Auto loan process

[Not So Mild]

So I feel like my bank just screwed me on an auto loan. I'm trying to get a motorcycle pretty soon so I can enjoy the full season. I've been saving for a bit, and in two months I can have the full amount, but I want a bike now and I'm fine with paying interest for that reason. My biggest hurdle is that the state of Kansas where I live, has almost no market for sport bikes, so Colorado is my best bet. I'll have to drive 5 hours to Denver to buy a bike. I'm still shopping but I might make a quick decision and buy a bike this weekend.

I talked to my bank today. They said I can't apply for an auto loan since I don't know the exact bike I'm getting yet. Fine. So she set me up with a shopping loan with 9% interest. Minimum loan amount of $7000. I can have this paid off by Summer, so it's not terrible, but I heard that paying loans off early negatively effects your credit score, so I might hold on to this for a year. It's a high interest rate and I feel like I was taken advantage of due to my young age (22). Is there something I could have done better, or even a way to get a better rate now? Or am I just overreacting and this all seems fine?

 

[deadlyapp]

Buying a motorcycle is difficult. I bought one when I was 17 with a loan (Ninja 250 which was only about 3k) and it was not a problem at all, but it's much simpler when you buy from a dealership.

Anyways, yes you got hosed, but it's because of how you went about it. You can't get a loan when you don't already have a vehicle set aside. They can give you a pre-approval with letter, but that won't let you take a vehicle home same day, since the loan isn't actually finalized, they've only confirmed a max amount and an interest rate tier. Once you have the bike decided on, you can take all the paperwork to the bank and then they can give you an actual auto loan. Otherwise, the only thing they can do is give you an unsecured loan which will have a much higher rate typically.

Paying off your loan early won't hurt your credit score as long as you have other accounts open with a long life-span. Since you're planning on paying it off nearly immediately, as long as the interest rate isn't already rolled into the loan amount, you should be fine.

 

[jtvang125]

The bank probably did a quick pull on your credit score and figured that's what they're comfortable giving right now based on that. It's not final and the amount and rates can change once you find the bike you want.

 

[Rumpltzer]

I'm totally not following, so maybe my understanding is flawed...

OP is saying he's been saving and it sounds like he's close, but he's being impatient and wants bike now.
OP is saying that he needed to take a $7k minimum loan at 9% interest.

So, it sounds like most of that $7k minimum loan can be paid off pretty much a day (or a week, or whatever) after taking the loan. Thus, the 9% on whatever remains is not a big deal.

Is that not how it works?

 

[BoomerD]

OP, you can always have the dealership arrange credit for you through one of their lenders. The way my credit union works, if you can beat their interest rate...and prove it...they'll beat THAT rate by at least 0.1%.

 

[Not So Mild]

I'm terribly sorry, I have the attention span of a grapefruit sometimes.

So a little clarification. I made this post almost immediately after leaving the bank yesterday. The loan wasn't finalized, they were waiting final approval or something and would call me back. About an hour later, I called them and the loan was denied. I had pulled out a credit line a few years ago when in school, and money got tight so i missed a few payments. I'm kind of glad it got denied. I wrote the OP from my phone in my car so it's a little confusing.

A couple of days ago, I saw a listing for a 2015 R6 going for $8,500. I have around $6,000 in the bank right now for my bike fund, but I still need a jacket and boots, and that amount also needs to cover sales tax, property tax, and any dealer fees that may apply. I can put back about $1,500/month into that account, so getting a bike like that would only need another 2 months of savings. This specific bike isn't the "dream bike" but it's a really solid choice for me. If I can't get this specific bike, then I'm not too bummed out. I went to Commerce Bank (who I bank through) and since I'm still shopping for a bike, they couldn't do an auto loan, which I understand now, and they have a minimum loan amount of $7,000 that they can do. The loan she was trying to set me up with was for a shopping loan.

So now I have 2 options. Either I look for another bike around the $8,500 price range, and hope for financing through the dealer, or save up for a little longer and pay cash. Obviously paying cash would be really nice, but I don't want to wait until June to get on a bike. I could look for something a little older like a 2011, which might be the best option. The main reason for wanting a newer bike was so there would still be some resell value left on it when I was ready to sell in probably 4-5 years. Also having a bike with low mileage and very little mods done already are a huge plus. I'm worried about trying to get a loan through a dealer though. My credit score is only 620, and I only have very limited credit history (4 years). When I was 19, I was able to get a $12,000 loan for my current car (which is paid off now) without a cosigner, but since then I've gone through some financial issues and had a few late payments. I've been doing good for the past 18 months, but I know that's very short term to a lender. The only debts I currently have are on my credit cards because I just built a $3,000 computer and put it on the CC so I could pay cash for a bike. I'm making decent money with my current job, but I know that's not something lenders really care about.

I know I've kind of thrown out everything about me and this situation, but I guess I'm upset about the whole situation. I know a lot of it is my fault, but the main thing that gets me is how the process went yesterday. The lady that worked with me was distracted the whole time, wasn't telling me what was going on, I had to ask what she was working on when she was asking for all my information. Call me emotional or whatever, but it wasn't handled well. When I bought my car, I know I was taken advantage of due to my age, but I needed a car and was happy to get one. But now, that shouldn't be the case so much.

It's kind of up to me now on what I want to do. Any advice that would help is greatly appreciated though. As you can tell, I don't have a clue what I'm doing.

Buying a motorcycle is difficult. I bought one when I was 17 with a loan (Ninja 250 which was only about 3k) and it was not a problem at all, but it's much simpler when you buy from a dealership.

Anyways, yes you got hosed, but it's because of how you went about it. You can't get a loan when you don't already have a vehicle set aside. They can give you a pre-approval with letter, but that won't let you take a vehicle home same day, since the loan isn't actually finalized, they've only confirmed a max amount and an interest rate tier. Once you have the bike decided on, you can take all the paperwork to the bank and then they can give you an actual auto loan. Otherwise, the only thing they can do is give you an unsecured loan which will have a much higher rate typically.

Paying off your loan early won't hurt your credit score as long as you have other accounts open with a long life-span. Since you're planning on paying it off nearly immediately, as long as the interest rate isn't already rolled into the loan amount, you should be fine.

Thanks for the advice, I wish I knew this information going in. The issue with getting an auto loan like this, is that I don't want to drive to Denver, shop for a bike, have a dealer hold a bike I want, and then have to come home and apply for a loan. I wouldn't make it back up until the following week, which I don't mind taking all these trips, but I also don't own a truck to haul the bike back. I have a buddy who is willing to go with me, but I really hate wasting other people's time.

 

[AznAnarchy99]

I'm terribly sorry, I have the attention span of a grapefruit sometimes.

So a little clarification. I made this post almost immediately after leaving the bank yesterday. The loan wasn't finalized, they were waiting final approval or something and would call me back. About an hour later, I called them and the loan was denied. I had pulled out a credit line a few years ago when in school, and money got tight so i missed a few payments. I'm kind of glad it got denied. I wrote the OP from my phone in my car so it's a little confusing.

A couple of days ago, I saw a listing for a 2015 R6 going for $8,500. I have around $6,000 in the bank right now for my bike fund, but I still need a jacket and boots, and that amount also needs to cover sales tax, property tax, and any dealer fees that may apply. I can put back about $1,500/month into that account, so getting a bike like that would only need another 2 months of savings. This specific bike isn't the "dream bike" but it's a really solid choice for me. If I can't get this specific bike, then I'm not too bummed out. I went to Commerce Bank (who I bank through) and since I'm still shopping for a bike, they couldn't do an auto loan, which I understand now, and they have a minimum loan amount of $7,000 that they can do. The loan she was trying to set me up with was for a shopping loan.

So now I have 2 options. Either I look for another bike around the $8,500 price range, and hope for financing through the dealer, or save up for a little longer and pay cash. Obviously paying cash would be really nice, but I don't want to wait until June to get on a bike. I could look for something a little older like a 2011, which might be the best option. The main reason for wanting a newer bike was so there would still be some resell value left on it when I was ready to sell in probably 4-5 years. Also having a bike with low mileage and very little mods done already are a huge plus. I'm worried about trying to get a loan through a dealer though. My credit score is only 620, and I only have very limited credit history (4 years). When I was 19, I was able to get a $12,000 loan for my current car (which is paid off now) without a cosigner, but since then I've gone through some financial issues and had a few late payments. I've been doing good for the past 18 months, but I know that's very short term to a lender. The only debts I currently have are on my credit cards because I just built a $3,000 computer and put it on the CC so I could pay cash for a bike. I'm making decent money with my current job, but I know that's not something lenders really care about.

I know I've kind of thrown out everything about me and this situation, but I guess I'm upset about the whole situation. I know a lot of it is my fault, but the main thing that gets me is how the process went yesterday. The lady that worked with me was distracted the whole time, wasn't telling me what was going on, I had to ask what she was working on when she was asking for all my information. Call me emotional or whatever, but it wasn't handled well. When I bought my car, I know I was taken advantage of due to my age, but I needed a car and was happy to get one. But now, that shouldn't be the case so much.

It's kind of up to me now on what I want to do. Any advice that would help is greatly appreciated though. As you can tell, I don't have a clue what I'm doing.



Thanks for the advice, I wish I knew this information going in. The issue with getting an auto loan like this, is that I don't want to drive to Denver, shop for a bike, have a dealer hold a bike I want, and then have to come home and apply for a loan. I wouldn't make it back up until the following week, which I don't mind taking all these trips, but I also don't own a truck to haul the bike back. I have a buddy who is willing to go with me, but I really hate wasting other people's time.

They're trying to rush you to push you through the process since they can tell you don't know the details. Usually with an auto loan from your personal bank, they'll want the final invoice to the agreed upon price from the dealer sent to them, then they go for final approval, and then they'll send you a check or if they have a relationship with the dealer, they can wire direct. You really don't want to do this same day, especially since you're inexperienced cause they'll push to you some sort of terms that you wouldn't agree with.

Unless you're specifically trying to get a loan to improve your credit, I'd just go online and start hardballing dealers. "Look, I have no credit, I have $7500 in cash, I want this motorcycle, make it work or I'll move on and find someone who can". It's near the end of the month, you'll find someone who's 1-2 motorcycles away from hitting their quota for a bonus and who will make the deal for you.

 

[Not So Mild]

They're trying to rush you to push you through the process since they can tell you don't know the details.

Unless you're specifically trying to get a loan to improve your credit, I'd just go online and start hardballing dealers. "Look, I have no credit, I have $7500 in cash, I want this motorcycle, make it work or I'll move on and find someone who can". It's near the end of the month, you'll find someone who's 1-2 motorcycles away from hitting their quota for a bonus and who will make the deal for you.

That's interesting. Would something like this work over the phone, or would I need to go in and assert my dominance? My thinking was most dealers aren't going to budge much right now because it's tax season and a lot of people have a little extra income to spend on toys.

 

[Uppsala9496]

Not going to be what you want to hear but...pay off your credit cards. NOW. Wait on getting a bike. I know you want one, but with your crap credit score and young age you should be concentrating on getting that cleaned up.
Get the cards paid off, save cash and maybe get a bike next year when your credit score is better.

(can't imagine insurance will be all that cheap on the bike given your age and credit score - another factor to consider)

 

[AznAnarchy99]

That's interesting. Would something like this work over the phone, or would I need to go in and assert my dominance? My thinking was most dealers aren't going to budge much right now because it's tax season and a lot of people have a little extra income to spend on toys.

You can do it over the phone, but you need to make sure they send it to you in writing in an email. Can't tell you how many times someone has promised me a number over the phone, then have me walk in with something completely different on paper. They could screw you over on email too but at least you have it on paper to argue. They'll always start off telling you the same thing too; "Come in, test drive and we can work the numbers". Don't do this. They know that if you come in, they have you trapped and can grind you down til you're exhausted and are willing to deal. Be adamant that you know what you're looking for and you want numbers before wasting your time driving 5 hours to their dealership.

As for taxes, some people might have extra money but towards the end of the month, they just need to push vehicles.

 

[Not So Mild]

Not going to be what you want to hear but...pay off your credit cards. NOW. Wait on getting a bike. I know you want one, but with your crap credit score and young age you should be concentrating on getting that cleaned up.
Get the cards paid off, save cash and maybe get a bike next year when your credit score is better.

(can't imagine insurance will be all that cheap on the bike given your age and credit score - another factor to consider)

Yeah, I've already looked at insurance. I'm pretty much forced into a 600cc or less for that reason, even though I wouldn't want anything more for how little motorcycle experience I have now. Full coverage is around $140/month, which is similar to what my car was before I dropped it to liability.

I know paying off the CC is the smart move, but I can have all this cleaned up relatively soon. I'm honestly OK with carrying a little debt on the CC. I know you pay interest for the joy of having extra money now, and I've been carrying the same cards for a few years now, so they've raised my limits pretty high. It sounds ignorant, but the bike is more important to me right now. If getting a loan isn't an option due to it, I'll just save and pay cash for a different bike.

 

[Not So Mild]

You can do it over the phone, but you need to make sure they send it to you in writing in an email. Can't tell you how many times someone has promised me a number over the phone, then have me walk in with something completely different on paper. They could screw you over on email too but at least you have it on paper to argue. They'll always start off telling you the same thing too; "Come in, test drive and we can work the numbers". Don't do this. They know that if you come in, they have you trapped and can grind you down til you're exhausted and are willing to deal. Be adamant that you know what you're looking for and you want numbers before wasting your time driving 5 hours to their dealership.

As for taxes, some people might have extra money but towards the end of the month, they just need to push vehicles.

Yeah, I know me, and as soon as I sit on the bike, I'm going to fall in love. Getting the quote in an email is great advice, I'll remember that one. It's not a promise, but at least I can call them out on their lies and bs if they try and pull one over.

 

[deadlyapp]

In your case, you're going to have some more difficulty with your creditworthiness and something deemed as "recreational" such as a motorcycle. Lending units for cars are very flexible and can offer you a lot of different options to fit you - higher rate, longer period of borrowing, etc etc, but recreational vehicles such as motorcycles will have some more limitations.

I think your best bet is to find a few options at dealers, then go to those dealers and try to get a loan directly through them, since they're more interested in working with you than the bank is. Since the bank was offering an unsecured loan (no collateral) it's much more difficult to be approved, however at the dealer they are giving you a loan based on collateral and there is less risk. Take some cash with you and start low with putting cash down - eg put 2k down and finance 6.5k or 7.5k and if the dealer sells gear too, roll that gear into your loan to sweeten the deal for them. Make sure they don't try to screw you by including the interest in the loan amount - otherwise if you pay early, you'll get no benefit, and if you have a higher rate, then that could be significant.

As always, since you're buying a used bike, don't be scared to walk away. Yes, we're going into summer and the market is good, but we're also at the end of the financial month and quarter, and if you can get in now you might be able to get a bit more leeway.

 

[Not So Mild]

I think I'm worrying too much about the financial part of this. Right now I have 50% of the money that I need, and in another month I'll have about 80%. At that point, I can get any dealer to finance the rest for me, and if I choose to go the craigslist route, usually those are slightly cheaper. I need to focus more on finding the right bike for me. I'll enjoy any bike for this first season, but once winter hits and I'm staring at it in the garage, I'm going to hate it if it isn't the perfect bike.

 

[Rumpltzer]

So... you're saying stuff about needing a helmet and a jacket and a little more experience on a bike. How much experience do you have on a bike?

I'm asking bc I wonder if it's time for you to be dropping $8k on a bike, or maybe if it's a better idea to spend $2k to $4k on a "lesser" used bike... if this is a starter bike... that you're going to crash.

 

[Not So Mild]

So... you're saying stuff about needing a helmet and a jacket and a little more experience on a bike. How much experience do you have on a bike?

I'm asking bc I wonder if it's time for you to be dropping $8k on a bike, or maybe if it's a better idea to spend $2k to $4k on a "lesser" used bike... if this is a starter bike... that you're going to crash.

So right now I have a Chinese Honda Grom clone. It's only a 125cc bike. I already have a helmet (2 actually), but never bothered to get a jacket because the thing doesn't go on the highway. I purchased it last April as a bike to learn on. I've never rode on a motorcycle before that, not even a dirt bike. I've put about 1500 miles on the bike, which is impressive imo considering it's no highway riding and in a town of ~25k people, so not very large.

I want to make the jump to 600cc, because I don't believe anything smaller will keep me satisfied for 4+ years like I want. I feel like I've mastered the 125cc and there isn't much more to learn, in fact I'm getting careless and have stunted out the 125cc to mess around on. I know the possibility of crashing a 600cc is very real. Frame sliders will be a very early purchase just in case I can prevent too much damage on a low speed lay over. I've thought about getting a 650 instead, but I really want the power of the 600. This bike is going to be a toy, not a tool, so I want something fun that I enjoy looking at.

I've thought about this for months, have heard all sides of the argument, and am pretty dead set on a 600cc super sport.

 

[dave_the_nerd]

They're giving you the shaft because your credit score sucks. You want to borrow money, fine, but it will cost you.

You're getting plenty of "grumpy old man" advice upthread, so I don't need to reiterate. I will point out that your situation is very similar to my brother in 2003. He still refuses to admit that he shouldn't have bought the bike, because "FREEDOM!!!", but it set off a chain reaction of negative financial consequences that took years to resolve.