r22tech said:
No, that's just not true. It used to be, but now the system recognizes that people shop for credit on cars. And just because your credit is checked, even if you get the loan and buy the car, doesn't automatically mean your score will drop. This guy just needs to be aware of his income to debt ratio: If he makes $200,000 a year and is buying a $200,000 home, a new car isn't going to mean a thing to the underwriter. However, if he makes $50,000 a year and is buying a $250,000 home, the car will have to wait until AFTER he buys the house.
I am an underwriter, I finance autos. Debt to Income ratio is valid, that is your debt that shows as active on the bureau (all minimum payments) you add the amount up, add 100 for insurance, ~15% for rent (if no mortgage shows on the bureau), and that is your ratio, most finance companies max out at 50-60% depending on your income and your credit. Also, there is payment to income ratio, which is another factor, basically it will toss out an application if someone has no debt, but only makes 1600 a month or so. Taking multiple hits for inquiries does effect your score, but there are different kinds of hits. The little pre-approvals you get in the mail do almost nothing, however shopping around for an auto DOES in fact lower your score, it isnt 5 points a hit, but it can effect your score for the worse if there is alot of inquiries, some companies dont care about the score drop, they might toss you out just for too many inquiries. Revolving credit is a big part of getting approved, you want a small balance across all cards, maxed out cards are bad, and empty cards do nothing for you, you want to show that you are capable of making monthly payments in a timely fashion. Remember: credit history gets your approval, score gets your interest rate. 525-600 credit scores should expect a 12-25% interest rate, 600-700 should expect 8-12%, 700-880 should expect 8% and down.
As far as buying a house, that wont show on the bureau until you start making payments. Buying the car will hurt your mortgage, not the other way around.
Dealerships are absolutely freaking criminals, every single one of them, I talk to hundreds of them a day, I see every single number they run and exactly how the game is played, so don't think hes a nice guy. 500 down is probably because they did run your credit, and the bank told them 500 down minimum. Alot of banks require a minimum down payment depending on your credit , your score, and your employment/residence histories. The dealership has to meet the banks criteria, however they will overcharge on practically everything just to make a buck.
Dealerships make money like this:
Sales Markup - what they pay for the car, what they sell it for.
Finance - bank approves 9% interest, congratulations mr. smith, your approved at a 12% interest rate (they make a percentage of the loan maturity split immediantly for this)
Service ( oil changes, shop fees, parts, etc.)
Trade ins - sure we'll take your 2003 mustang and pay it off for you, so you can start clean on your new car (payoff is 4800, they resell 3 days later for 17k)
They are money MACHINES, you have no idea how much money these dealerships actually make net.