KEY FACTORS You Need to Know about Credit Scores and Car Loans (Former Dealer Explains)

Consumer Reports Article Mentioned in the Video:

How to Get A Low Interest Rate on a Car Loan:

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Daily News You Can Use from YAA. Today Ray and Zach are joined by Kimberly Kline! We'll discuss a recent Consumer Reports article that found consumers with good credit are being put in subprime loans, and many are paying more than they can afford, putting them at risk of default.

[incredibleshrinkingfungus]

Ray, you'll love this one. Just got back from a dealership in Lancaster PA for a car right now that's universally not being discounted. They jacked up the MSRP no explanation and no sticker saying market adjustment or dealer enhancement or the like, then they added up all the doc fees and taxes and added that to the MSRP, saying they did us a favor or "rolling them into the sales price" while still itemizing them into the final total, gave us a lease factor of .003XX equating to an 8 or 9% APR despite having a credit score of 740, never missing a car payment in 28 years, and leasing new every three years or less. Best we can figure they did was enormously pad the sales price and ran our credit at a lower credit score likely getting an enhanced kickback from the leasing company because the payment should be around ~ $580 paying full sticker with no money down but their best deal was $779! We walked!

[bimbozilla]

I had a 747 score but was told that my car FICO score was 701 with a APR rate of 9.14%
Total car 27, 762.13 down payment of 8K
First time car buyer for a 48 month loan!

I was so shocked.

[jerrylundegaard]

If a person has a prime or super prime credit score and that person agrees to an interest rate higher than the going rate for that type of credit score the person is simply not very informed.  

Every car buyer should contact their bank or credit union or an on-line lender before visiting the dealer to learn the financing they can get outside the dealership.

A key, as noted in this video, is dealer markup of the interest rate (AKA dealer reserve). This is when the F&I manager bumps the interest rate for which the customer was quoted by the financial source. This bump, of course, is big profit for the dealer.

It is important to note new car dealers do not finance vehicles. The dealer F&I manager arranges financing. While it is not an inherently bad thing to finance through a car dealer the customer must always demand, not ask, the F&I manager disclose the "buy rate" the rate which the financing source quoted for the customer.

If the F&I manager refuses the customer can be sure that F&I manager bumped the rate, usually by 2 percent or so.


In general, the credit score (as noted there are separate credit scores for auto loans) determines the interest rate while the customer's income and debt to income ratios determine the amount a lender will allow.

[geo]

I have credit score of 720 and purchased a used 2016 Camry from Toyota. I got a loan for 4.99% 60months from Toyota. Not bad but not great.

[DanielGarcia-zzeg]

When u know u have good credit and down payment, you can demand a low rate.

They need you more then u need them.

[yashasan]

Speaking to the topic of the vehicles being valued at 12, 000 and being financed at 18, 000….That $12k value for the vehicle can easily be inflated to $18k after factoring in taxes, paperwork fees from the dealer, plus factor in what sounds like a used car purchase on top of which dealers like to sell “extended warranty” plans, which even the cheapest one can be around $3k and they roll into the finance agreement and you’re easily at the 18k mark, the last used car that I purchased almost mirrors the scenario in the article exactly…. Purchased a used car with a price of $12k, after taxes and paperwork fees it bumped that price up to $15k and then dealer suckered me into spending money on a useless “extended warranty” for $3k and final total financed came up to $18k with a payment of about $357 a month for 72 months at 5.49%

[ericeandco]

Credit needs to be more straightforward. They’ve got you coming and going.

[darrell]

This was so interesting! I had no idea that credit was more of a lifestyle than just a score.

[slimjseattle]

Question for Kimberly. You talk about a "good 660" and "bad 660" credit score. Can you expand on that? I thought the purpose of assigning a numerical credit score is to make scores objectively comparable. Are you saying that someone with a "good 660" score is more loan worthy and someone with a "bad 700" score? I mean - if the credit score doesn't correspond to credit worthiness then scores are essentially worthless, right?

[invisablehvman]

Try getting a loan from a private party or a dealer not in your Bank's network or perhaps a smaller lot, not necessarily a buy here pay here lot. Large banks like Bank of American or Chase only lend for cars if it is purchased at one of their dealer networks. I bought a used pickup from a small lot a couple of hundred miles from my home. My bank said they could not lend on it, so I just took the money out of savings and paid cash. With a 800+ credit rating and checking, savings, cd's and brokerage accounts, etc at the bank they still would not lend. So depending on the available financing options the rate could vary.

[louisb]

My auto score is a 733 and was offered a 6.99% for a new car.. I asked the finance manager why didn’t I qualify for a lower rate being that my credit is a 733?? He said that was the lowest.. I walked please help me understand why I didn’t qualify for a Lower rate?

[Rottingboards]

It makes sense if you are a sleazy used car dealership and you want people to default on their loans so you get the car back to sell again and again.

[neilmartin]

horrible experience with Chase auto finance as after paying them iff tge lease they could not transfer the title

[flashgordon]

Unrelated to the video but need your advice. I BOUGHT A VAN IN FEB! A Promaster 2500 hightop! Just like bitcoin I want to make sure I sell it at the top aha. My question to you is, how long would you hold out for and what would be the best route to sell it? It is my primary source of travel. Thank you for any advice you might have.

[ShadowCaster]

While it is true that credit needs to be more straightforward, it does not remove personal accountability. People need to understand and take the time to learn how credit scores actually work because it is learnable. The value in learning is priceless. It will help with the three biggest loans we are all likely to take in life: student, auto, and home. An auto dealership determines their loan terms based upon credit mix, on time payment history, auto loan history, and any

[Jazzmin]

Your video are nice ❤ was stress asf getting bank statements and paystub for my car loan until I ended up getting it from a vendor online

[thehumancanvasco]

Do you have a video on how leases are figured out? I can't figure out what kind of witchcraft that is!

[EMNHandler]

Love the content as always. Finally joined YAA and working my way through more content. My question is how weighted is prior auto credit history?

[TheRevolutionWillBeTelevised]

Yes, but I still have some charged off loans, and a repo, but since have been working on my credit and on track to see a 700 credit score by spring. So I'd understand that different people may receive different interest rates.

[davesecx]

I have an 800 credit score and got qualified for 0.9% on a new car loan. I always go for the APR deals unless the other offer is gonna be a huge cash back instead of low APR.