Credit score vs down payment

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dylphil21-1997
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Credit score vs down payment

Post by dylphil21-1997 » Wed Nov 06, 2019 10:16 am

Keeping it simple today folks!

Which one is more important??

I'm 21 years old and the scenario would either be

630 credit score and 2500 down payment (on 10-12,000 laon)

OR

690 credit score with 1500 down payment

If it helps, this is for a used auto loan.

I understand I don't have much to work with here, but time is running short and any advice is appreciated!!

runner540
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Re: CREDIT SCORE VS DOWN PAYEMENT

Post by runner540 » Wed Nov 06, 2019 10:20 am

dylphil21-1997 wrote:
Wed Nov 06, 2019 10:16 am
Keeping it simple today folks!

Which one is more important??



I'm 21 years old and the scenario would either be

630 credit score and 2500 down payment (on 10-12,000 laon)

OR

690 credit score with 1500 down payment




If it helps, this is for a used auto loan.


I understand I don't have much to work with here, but time is running short and any advice is appreciated!!
Take the $2500 and buy a cheap car for cash, and don't worry about the credit score.

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dm200
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Re: CREDIT SCORE VS DOWN PAYEMENT

Post by dm200 » Wed Nov 06, 2019 10:21 am

dylphil21-1997 wrote:
Wed Nov 06, 2019 10:16 am
Keeping it simple today folks!
Which one is more important??
I'm 21 years old and the scenario would either be
630 credit score and 2500 down payment (on 10-12,000 laon)
OR
690 credit score with 1500 down payment
If it helps, this is for a used auto loan.
I understand I don't have much to work with here, but time is running short and any advice is appreciated!!
I must be missing something, but how does (or will) an added $1,000 down payment cause a credit score to drop 60 points?

At age 21, I suspect you may have little savings or emergency fund. If that is the case, then go for the auto loan with the lowest (if any) down payment and build up BOTH your emergency fund and long term/retirement savings.

Almost all credit unions make used auto loans with little or no down payment needed. Look for a credit union loan - and be pre-approved - BEFORE going shopping for a used car.

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dylphil21-1997
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Re: CREDIT SCORE VS DOWN PAYEMENT

Post by dylphil21-1997 » Wed Nov 06, 2019 10:29 am

dm200 wrote:
Wed Nov 06, 2019 10:21 am

I must be missing something, but how does (or will) an added $1,000 down payment cause a credit score to drop 60 points?
Correct me if I'm wrong, but I'm loosely predicting that if I use 1000 to pay off some credit card debt my score will raise due to my utilization dropping substantially.

Credit union definitely seems the way to go--

aerosurfer
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Re: CREDIT SCORE VS DOWN PAYEMENT

Post by aerosurfer » Wed Nov 06, 2019 10:43 am

dm200 wrote:
Wed Nov 06, 2019 10:21 am
dylphil21-1997 wrote:
Wed Nov 06, 2019 10:16 am
Keeping it simple today folks!
Which one is more important??
I'm 21 years old and the scenario would either be
630 credit score and 2500 down payment (on 10-12,000 laon)
OR
690 credit score with 1500 down payment
If it helps, this is for a used auto loan.
I understand I don't have much to work with here, but time is running short and any advice is appreciated!!
I must be missing something, but how does (or will) an added $1,000 down payment cause a credit score to drop 60 points?

.
Probably is a high %age of his total credit utilization that swings it.

I remember years ago, my now wife had a pretty low Discover card limit, like 3k. Even though she paid it off every month, we could simulate different credit scores based on her present balance.

Once she was able to get the limits raised it made less difference

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dm200
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Re: CREDIT SCORE VS DOWN PAYEMENT

Post by dm200 » Wed Nov 06, 2019 10:47 am

dylphil21-1997 wrote:
Wed Nov 06, 2019 10:29 am
dm200 wrote:
Wed Nov 06, 2019 10:21 am
I must be missing something, but how does (or will) an added $1,000 down payment cause a credit score to drop 60 points?
Correct me if I'm wrong, but I'm loosely predicting that if I use 1000 to pay off some credit card debt my score will raise due to my utilization dropping substantially.
Credit union definitely seems the way to go--
Yes - I see that now.

Today, almost all credit cards are charging relatively high interest rates - often in the high teens and twenty plus per cent range - it is a near certainty that a low/no down payment used car loan from a credit union will have a lower interest rate than what you are paying currently on the balances of your credit card accounts.

Assuming that you need/want a car for more than $2,500 - then get a low/no down payment used car loan from a credit union AND pay the $2500 you have on your credit card balances. WIN - WIN for you and the lending credit union. LOSE - LOSE for the credit cards!

Lee_WSP
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Re: CREDIT SCORE VS DOWN PAYEMENT

Post by Lee_WSP » Wed Nov 06, 2019 11:01 am

runner540 wrote:
Wed Nov 06, 2019 10:20 am
dylphil21-1997 wrote:
Wed Nov 06, 2019 10:16 am
Keeping it simple today folks!

Which one is more important??



I'm 21 years old and the scenario would either be

630 credit score and 2500 down payment (on 10-12,000 laon)

OR

690 credit score with 1500 down payment




If it helps, this is for a used auto loan.


I understand I don't have much to work with here, but time is running short and any advice is appreciated!!
Take the $2500 and buy a cheap car for cash, and don't worry about the credit score.
Yup. And use what you would've paid in monthly loan payments to pay down your credit card.

gr7070
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Re: Credit score vs down payment

Post by gr7070 » Wed Nov 06, 2019 11:45 am

Make the decision that most positively affects your future *net worth* and ignore your credit score.

As you continue to make good decisions in that regard your credit score will rise simply because of those good decisions.

0. Live within your means - spend less than you make
1. Have an emergency fund, even if just 1 month's expenses
2. Pay yourself first. Save as much as you can afford in tax protected, retirement plans (401k, 457, 403b). Target 15+%
3. Pay off credit cards every month
4. The loan most worth of having is your home mortgage. Consumer debt is often an excuse to overspend
5. Drive an appropriately priced car, the longer you keep it the better
6. Have appropriate insurance: health, long-term disability, auto, term life once you have dependents
7. Give some, even if it's a little; including time

mhalley
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Re: Credit score vs down payment

Post by mhalley » Wed Nov 06, 2019 11:51 am

What percentage of utilization do you have now? I think getting the score above 660 would help a lot, but the money toward cc debt would be better as the interest rate on a cc is prbly going to be higher than a car loan.
This info is a little old, but might give a better idea of what to expect on rates.
According to Experian, for those with scores of 660 or less, average loan interest rates in Q3 2018 ranged from 7.52% to 14.41% for new vehicles and 10.34% to 18.98% for used cars.

These rates are much higher than the averages for those with prime or super-prime scores. Experian considers scores of 661 to 780 to be prime, and scores of 781 to 850 to be super prime. In Q3, people with scores above 660 had average interest rates of 3.68% to 4.56% for new cars and 4.34% to 5.97% for used vehicles.
https://www.creditkarma.com/auto/i/cred ... -car-loan/

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dm200
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Re: Credit score vs down payment

Post by dm200 » Wed Nov 06, 2019 12:05 pm

gr7070 wrote:
Wed Nov 06, 2019 11:45 am
Make the decision that most positively affects your future *net worth* and ignore your credit score.

As you continue to make good decisions in that regard your credit score will rise simply because of those good decisions.

0. Live within your means - spend less than you make
1. Have an emergency fund, even if just 1 month's expenses
2. Pay yourself first. Save as much as you can afford in tax protected, retirement plans (401k, 457, 403b). Target 15+%
3. Pay off credit cards every month
4. The loan most worth of having is your home mortgage. Consumer debt is often an excuse to overspend
5. Drive an appropriately priced car, the longer you keep it the better
6. Have appropriate insurance: health, long-term disability, auto, term life once you have dependents
7. Give some, even if it's a little; including time
If you generally do these things listed - then your credit score will take care of itself - and go up.

The only specific things I would investigate or monitor related to credit reports/scores is to make sure there are no errors on the reports.

Broken Man 1999
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Re: Credit score vs down payment

Post by Broken Man 1999 » Wed Nov 06, 2019 1:38 pm

dm200 wrote:
Wed Nov 06, 2019 12:05 pm
gr7070 wrote:
Wed Nov 06, 2019 11:45 am
Make the decision that most positively affects your future *net worth* and ignore your credit score.

As you continue to make good decisions in that regard your credit score will rise simply because of those good decisions.

0. Live within your means - spend less than you make
1. Have an emergency fund, even if just 1 month's expenses
2. Pay yourself first. Save as much as you can afford in tax protected, retirement plans (401k, 457, 403b). Target 15+%
3. Pay off credit cards every month
4. The loan most worth of having is your home mortgage. Consumer debt is often an excuse to overspend
5. Drive an appropriately priced car, the longer you keep it the better
6. Have appropriate insurance: health, long-term disability, auto, term life once you have dependents
7. Give some, even if it's a little; including time
If you generally do these things listed - then your credit score will take care of itself - and go up.

The only specific things I would investigate or monitor related to credit reports/scores is to make sure there are no errors on the reports.
The list is a good one.

I would add a couple of things:
1. Establish credit as an individual. Every able adult should have their own credit. Life happens.(OP has done that, I assume).
2. Be very, very careful if you have joint credit card accounts. DW and I have no issues as we have no joint credit card accounts. I did observe the financial near-ruin of a friend. Divorce can turn into a very messy, ugly, expensive event. She will be digging herself out of the mess for some time. The fewer financial entanglements one has the better, IMHO.

Sadly, too many marriages don't end in the "together for the rest of our lives" column.

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven than I shall not go. " -Mark Twain

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grabiner
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Re: CREDIT SCORE VS DOWN PAYEMENT

Post by grabiner » Wed Nov 06, 2019 9:40 pm

dylphil21-1997 wrote:
Wed Nov 06, 2019 10:29 am
dm200 wrote:
Wed Nov 06, 2019 10:21 am

I must be missing something, but how does (or will) an added $1,000 down payment cause a credit score to drop 60 points?
Correct me if I'm wrong, but I'm loosely predicting that if I use 1000 to pay off some credit card debt my score will raise due to my utilization dropping substantially.
Independent of any effect on your credit score, paying down your credit-card debt is the best investment you can make, because of the very high risk-free returns. The effect of a higher rate on an auto loan (because your bank charges more if you finance 90% rather than 80%) isn't as important, and once the credit-card debt is gone, you can use the money that was previously going to the credit-card payments to pay down your auto loan faster.
Wiki David Grabiner

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dylphil21-1997
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Re: CREDIT SCORE VS DOWN PAYEMENT

Post by dylphil21-1997 » Thu Nov 07, 2019 9:37 am

grabiner wrote:
Wed Nov 06, 2019 9:40 pm
dylphil21-1997 wrote:
Wed Nov 06, 2019 10:29 am
dm200 wrote:
Wed Nov 06, 2019 10:21 am

I must be missing something, but how does (or will) an added $1,000 down payment cause a credit score to drop 60 points?
Correct me if I'm wrong, but I'm loosely predicting that if I use 1000 to pay off some credit card debt my score will raise due to my utilization dropping substantially.
Independent of any effect on your credit score, paying down your credit-card debt is the best investment you can make, because of the very high risk-free returns. The effect of a higher rate on an auto loan (because your bank charges more if you finance 90% rather than 80%) isn't as important, and once the credit-card debt is gone, you can use the money that was previously going to the credit-card payments to pay down your auto loan faster.
Understood, my issue now is lack of time (and funds), so trying to figure out best way to do this..

dsmil
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Re: Credit score vs down payment

Post by dsmil » Thu Nov 07, 2019 10:22 am

I think you'd be better with $1k more in your auto loan rather than $1k more in credit card debt, so I'd definitely use the $1k toward the credit card. I wouldn't bank on a 60 point change based on lowered utilization, but I don't know the details.

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dm200
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Re: CREDIT SCORE VS DOWN PAYEMENT

Post by dm200 » Thu Nov 07, 2019 10:56 am

dylphil21-1997 wrote:
Thu Nov 07, 2019 9:37 am
grabiner wrote:
Wed Nov 06, 2019 9:40 pm
dylphil21-1997 wrote:
Wed Nov 06, 2019 10:29 am
dm200 wrote:
Wed Nov 06, 2019 10:21 am
I must be missing something, but how does (or will) an added $1,000 down payment cause a credit score to drop 60 points?
Correct me if I'm wrong, but I'm loosely predicting that if I use 1000 to pay off some credit card debt my score will raise due to my utilization dropping substantially.
Independent of any effect on your credit score, paying down your credit-card debt is the best investment you can make, because of the very high risk-free returns. The effect of a higher rate on an auto loan (because your bank charges more if you finance 90% rather than 80%) isn't as important, and once the credit-card debt is gone, you can use the money that was previously going to the credit-card payments to pay down your auto loan faster.
Understood, my issue now is lack of time (and funds), so trying to figure out best way to do this..
Some others have suggested some different approaches - but let me summarize what I might recommend:

1. You need a car (soon, I assume>)
2. If so, then first determine/decide an acceptable used car type and cost. Check Consumer reports for recommended cars in various price ranges. My "guess" is that you can find something for under $6,000 or so. For the next step, assume $6,000. A 36 month loan for $6,000 would have monthly payments of under $200.
3. Go to a credit union (local or online) where you qualify for membership and apply for a used car loan for $6,000 - 36 months. You can be pre-approved for a used car loan before you get the actual car and the money is disbursed.
4. After used car loan approval, go shopping for an acceptable car for $6,000 or less.
5. Buy the car, sign all of the agreements for the loan, get auto insurance (updated) - and you are on your way. Put the car payment (under $200) into your budget and schedule.
6. Decide how much you need/want for an "Emergency Fund". You already have $2,500 - is that too little, too much or just right?
7. If you have any money left - make some extra credit card payments.
8. STOP (or reduce) use of credit cards. Pay at least the minimum payment on time every month on credit cards. Track progress on reducing the credit card balances - and set a target of zero. Perhaps, you can then charge some expenses - BUT then ALWAYS pay balances in full every month.

Good Luck, best Wishes - and keep us posted on your progress - as well as other financial issues such as various insurance matters and investing/saving.

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dylphil21-1997
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Re: CREDIT SCORE VS DOWN PAYEMENT

Post by dylphil21-1997 » Thu Nov 07, 2019 11:18 am

dm200 wrote:
Thu Nov 07, 2019 10:56 am


Some others have suggested some different approaches - but let me summarize what I might recommend:

1. You need a car (soon, I assume>)
2. If so, then first determine/decide an acceptable used car type and cost. Check Consumer reports for recommended cars in various price ranges. My "guess" is that you can find something for under $6,000 or so. For the next step, assume $6,000. A 36 month loan for $6,000 would have monthly payments of under $200.
3. Go to a credit union (local or online) where you qualify for membership and apply for a used car loan for $6,000 - 36 months. You can be pre-approved for a used car loan before you get the actual car and the money is disbursed.
4. After used car loan approval, go shopping for an acceptable car for $6,000 or less.
5. Buy the car, sign all of the agreements for the loan, get auto insurance (updated) - and you are on your way. Put the car payment (under $200) into your budget and schedule.
6. Decide how much you need/want for an "Emergency Fund". You already have $2,500 - is that too little, too much or just right?
7. If you have any money left - make some extra credit card payments.
8. STOP (or reduce) use of credit cards. Pay at least the minimum payment on time every month on credit cards. Track progress on reducing the credit card balances - and set a target of zero. Perhaps, you can then charge some expenses - BUT then ALWAYS pay balances in full every month.

Good Luck, best Wishes - and keep us posted on your progress - as well as other financial issues such as various insurance matters and investing/saving.
CORRECT ME IF IM WRONG:

I'm definitely leaning toward a Hyundai Certified Pre-Owned at about $12,000
The main reason is for the 10 Year/100,000 mile warranty; as I have been known to buy used vehicles that are quite subpar.

Even though I'd be taking out a 5 year loan, I'm on schedule to receive a great raise; the issue is not how long I'd be paying the loan, its getting the loan now.

Credit score is 630 ish. If I got get a used car loan my interest will be AT LEAST 9%+ (which is less than half of my CC int rates...)

I could always refinance once my score and salary go up; but just want to make sure I'm approaching it correctly now..

So just bite the bullet and try to get pre approved for 12,000 loan? Is that even possible in my case??

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dm200
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Re: Credit score vs down payment

Post by dm200 » Thu Nov 07, 2019 11:56 am

CORRECT ME IF IM WRONG:
I'm definitely leaning toward a Hyundai Certified Pre-Owned at about $12,000
The main reason is for the 10 Year/100,000 mile warranty; as I have been known to buy used vehicles that are quite subpar.
Even though I'd be taking out a 5 year loan, I'm on schedule to receive a great raise; the issue is not how long I'd be paying the loan, its getting the loan now.
Credit score is 630 ish. If I got get a used car loan my interest will be AT LEAST 9%+ (which is less than half of my CC int rates...)
I could always refinance once my score and salary go up; but just want to make sure I'm approaching it correctly now..
So just bite the bullet and try to get pre approved for 12,000 loan? Is that even possible in my case??
Whether is is "best" FOR YOU] or not - I have no opinion. It is not unreasonable - as you cite your situation. A five year (60 month) loan is also not unreasonable either - in my opinion - AS LONG AS YOU MAKE PROGRESS ON THE CARD BALANCES!

Even if you have to pay in the 9% interest rate range for this car loan - that is OK - but if you get your debts all in order and establish a good payment record - your credit score will go up - so that the next car loan you get will have a much, much lower rate.

Be alert to the dealership getting you to pay a lot for things like added warranties, etc. JUST SAY "NO". Likewise, for the credit union loan, I would not choose GAP insurance or buy a credit union warranty. Just use the equivalent amount to add to your emergency fund.

I know nothing about Certified used cars - have no idea whether they are a good deal or not.

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Re: Credit score vs down payment

Post by grabiner » Thu Nov 07, 2019 9:42 pm

dm200 wrote:
Thu Nov 07, 2019 11:56 am
Even if you have to pay in the 9% interest rate range for this car loan - that is OK - but if you get your debts all in order and establish a good payment record - your credit score will go up - so that the next car loan you get will have a much, much lower rate.
Or you can refinance the existing loan. If you pay 9% for the first year but then have good credit and can refinance to 3% a year later, you aren't hurt as much by the first year's rate.
Wiki David Grabiner

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dm200
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Re: Credit score vs down payment

Post by dm200 » Fri Nov 08, 2019 9:37 am

grabiner wrote:
Thu Nov 07, 2019 9:42 pm
dm200 wrote:
Thu Nov 07, 2019 11:56 am
Even if you have to pay in the 9% interest rate range for this car loan - that is OK - but if you get your debts all in order and establish a good payment record - your credit score will go up - so that the next car loan you get will have a much, much lower rate.
Or you can refinance the existing loan. If you pay 9% for the first year but then have good credit and can refinance to 3% a year later, you aren't hurt as much by the first year's rate.
Yes - very good point!

mhalley
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Re: Credit score vs down payment

Post by mhalley » Fri Nov 08, 2019 5:49 pm

I would say going 12k into further debt when you have a cc balance is not wise. You should significantly decrease the price on the car you buy. Get a <5k beater, then when you get the cc payed off, and your credit score improves, get the 12k car. Get the car inspected by an independant mechanic before buying.

michaeljc70
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Re: CREDIT SCORE VS DOWN PAYEMENT

Post by michaeljc70 » Fri Nov 08, 2019 6:46 pm

dylphil21-1997 wrote:
Thu Nov 07, 2019 11:18 am
dm200 wrote:
Thu Nov 07, 2019 10:56 am


Some others have suggested some different approaches - but let me summarize what I might recommend:

1. You need a car (soon, I assume>)
2. If so, then first determine/decide an acceptable used car type and cost. Check Consumer reports for recommended cars in various price ranges. My "guess" is that you can find something for under $6,000 or so. For the next step, assume $6,000. A 36 month loan for $6,000 would have monthly payments of under $200.
3. Go to a credit union (local or online) where you qualify for membership and apply for a used car loan for $6,000 - 36 months. You can be pre-approved for a used car loan before you get the actual car and the money is disbursed.
4. After used car loan approval, go shopping for an acceptable car for $6,000 or less.
5. Buy the car, sign all of the agreements for the loan, get auto insurance (updated) - and you are on your way. Put the car payment (under $200) into your budget and schedule.
6. Decide how much you need/want for an "Emergency Fund". You already have $2,500 - is that too little, too much or just right?
7. If you have any money left - make some extra credit card payments.
8. STOP (or reduce) use of credit cards. Pay at least the minimum payment on time every month on credit cards. Track progress on reducing the credit card balances - and set a target of zero. Perhaps, you can then charge some expenses - BUT then ALWAYS pay balances in full every month.

Good Luck, best Wishes - and keep us posted on your progress - as well as other financial issues such as various insurance matters and investing/saving.
CORRECT ME IF IM WRONG:

I'm definitely leaning toward a Hyundai Certified Pre-Owned at about $12,000
The main reason is for the 10 Year/100,000 mile warranty; as I have been known to buy used vehicles that are quite subpar.

Even though I'd be taking out a 5 year loan, I'm on schedule to receive a great raise; the issue is not how long I'd be paying the loan, its getting the loan now.

Credit score is 630 ish. If I got get a used car loan my interest will be AT LEAST 9%+ (which is less than half of my CC int rates...)

I could always refinance once my score and salary go up; but just want to make sure I'm approaching it correctly now..

So just bite the bullet and try to get pre approved for 12,000 loan? Is that even possible in my case??
Just to clarify, the 10 year warranty is only on the powertrain. I believe you get a 5-year or 60,000-mile bumper-to-bumper warranty.

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dm200
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Re: Credit score vs down payment

Post by dm200 » Sat Nov 09, 2019 2:39 pm

Just to clarify, the 10 year warranty is only on the powertrain. I believe you get a 5-year or 60,000-mile bumper-to-bumper warranty.
In all the decades of my owning cars, I do not recall any of them having any kind of "powertrain" failure within ten years of the car's model year.

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Bogle7
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Powertrain failures

Post by Bogle7 » Sat Nov 09, 2019 2:47 pm

dm200 wrote:
Sat Nov 09, 2019 2:39 pm
In all the decades of my owning cars, I do not recall any of them having any kind of "powertrain" failure within ten years of the car's model year.
I have.
* 1963 Rambler American. Standard transmission failure. Twice.
* 1968 MGB. Clutch failure.

mdavis6890
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Re: Credit score vs down payment

Post by mdavis6890 » Sat Nov 09, 2019 3:09 pm

You already have credit card debt. Under no circumstances should you go get a car loan. The right play is to buy a disposable $500 car, the uglier the better (because if you have to compromise on something, better looks than mechanicals) . Use the rest of your money (less a $1000 emergency fund) to pay off whatever you can on the cards. Upgrade your car later, with cash, once the credit cards are paid off. It won't take long, and you'll feel better in the morning.

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Nate79
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Re: Credit score vs down payment

Post by Nate79 » Sat Nov 09, 2019 4:19 pm

Don't take on car debt, especially when you are broke with credit card debt. This is the definition of buying a car you can't afford.

michaeljc70
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Re: Credit score vs down payment

Post by michaeljc70 » Sat Nov 09, 2019 5:25 pm

Do you really need the car now? Can you wait until you get the raise?

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