I am impressed by you willingness to not only provide free advice, but also by that you did so quickly. Even though your advice is not what I "wanted" to hear, I appreciate the straight answer.
You are correct that my car is the one getting "tired". It recently hit 150k and is exhibiting issues more and more often and it is VERY close to needing a major maintenance (timing belt) that I just can't bring myself to invest in.
I have enjoyed being car-payment free for about a year and will be sad to give that up, but I feel it a necessary evil to sell that car before it breaks down and I HAVE to put a bunch of money into it just to make it sell-able.
While I'll be disappointed by how much "extra" is costs to go through a dealership, I guess it will simplify matters on getting rid of my current vehicle for another in terms of trading it in as a form of "down payment". I'll just have to remember that the extra money spent associated with dealer mark-up, taxes, and the hit I'll take on trade-in will all be a means to an end.
I don't need a fancy or expensive car, just something that's reliable and not totally embarrassing. I assume I'll pay 20% + in interest for the first year, so I'd like to not exceed $10-$15k MAX and preferably the lesser as to not have too absurd a payment.
Is there a science behind why a lender would rather finance a dealer car than a private party vehicle?
It seems to me that the lender would also want to get the most bang for their buck on the collateral and I assume the money comes from the same place (unless I go to a buy-here pay-here dealership).
Speaking of which, since you are in AZ, would you have a suggestion on the best dealers to work with on this kind of thing?
Thanks again! Dylan
Hi Dylan... by: Justin (Editor in Chief)
As you mentioned, you probably will be in the 20+% range (I'm guessing about 24%) and you'll need to find a dealer that works with lenders that specialize in recent bankruptcy discharges.
Just keep in mind that this car you buy can be refinanced at a later date as long as you stay on top of your credit and make all your payments on time.
I used to work for Camelback VW, Larry Miller Toyota (Larry Miller owns Prestige Financial which specializes in bankruptcy) and Darner Chrysler when I was down in the Phoenix/Mesa area, but am not too familiar with the dealers in the Scottsdale area.
The first lender that comes to mind in your situation is United Auto Credit and it wouldn't hurt to call a few dealers before driving around town to see if they work with them and/or similar lenders.
As far as buy here pay here's go, I know there is at least one DriveTime in the Phoenix area. One of the main reasons I mention them is that they report to the credit bureaus, which not all BHPH's do. This will obviously help you to rebuild.
The main reason lenders will not do a private party used car loan for someone with some credit challenges is simply the risk involved.
When they loan money through a dealer they have some recourse available to them where they don't on private party used car loans. If the customer doesn't make the first payment, then they charge the dealer back for the full loan amount.
In addition, they assume that a dealer has performed a professional inspection and made all necessary repairs to get the car in working order.
A private party car on the other hand may have hidden problems and if the car breaks down somewhere in the near future, then someone with credit issues will many times let the broken car go back to the lender. Ouch for the lender!
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