We have excellent credit and substantial assets, but will only have SS as verifiable income after I retire (at 62). I was planning on keeping our car another year or two but the stories I'm hearing about consumer loans in this current market have me concerned. Will our credit score take a hit after retirement? Will we have any trouble getting a car loan? Should I advance the purchase of a new car to this year so I can finance it while still employed? We've been loan free for years, so this subject hasn't been a priority in planning. Withdrawing cash to pay for a new car would result in a heavy tax hit.
I'll skip the "used car" and "Craigslist" part of this topic.
I think a credit rating is based more on how well you've handled the debts you've been given, not how much income you have now. So ER doesn't seem to impact those. Spouse and I both have pretty high up there credit ratings because we always pay the debts.
Whether the car dealer (or whoever) wants to loan you more money is another situation, and can be easily finessed. For example our last two real estate refinancings were based on the classic debt/income ratios. Pension, CD interest, and bond/stock dividends were counted as income. Cap gains and account balances weren't considered "income". Frankly the banks were much more surprised (and a little suspicious) to learn that we didn't have any credit-card debt. It wasn't "does this guy have the cash flow to pay the mortgage" as much as "where is he hiding those consumer debts?!?"
If you don't have the interest & dividend income then there are other non-income choices. Your car-loan options include a home equity line of credit (secured by the home, not by your income), credit cards (admittedly not a very attractive choice), and a secured loan. A bank may be willing to loan you the car price if you maintain your cash asset allocation in one of their CDs.
I've said it before: if the strength of your ER rests on a single point of failure like this, then it's time to reconsider the ER planning. These issues are typically indicative of ER plans that may be undercapitalized. Rather than planning credit strategies for a new-car purchase, you'd be much better off (and sleep much better at night) with either setting aside the cash now (to someday buy a new car) or working longer to have the cash to set aside.
Or revert to the "used car" and "Craigslist" options.
I don't know about car loans, but the experience of many retirees on the board has been that rules have changed for asset based borrowing for homes.
... to that Nords reported that there was some questions about his military pension LOL.
I sure hope that was indicative of the credit crisis.
The "documentation" for our refis between 2002-2006 was laughable. No one wanted to verify anything because their compensation was related to volume, not verifications or audits. Admittedly these were handled through Navy Federal Credit Union, which probably has some experience with military pay.
The last two refis were through Territorial Savings Bank in Feb 2009, a tiny local bank that was just getting ready to IPO, and Bank of America in Nov 09. We used the same mortgage broker for both, and even she was a bit taken aback at Territorial's inquisitiveness. I not only had to cough up a 1099-R for 2008's pension but even had to produce the military pay (DFAS) statement that promised to pay my 2009 pension. That year the military retirees had been given something like a 5% COLA so I not only had to convince these green-eyeshade-wearing accountant types that the federal govt would pay its obligations but that it would even give me more money. Territorial has held & serviced the loan; we expect to stick with them for the next 30 years. Or until mortgage rates drop way below 4.5%.
Nine months later BoA was much more accommodating. "You're paying points? Why, step right this way. Pension 1099? Sure, whatever. Hey, how come this guy doesn't have any debt?!?"
So I think if you go with a large financial institution (perhaps not BofA) for a loan then you'll be fine. "Honest Cal's Clean Cars & Payday Loans"... maybe not so good.
