New car loan and credit after retirement?

[rayvt]

Quote:

Originally Posted by DWPC That pretty much sums up my original question. I have called our CU and asked directly, but the rep I spoke with didn't seem to understand the issue very well.

They don't see many applications from people who don't have jobs. However, no problem, mate.

I've been retired sone 2006 and bought 2 cars in the last 2 years. Both financed thru my credit union. I could have financed with a local bank thru the car dealer with no problem, too.

All they care about is the income you state you have, AND your credit report. But mostly your credit report.

We've been loan free for years
Have you been using credit cards? Or paying cash. If you use CC's, even if you pay it off each month, then you'll have a long-standing history of excellent credit, so you report will be great.

If you haven't, better start. There are some simple ways to build a good report in a short time, but using CCs is the easiest.

[haha]

Quote:

Originally Posted by rayvt All they care about is the income you state you have, AND your credit report. But mostly your credit report.

So ryvt, were your interest and dividends income enough for the loan, or do you have pension income of annuity or other cash flow so that dividends and intersst are not the sole or een the major source of your qualifying funds?

My borrowing interest is in possibly buying a condo. But I really am not interested in buying low quality debt right now, or high yielding stocks, to goose my income. At present I would not buy a place for cash either- as I see it prices are still rather high for property here, but rates are pretty low so the payment comes in not too bad.

Ha

[DWPC]

Quote:

Originally Posted by clifp I agree with you although for me the numbers are 4.875 partially deductible mortgage vs 3-3.5% GNMA fund. Where are you earning 7-8%?

Until the economy went bust, 8% overall return wasn't too hard to achieve by including equity funds and individual stocks.

[clifp]

Quote:

Originally Posted by DWPC Until the economy went bust, 8% overall return wasn't too hard to achieve by including equity funds and individual stocks.

Well yes in the good old days I could get MLP's and such that had 8% distribution and of course even a fund like Total Stock Market had similar returns.

Sadly my time machine is broken

[ERD50]

Quote:

Originally Posted by clifp I agree with you although for me the numbers are 4.875 partially deductible mortgage vs 3-3.5% GNMA fund. Where are you earning 7-8%?

Over the long run, aren't we all expecting to earn ~ 7%?

In very rough terms, 7% return minus 3% inflation = the famous 4% SWR.

For the record, I've never had a car loan. But now that I've seen the rates listed at my CU, I just can't say that is as bad idea an idea as I thought. Maybe not a good thing, but not terrible either. I always listened to the conventional wisdom that you "don't want to borrow money on a declining asset". But what difference does it make? Borrow $X at Y% and invest the difference at Z% (BTW, why does the dollar sign come before, and the % sign after?) and what difference does it make what the loan was against? Car, house, anything?

Am I missing something?

-ERD50

[rayvt]

I think that "don't borrow money on a declining asset" implicitly assumes that the borrower requires the loan in order to buy the car. IOW, they can't really afford the car, so they need to borrow the money for it. For people in that circumstance, the comparison of "invest at X%, borrow at Y%" is meaningless----because they have no money that they can invest at X%, Y%, or Z%. You can't compare two alternatives when one of them is truthfully non-existant.

For people who have adequate assets, it is meaningful. In fact, for a cash purchase they could consider it as "borrowing" the money from themself at an interest rate equal to what that money is currently earning. So the question then becomes "should I borrow from myself at 8% or borrow from the credit union at 3.99%?"

"A man who has a million dollars is as well off as if he were rich."

[Koolau]

Quote:

Originally Posted by Life_is_Good I found the loan officer to be mostly concerned with income and not so much with assets. My saving grace is that I move money into my checking account every month from brokerage institutions. I was able to show these monthly deposits into their checking account and this qualified as meeting the income requirement - loan approved.

Related elsewhere, I got a mortgage last year. While the bank was impressed with my credit score, they didn't like my income because it was a relatively small pension and DW's smaller SS. What finally allowed us to get the mortgage was the "apparent" income generated in the past few years because I had converted traditional IRAs to Roths. Bizarre! Here, I was sitting on a pile of assets and all they wanted to know is what my tax return said I had taken as "income". The fact that I hadn't spent that income was immaterial to them. What a total crock. Still, it worked. So, to answer OPs question, it's important to show income in addition to your good credit score. Not suggesting you do what I did, 'cause I did it for other reasons.

[ERD50]

Quote:

Originally Posted by rayvt I think that "don't borrow money on a declining asset" implicitly assumes that the borrower requires the loan in order to buy the car. IOW, they can't really afford the car, so they need to borrow the money for it. For people in that circumstance, the comparison of "invest at X%, borrow at Y%" is meaningless----because they have no money that they can invest at X%, Y%, or Z%. You can't compare two alternatives when one of them is truthfully non-existant. For people who have adequate assets, it is meaningful. In fact, for a cash purchase they could consider it as "borrowing" the money from themself at an interest rate equal to what that money is currently earning. So the question then becomes "should I borrow from myself at 8% or borrow from the credit union at 3.99%?"

Thanks rayvt - I think that is a good way to distinguish the two.

-ERD50