Tips on Buying Cars: Car Loan Question

QUESTION: Thank you for taking my question. I was hoping to get an idea of what kind of car loan I would qualify for.

-I am 24 years old.
-I work full-time (for the past 2 1/2 years) earning $29000 gross yearly
-I live at home with my Mom and Brother, all over 18 and on the lease as liable
-My credit score is ~740
-My only history of credit is are two credit cards. I have had one for two years, the other for a year. The limit on each is $3000 and, while the balance has gone up and down, they are both at $0 and I have never missed a payment

I pre-qualified at two locations, with very different results:
1. A credit card company approved me for $19,000 and between 2.5 and 7.5% apr
2. My bank rejected me completely on the basis I do not have enough open lines of credit; they estimated if I had I would have gotten around $15,000

My questions are:
-What kind of amount and interest rate am I likely to get (purchasing a new car at a dealership) on a loan?

-If you live at home (my name is on a rental lease), does it look better to claim a share of rent (1/3, or $275 per month) or to have no rent and just be "living at home"?
Thank you again so much for your time,

ANSWER: Dear John,

Your answer is coming right up. I am on the road today driving so feel free to call me at 503 683 1233.

OK here you go... I shopped your info around to 2 other auto finance gurus closer to your area just to confirm rates in your region. We are all of one mind on this.

You are what we call a "thin file beacon" which means its basically a false beacon because you have fewer than 5 tradelines open for less than 5 years. Being a thin file used to be a bigger thing than it is today ...which is good for you.

You can borrow money for a new or late late model car (1-3 years) through a dealership subject to the following parameters:

-- Up to 100% of retain book (or MSRP)
-- Rate will be from 3.74 - 4.74 APR
-- Term will be up to 72 months
-- Payment cannot exceed 15-17% of your gross pay
-- If you buy a new car (like a Ford for example) try to find one with a big rebate on it so your LTV looks better (% of the cars invoice you are borrowing) because franchise dealers will generally try to place the loan through a captive lender i.e. Ford Motor Credit Co that tiers its rates based upon LTV as well as credit history.
-- DONOT PUT more than 10% down no matter what anyone tells you... in fact 5% is more than plenty
-- DONOT trade a car in ...its like handing the dealer a stick to beat you with ...retail it yourself on Craigs list
-- See my other advice on how to buy a car and beat the dealer ...or get as close as he will let you and still sell you the car...DONOT sit at a dealership and negotiate the deal EVER. Go there the car you like ...get someone's card and do the rest via text and email. PERIOD.

AS FAR AS whether or not to claim a portion of the rent ...the answer is that it won't matter whether you do or not because the banks are going to impute to you a rent factor of at least 350 mo whether you pay any rent or not. my advice is to tell them the truth...what the heck its only 375 right?

NOW the only thing you are doing wrong is waiting for the dealer to set up the financing ... what you need to do to be 100% smart on this deal is to go establish an account with a local credit union ..find one with the cheapest rates ...then get yourself pre-approved for a set amount before you try to make a deal. The dealer can mark up your rate when you go thru them by as much as 3 pts (but usually just 2 pts) either way it amounts to 1000's of dollars in the end.

Ask as many follow ups as you want until you are 100% happy with the answers then when you get a survey sent to you you will be able to award me all 10's plus maximum bonus points. I will hang with you through the whole process until you are an owner if you need me too my personal email is

---------- FOLLOW-UP ----------

QUESTION: Thank you so much, that was a brilliant answer. I really appreciate your willingness to take follow-ups as well, so great and generous. (You will definitely get all 10's for this and a written review!)

I went into my local Hyundai dealer and attempted to purchase a 2017 Hyundai Sonata SE (basic, not sport or hybrid; no special packages). The numbers:

MSRP: 22,950
Invoice: 21,047
Holdback: 659

Their Offer (excluding rebates): 20,810 (includes Destination fee in there)
Rebates I qualify for: 2150 total(500 Fall Sales Cash, 1250 Customer Cash, 400 recent College Grad)
Tax, Title/Liscense and Other Fees (TTF): 1750

We proposed an offer of 18,600 (excluding rebates and TTF). No trade in. We knew this offer was low and wouldn't be accepted but we wanted to start lower and work our way up. They tried to claim they were already losing $260 on the vehicle and couldn't go any lower than their offer of $20,810, which I know isn't true because of holdback, factory/manufacturer/company incentives and bonuses, etc..

So my question is, what should we expect to pay for the vehicle (before rebates and TFF)? How should we deal with their "can't go any lower, already losing money". We are on a bit of a time crunch, so we do not have days and weeks to posture and go back and forth. Any help/answers you have are sincerely appreciated.
Thank you so much again,
John (and Ellen, my wife)

Note: I sent this message to your email account as well, I wasn't sure which method you preferred.


I didn't see this updated question till just now ...Do you still need this info...I will look for your reply and can respond immediately. There are some things you need to know about how Hyundai compensates its dealers and their salespeople ... they are the kings of the back door money and the invoice could not be more meaningless