? the less you spend, the less insurance you will need.
J.
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04:52 PM
jaskispyder Member
Posts: 21510 From: Northern MI Registered: Jun 2002
from consumers report... How much can you afford to spend? Determine the costs and price you can pay You may already be dreaming of a model that has caught your eye. Or of features that will make your driving more pleasurable. But first you must face reality. The first step in buying a car should be to estimate what price range you can afford.
To do this, you need two pieces of information: Down payment How much money can you pay up front in cash, with a trade-in, or both? Monthly payment If you plan to borrow money, what is the maximum payment you can afford every month?
While it may be possible to find an auto loan that requires a low down payment, such as 5 percent, it's best to, put down as much as you can afford—preferably at least 20 percent. A higher down payment reduces the amount of money you need to borrow, which lowers your monthly payments and reduces the amount of interest you’ll pay overall.
A down payment doesn’t have to be all cash. If you already have a car, any trade-in allowance the dealer gives you for it can be credited toward your down payment. Or you can sell it yourself, which will usually get you more money than trading it in. But you may need to do it before you buy your car.
To get a ballpark figure for the monthly payment, Consumer Reports’ financial experts recommend that your total debt payment be no more than 36 percent of your gross income. Going by this rule, you can use the following steps to determine how much you can afford:
Calculate what 36 percent of your gross monthly income is. Itemize and total all your monthly payments, including your mortgage or rent, credit card bills, and other installment loans. Subtract the total of your monthly payments from the 36 percent figure.
For example, if your pretax income is $75,000, total debt payments should not exceed $27,000 a year. If your existing debt payments equal, say, $20,000 a year, you can afford to pay $7,000 annually, or $583 a month, for car payments.
By knowing your down payment and monthly payment, along with a typical interest rate and the number of years you’re willing to make car payments (the term of the loan), you can calculate the price of the vehicle that you can afford and the loan amount for which you’ll need to qualify. You can see what the interest rates are by calling your bank, credit union, or other lending institution. You can also go online to see prevailing rates at www.bankrate.com.
In addition to the vehicle price, you need to consider other costs, including:
Sales tax Registration fees Insurance premiums
Taxes and registration fees can increase your out-of-pocket cost by as much as 10 percent or more, and driving a car that’s worth more than your current one will cost more to insure. Be sure to check with your insurance agent or get insurance quotes online so you understand what you’re getting into.
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04:55 PM
rogergarrison Member
Posts: 49601 From: A Western Caribbean Island/ Columbus, Ohio Registered: Apr 99
I was always told at the very most, a car payment and all car expenses should be not any more than a weeks pay if your single. Luckliy I always buy cash. You can save a ton with that. Of course that does nothing to establish credit. Save what you think you can afford as a payment till you have enough to buy it outright for a lot less money.
[This message has been edited by rogergarrison (edited 04-11-2011).]
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04:56 PM
LitebulbwithaFiero Member
Posts: 3378 From: LaSalle, Michigan Registered: Jun 2008
It will be used.I currently save over half my check, but I could do better. My banks website says it would be less then $400 a month for a $20,000 dollar car. That sounds too affordable to me?
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04:58 PM
jaskispyder Member
Posts: 21510 From: Northern MI Registered: Jun 2002
It will be used.I currently save over half my check, but I could do better. My banks website says it would be less then $400 a month for a $20,000 dollar car. That sounds too affordable to me?
that sounds about right, but add in insurance.
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04:59 PM
rogergarrison Member
Posts: 49601 From: A Western Caribbean Island/ Columbus, Ohio Registered: Apr 99
get a prepaid card most start with 300 to 500 they hold in a saving account and that is your limit . you cant get a credit card but can get a loan for 20000 dam no wonder the world is going to heck in a handbasket
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07:14 PM
jaskispyder Member
Posts: 21510 From: Northern MI Registered: Jun 2002
get a prepaid card most start with 300 to 500 they hold in a saving account and that is your limit . you cant get a credit card but can get a loan for 20000 dam no wonder the world is going to heck in a handbasket
Already got a debit card, doesn't help credit. Reason can get a loan and not a credit card is because someone can co-sign for a loan which makes up for the lack of credit.
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09:57 PM
LitebulbwithaFiero Member
Posts: 3378 From: LaSalle, Michigan Registered: Jun 2008
The $800 figgure above is pretty close...last few cars/trucks between payment, insurance, and gas works out close...newer has better gas, but higher insurance and lower payment (longer term)...older has shorter term so higher payment, higher gas (by class of vehical), and insurance. Truck has insane gas, decent payments, slightly high insurance.
I've also found (here in Ontario anyway) that it doesnt matter what you drive, buick, firebird, F-150, Grand-Am, Fiero, Cobalt---insurance is minimum $150/mo....all the companies do is adjust coverage to get that amount and if you ask questions, then ya just get a cancellation notice by registered mail and ya dont drive (this is a mandatory-insurance area)
Originally posted by LitebulbwithaFiero: Reason can get a loan and not a credit card is because someone can co-sign for a loan which makes up for the lack of credit.
You'll find out this isn't the best way to gain credit. In fact, it doesn't really help like you think it would. I should know. Been there, got the t-shirt, yadda yadda...
The problem is, and this does vary rather widely, is that yes indeed you can co-sign with someone to purchase the vehicle, but obviously the primary co-signer (I'm guessing in this case it would be an older relative) is going to actually be affected by the credit increase (or potential decrease) more so than yourself. So instead of your credit actually increasing at a high rate you'll find out it increases very little.
In fact, myself in question, after having paid off a $11,000 car loan as a co-signer in 2005 after having paid on a car for three years (me being the one needing my parent to co-sign), I actually gained LESS credit than I did about five years ago in 2007 when I bought a car for $6,000 and was the primary signer (as in everything was based solely on me). Needless to say in the period from 2005 to 2007 I actually had a VERY hard time getting credit approval for many common things like good credit cards, and ended up having to utilize those store-specific cards (like Best Buy) to build credit. In fact, to this day I only have one real credit card.
I did have better luck though once I paid off the second car. I established enough credit that I was able to buy the house I live in now, in addition to now being able to essentially get approved for anything I'm interested in establishing credit with.
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10:26 PM
Apr 12th, 2011
Old Lar Member
Posts: 13797 From: Palm Bay, Florida Registered: Nov 1999
I'm old school.. If you can not pay off the car within a three year time frame, it is too expensive. If you take out a 72 month loan, you are upside down with the car loan from the get go.
Establishing good credit takes time. I got a BOA credit card and charged things, then paid off the balance monthly. I was in the military making no money (1970) and had to "beg" BOA to get me a card. Just don't go overboard with charging, all to easy.
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07:57 AM
jaskispyder Member
Posts: 21510 From: Northern MI Registered: Jun 2002
My first credit card was a secured card through a credit union. Had $800 in savings there, got a card with an $800 limit. Paid it off every month, and increased the limit as my savings increased. When it hit $4,000 I got a regular card with a low rate, still pay the balance off every month no matter how much it hurts. Lesson: Don't spend more than you make. There's a reason why my credit score is well over 700 (750's last time I checked). On car payments, I've only ever made payments one time, that was my first car. What a mistake. Being a slave to payments and interest and high value full insurance coverage really crimped my finances. Since then I only pay cash for cars, and if I can't afford it I don't get it. Other than a mortgage, my total debt load is zero.
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10:22 AM
jaskispyder Member
Posts: 21510 From: Northern MI Registered: Jun 2002
There is nothing wrong with buying a car with credit. IF you can afford it. Buying a Porsche on $1400 a month? That doesn't make a lot of sense, as one repair will break you. Buying a used Cobalt or Civic, that makes more sense. Get something reliable, good on gas, and cheap to fix/insure. Pay it off in 3 years and save as much as possible. After the loan is up, take the same amount of money and keep putting it away and then in 8 years or so, buy another car and if you have take out a loan, it will be for much less. Continue until you can afford larger down payments or until your income increases so you can afford to pay more.
Sometimes people need good transportation and they don't have the finances to buy with cash. Credit works, if you are smart about it. With today's interest rates, it makes sense to use your credit to buy things and save your money for investments with higher returns.
With that said, you have to be reasonable with the type of vehicle that is purchased, if you have limited income.
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10:28 AM
Lambo nut Member
Posts: 4442 From: Centralia,Missouri. USA Registered: Sep 2003
Theres a huge dealership here in Ohio. It used to be all Ford, now its everything domestic and foriegn. He sells mostly brand new cars for tiny payment. Not unusual to find a new car for $80-100 @ month. He finances them up to 9 years. Who really wants to pay 9 years of payment for a Focus. Even when its broke down and rusted to crap, your still paying on it.
take a rough guess on how much you think you can afford in payments for 6 months, and put that amount away if it is a burden - try a smaller amount if it is easy - try a larger amount and, keep that $ saved until the car is paid off, in case something should go wrong, giving you a 6 month buffer
insurance and fuel costs overlap with current costs - so are difficult for anyone but you to guess at
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04:03 PM
LitebulbwithaFiero Member
Posts: 3378 From: LaSalle, Michigan Registered: Jun 2008
I said how much of a car loan can I afford, not a car. So those saying to pay cash are just trolling.
I am looking to buy a fun car. Something to drive daily and if need be can be stored for winter or major problem.
Looking at Porsches, but will not be able to afford one. Might be able to buy one, but if something goes wrong I will be sol.
Started looking at Corvettes instead. Found a 2000 Corvette c5 for $15,000. I think I could afford it. That is how much my brother bought his mustang for when he was making less then me.
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08:45 PM
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jaskispyder Member
Posts: 21510 From: Northern MI Registered: Jun 2002
I want my dad to go with me to the bank and to the insurance place like he did with my brother, but he seems to think I need a truck more then another car.
I did my best at figuring my budget out for a month without including any over time pay, and I have $600 a month left over before however much insurance would be.
Did an online quote for insurance on the Vette and got $300 a month...
[This message has been edited by LitebulbwithaFiero (edited 04-13-2011).]
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09:56 PM
Lambo nut Member
Posts: 4442 From: Centralia,Missouri. USA Registered: Sep 2003
I said how much of a car loan can I afford, not a car. So those saying to pay cash are just trolling.
They would not be trolling, just stating a fact. If you can not walk into a place and pay cash for something you want, then you technically can not "afford" it, plain and simple.
Kevin
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11:38 PM
Apr 14th, 2011
jaskispyder Member
Posts: 21510 From: Northern MI Registered: Jun 2002
I want my dad to go with me to the bank and to the insurance place like he did with my brother, but he seems to think I need a truck more then another car.
I did my best at figuring my budget out for a month without including any over time pay, and I have $600 a month left over before however much insurance would be.
Did an online quote for insurance on the Vette and got $300 a month...
So, you would have $300 a month left over if you bought the vette? Add in the price of gas and some other expenses and you have nothing left at the end of the month. If you were my son, I would say, no.... the insurance is too high... think about it... $3600 a year just to put the car on the road, then add in gas... at least $100 a month, taxes, registration, etc... honestly, you can't afford a vette or any vehicle if you are paying that much in insurance. One new ticket and you could be paying double that for insurance. You are making $17K a year ($1400 a month). Is that Gross or Net? Are you going to college, or plan on going (not sure of your age, so I have to ask)? Do you buy clothes or food? Do you ever plan on living on your own (as I assume you are living at home because of your salary).
What expenses do you have per month, where do you want to be in 5 years? Will you have the finances to be there?
I said how much of a car loan can I afford, not a car. So those saying to pay cash are just trolling.
I am looking to buy a fun car. Something to drive daily and if need be can be stored for winter or major problem.
Looking at Porsches, but will not be able to afford one. Might be able to buy one, but if something goes wrong I will be sol.
Started looking at Corvettes instead. Found a 2000 Corvette c5 for $15,000. I think I could afford it. That is how much my brother bought his mustang for when he was making less then me.
We aren't trolling. We gave you the CORRECT answer, but you don't like it. Take your $12 an hour job and save some money for an education. Man I wish I had all the money I wasted on STUPID crap that I couldn't afford when I was 19.
Side note. If you had the cash you could get a MUCH better deal than that. I was 1 hour late to buying a 2006 vette with 60k miles and 1 owner for $12000. Guess who bought it? Another guy with cash. You can't afford the car. You can't even afford to take care of yourself. Also, man up and do this on your own. Do you really need to have your dad hold your hand through life?
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09:04 AM
avengador1 Member
Posts: 35467 From: Orlando, Florida Registered: Oct 2001
Actually, he can buy any car he wants. If he can't keep up the payments it will be repossesed. It is always best to pay cash for anything you buy. If you are paying interest, the items will cost you more than what they are worth. I personally have only financed one new car in my life, I paid cash for all the other ones I have owned. At his stage in life he should be looking for something used, cheap and reliable, that gets good gas mileage. The rest of his money should be saved or invested for the future.
We aren't trolling. We gave you the CORRECT answer, but you don't like it. Take your $12 an hour job and save some money for an education. Man I wish I had all the money I wasted on STUPID crap that I couldn't afford when I was 19.
Side note. If you had the cash you could get a MUCH better deal than that. I was 1 hour late to buying a 2006 vette with 60k miles and 1 owner for $12000. Guess who bought it? Another guy with cash. You can't afford the car. You can't even afford to take care of yourself. Also, man up and do this on your own. Do you really need to have your dad hold your hand through life?
Some lessons are best learned by experience. BUY THE PORSCHE!
Gotta cut Josh a little slack. He didn't like it when I called him out last year for having his parents pay for a 20 year old to insure his own car.
I'd bring up who's paying for college expenses but why mess with a hornet's nest?
At least it would appear Josh is going to pay for his own car insurance so it's a start on "manning up".
Stupid insurance raised there prices again. It is already bad enough that my parents have to pay it, but now all of a sudden it increased by at least 50%. They almost want $1000 every 6 months for the lowest possible liability insurance. I am 20 years old with no accidents or tickets. I would be happy to get down to $600 every 6 months, but I must be dreaming.
Hi every one i have a 2006 Cobalt ss supercharged i have owned it over 1.5 yrs i recently moved to a remote duty station ( Sugar grove WV). I really don't need it nor want it any more... I owe some thing like 14K its worth maybe 9K is their any way i can get rid of this car?? I really want a 4wd suv i have a family now i didn't when i got the car. Any ideas guys i am paying 380 a month on it and Since the cobalt is a Highly wrecked car from teens the insurance is higher..
[This message has been edited by FrugalFiero (edited 04-14-2011).]
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09:44 AM
jaskispyder Member
Posts: 21510 From: Northern MI Registered: Jun 2002
jaskispyder, you have been great, thanks for your help and any others that actually helped with the question on hand.
The budget I posted was with gas and food figured in. The only thing that I didn't subtract out was insurance. That pay is my net pay that I bring home, and I remind you that is with no overtime. I get overtime frequently but I would rather not plan on it.
I am almost able to graduate college. I only need a few more classes to graduate, but I like taking other classes and learning other stuff. I am going to a job fair tomorrow at school that a few employers I would like to work for will be attending.
Oh frugal, please do tell me who pays for my college, we will see if you really know or not.
And those that say to man up, need to read up. I am asking how much of a loan I can afford. Your answer is if you can't buy it with cash then you can't afford it. Who pays cash for a loan?
[This message has been edited by LitebulbwithaFiero (edited 04-14-2011).]
