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What would the difficulties I face be with moving into a car of this cost when I haven't had a car close in cost prior?

It isn't an issue of Salary, or credit, both are high enough to easily cover the car cost, but my worry is from the banks perspective seeing as I have never had a car that costly in comparison to what I had before, they may expect a ton of money down, or maybe won't approve it at all?

Am I right in these thoughts? I plan to trade my current car in, which is valued at around 20k and fully paid off and put 5 - 10k down. It's not that I can't put more down, but it seems like a waste to me.

Anyway, any advice on this would be amazing as it honestly doesn't seem to exist.

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When you apply for a car loan, the bank's main consideration is whether or not they believe you can afford the loan (based on your income and other expenses), and assuming you can afford it, whether or not they believe you will make the payments (based on your credit score and history). This is true regardless of price; the banks use similar types of algorithms if you are purchasing a car for $2k or $200k.

Just FYI, this is anecdotal at best, but most people I know that have new expensive cars usually lease them (e.g. a 1-2 year lease on the latest Ferrari). Those I know that buy exotic cars typically buy them used since 3 year old models are significantly cheaper except for the rarest limited production cars.

You mentioned that you plan to put around $25-30K down, and I want to question your statement about that:

It's not that I can't put more down, but it seems like a waste to me.

Why does putting more down seem like a waste? The only absolute reason I can think of not to put more down is if you are offered 0% financing on the car. (Which probably won't happen on an expensive vehicle.) Perhaps you can put the money into an investment that does better than the interest rate you'll pay, but there is likely an element of risk to doing that. So, see what your interest rate will be, and if it's more than you can make on that money with moderately low risk, I'd consider maximizing the down payment, perhaps even being prepared to pay for the car outright.

  • Great question and you would be exactly right in your assumption. I just look at it in terms of having the extra money that I could put down as additional funds for other things just seems better when it gets to a certain point. It doesn't make that big of an impact over the course of the loan unless you're putting down even larger amounts. But if it's only an extra 5k, or 10k, I don't see the value over just holding onto it. Thanks for the info/advice though, much appreciated. – dbrree Apr 1 '18 at 15:16
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Buying a car is very different from buying a house in this regard. Unless you were buying the house with the mortgage written by the seller, there is another party involved, the bank.

Of course, there still a bank involved when you buy the car, but the dealer is most likely the one who takes your application, it’s not as if you visit the dealer and make a separate trip to a bank. As a comment notes, this doesn't have to be the case. I only say this as a high end car dealer is going to have a relationship with a financial company. It’s for this reason that I would suggest that you sit down and speak to the car dealer. I personally have never bought a car this expensive, but I am certain that you will not be the first person to ask the dealer this type of question.

As with any loan, your credit score and history are going to be a factor. As will the percentage of your income that will be going to service this loan. Similar to how a mortgage payment along with other home cost should not exceed 28% of your monthly income, the car payment should not exceed a certain percent. I don’t know what that percent is.

Welcome to money.SE, other members will post an answer trying to talk you out of the purchase all together. Me, I just want to try to answer your question directly, I will leave the lecturing for them.

  • Appreciate the feedback and thanks for the welcome. Before I accept this as an answer, I'll wait for some additional feedback that otherwise may not be provided. – dbrree Mar 31 '18 at 14:46
  • Exactly! Always good practice to give it Time. – JTP - Apologise to Monica Mar 31 '18 at 14:47
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    the dealer is the one who takes your application it’s not as if you visit the dealer and make a separate trip to a bank Only if you do it this way. You absolutely can finance a car through your bank and it is sometimes better to do it this way. – Matt Mar 31 '18 at 15:36
  • I edited a bit, Matt. I shouldn't have spoken as if it were an absolute. – JTP - Apologise to Monica Mar 31 '18 at 15:54

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