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Old 12-20-2019, 07:50 PM
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Default Denied once again for financing. Did anyone else ever have issues like this?

I'm going to be as candid as possible here because I'm essentially anonymous, so it doesnt matter, and more info might help.

I've been shopping for a pre-LP Gallardo for about a year or two now. I've been denied financing on three cars. I've been denied insurance by everyone except state farm. Here is my situation laid out:

I'm under 30.
I'm self employed and for the last 4 years had take home pay of ~$250k
720 credit score, all debt paid down and currently owe nothing on anything
Income - Liabilities results in savings rate of 92%
I have never had a car loan or a mortgage. I rent.
I'm definitely "in the system", as everything above can be easily proven with tax returns and whatnot.
Funny enough, I am regularly bombarded by various agencies wanting to give me business loans for $200k+, yet no one will approve me for this car.

All of this and I cannot get approved for anything. The cars in question: 2004 gallardo, 2006 gallardo, 2006 gallardo. All around $85k asking, putting $20k down and financing $65k. Tried penfed, local credit union, wells fargo, even a dealership (chevrolet) failed to get me approved.

I have no idea what I could do differently. They all cite the age of the car as the problem, but I've never heard of anyone else having this sort of a difficulty. Penfed cited the age of the car and lack of "car credit". I will never be able to justify putting $85k worth of cash into a car when it could be leveraged elsewhere, so I'm starting to think I'm just never going to be able to own one of these. Does anyone have experience with this or advice? For the time being I've stopped the search and decided maybe I should buy a house even if I'd rather rent, since it seems that is severely limiting what I can do with my money, but I thought I should post this anyway since maybe there is an easy solution to this.

Last edited by MindfulMoose; 12-20-2019 at 07:54 PM.
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Old 12-20-2019, 08:37 PM
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There are several things causing you to not get approved. I am going to ask you some questions and you can choose to answer or not. Knowing the answers will help me to define your exact problem. I have had two bank presidents as partners in developments who are also friends so get a lot of insider info. I have also been self employed for 35 years and had many large loans.
!. All lenders are not alike. All the ones you named are big lenders that operate under specific guidelines. You need to find lenders that loan on older specialty cars and exotics. Many lenders have policies that they will not loan on cars over 7 years old, 10 years old etc. Ask them before you apply.
2.Lack of installment credit makes you a risk since you have never shown proof that you will repay a large loan.Buying a house or getting a car loan on a new car would help establish this. When faced with higher risk more down payment can often help the lender get over this hump. 25% down on an exotic is really a very small down payment. The price of exotics can drop 25% in short order . Lenders are very aware of this. I would bet that borrowing 50K on an 85K car would be much easier.
3. Is your income net income as reported on your tax return?
4. Do you have any money deposited at the bank you are trying to borrow from. (A substantial amount) Often a difficult loan may go through when they see a substantial balance . I have several six figure accounts earning only 2% just to facilitate seven figure loans. It DOES make a difference. Bankers by nature are very conservative and will give favorable treatment to bank customers especially those with large balances. Take some of your investment money an put it in a CD at a bank that shows willingness to make a loan on an older Lambo. Leave it there a few months and make some additions. Then apply. If you go in to borrow 50K , have 25K in the bank and are putting 35K down, The bank will have a completely different view.
5. Lambos are depreciating assets. The bank knows this. Why not put 50% down and be in a never get hurt position. With 25% down , self employed and no large ticket credit history I doubt any A paper lender will finance you.(You might find a specialty B paper lender that will do it at a higher rate) Raise the down , deposit some money and find a lender that will loan on older cars. Stay away from large banks. Officers are offered very little discretion in making loan decisions. If it does not fit the box forget it. Lee
One more thing. Some banks will let you cross collateralize. You pledge other assets to offset down payment
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Last edited by Lee T; 12-20-2019 at 08:43 PM.
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Old 12-20-2019, 08:53 PM
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3. Is your income net income as reported on your tax return?
Sort of. I made the "mistake" before 2018 of trying to take all the deductions and deferrals possible. On my 2018 tax return lenders will see my actual net, take-home as $250k. Prior years were $175k and $180k even though my "real" income was much higher, I was taking a ton of deductions and doing as much as I could to defer taxes.

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4. Do you have any money deposited at the bank you are trying to borrow from. (A substantial amount) Often a difficult loan may go through when they see a substantial balance . I have several six figure accounts earning only 2% just to facilitate seven figure loans. It DOES make a difference. Bankers by nature are very conservative and will give favorable treatment to bank customers especially those with large balances. Take some of your investment money an put it in a CD at a bank that shows willingness to make a loan on an older Lambo. Leave it there a few months and make some additions. Then apply. If you go in to borrow 50K , have 25K in the bank and are putting 35K down, The bank will have a completely different view.
Funny you ask this. Just last night I learned about the Bank of America/Merrill Edge "honors" tiers and I'm now platinum honors at BOA as I do have a 6 figure account there. I actually didnt even consider going to BOA to get a loan just because of my account balance, but thats a very good idea. I was hoping I could use my business inventory to prove I own X amount of assets, but I was told that since it belongs to the business, even though I own 100%, it doesnt matter in regards to a loan. 60% of my networth is inventory. I'm going to give BOA a call. I'm not sure how I didnt consider this last night.

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Originally Posted by Lee T View Post
5. Lambos are depreciating assets. The bank knows this. Why not put 50% down and be in a never get hurt position. With 25% down , self employed and no large ticket credit history I doubt any A paper lender will finance you.(You might find a specialty B paper lender that will do it at a higher rate) Raise the down , deposit some money and find a lender that will loan on older cars. Stay away from large banks. Officers are offered very little discretion in making loan decisions. If it does not fit the box forget it. Lee
Maybe its just a thing with lenders, but no one I spoke to was able to answer my question of "How much would I have to put down in order to be approved". They required me to go through the whole process again and basically guess at down payments until it showed them an approval message, and I didnt want to keep dinging my credit. Truthfully I'm not sure I'd want to do 50%. Maybe if I was older, but 50% down on an $85k car is significant, especially considering my age and my ability to take advantage of many years of compound interest. $40k is a down payment on a good rental property around here. It just feels a bit too reckless for me to lock it up in a car, I guess.

I appreciate your insight, of course. I'm going to speak to BOA on Monday and see what happens! I could definitely temporarily transfer the balance elsewhere, too.

Last edited by MindfulMoose; 12-20-2019 at 08:58 PM.
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Old 12-20-2019, 10:29 PM
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Originally Posted by MindfulMoose View Post
.. It just feels a bit too reckless for me to lock it up in a car, I guess...
If YOU think $40k is reckless, just imagine what the bank is thinking about their $65k!

Lee is dead on. You have no record of being willing to pay off a loan. And loan officers can't tell you what will get you approved. You have to keep playing the game. Or invest the money elsewhere while getting some other loans and play later when you are more "credit worthy".
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Old 12-20-2019, 10:52 PM
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I have been in real estate finance since the 90's so I have an extensive background in banking guidelines. Lee is spot on. Lack of showing the ability to repay a somewhat significant loan is a big part, but also your down payment is very light on the purchase you are trying to make. You will most likely need to put down 35-50% to minimize the lenders risk. You will also be subject to higher interest rates, especially if you want to stretch out the loan term. Best advice to give you is either commit to a larger down payment, or wait until you are in a stronger cash position and more comfortable to do so. You are still young, you have time to get your Lambo. You are on the right path so maybe revisit this acquisition in a year or so. Best of luck to you, keep us posted if you need any advice or have any further questions.
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Old 12-20-2019, 11:11 PM
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I have been in real estate finance since the 90's so I have an extensive background in banking guidelines. Lee is spot on. Lack of showing the ability to repay a somewhat significant loan is a big part, but also your down payment is very light on the purchase you are trying to make. You will most likely need to put down 35-50% to minimize the lenders risk. You will also be subject to higher interest rates, especially if you want to stretch out the loan term. Best advice to give you is either commit to a larger down payment, or wait until you are in a stronger cash position and more comfortable to do so. You are still young, you have time to get your Lambo. You are on the right path so maybe revisit this acquisition in a year or so. Best of luck to you, keep us posted if you need any advice or have any further questions.

I was planning on doing 48 - 60 months. When you say I'll be subject to a higher interest rate, is that due to the lack of history or due to the low down payment?

I'm going to call BOA tomorrow to see what they can do, but I'm starting to think I either need to

A. Put down a large down payment or pay cash
B. Just buy a house. This may be the best option as it will build my installment loan history. Eventually I'll need this kind of history. Its just frustrating delaying the purchase of a car that I can afford because I cant get anyone to approve me for the loan.

Its funny, I actually thought doing ~25% down was above average for a car loan, but it seems from these responses that its too low. Probably just due to the credit history thing. I'll have to see what my tax liability looks like this year before I can really commit to tying up 40k in a car instead of something more productive. I kind of went into this assuming if all of the barely-20 year olds with youtube channels could land their 144 month loans, I'd have no problem getting a less risky loan. Definitely didnt expect this result.

I appreciate the insight, guys. Very helpful

Last edited by MindfulMoose; 12-20-2019 at 11:15 PM.
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Old 12-20-2019, 11:24 PM
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25% is a great downpayment on a new or newer car. It is very light on a 12-15yr old Lambo. That is honestly probably your biggest hurdle, lack of being able to show repayment on a larger loan is also a strong factor. What about getting a $50-60k car (R8, Porsche Turbo etc) enjoy that for a year, show the ability to pay and then move on to the Lambo? Being in Real Estate for almost 25yrs leads me to suggest that direction. But when I was your age I also got the nice car before the houses.
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Old 12-20-2019, 11:40 PM
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25% is a great downpayment on a new or newer car. It is very light on a 12-15yr old Lambo. That is honestly probably your biggest hurdle, lack of being able to show repayment on a larger loan is also a strong factor. What about getting a $50-60k car (R8, Porsche Turbo etc) enjoy that for a year, show the ability to pay and then move on to the Lambo? Being in Real Estate for almost 25yrs leads me to suggest that direction. But when I was your age I also got the nice car before the houses.
That was also a thought that I had. I could just get a cheaper car and move up after a couple of years. I cant believe how much some cars have come down in price over the last couple of years. R8s and Ferrari 360s are in the 60s now, GTRs can be found for 40k. My head almost exploded when I realized DB9's and Granturismos are ~$25k now for a good example. Crazy.

I jumped to the house idea because I've been planning to get into real estate in 2020 to diversify my income in case anything goes wrong with my business. The big drawback is that my business is very cash intensive. Sometimes my networth will be 75% business inventory and that makes me nervous, so large down payments are always something that I have to plan very carefully for. I have cashflow, just not tons of liquid cash. Especially near the end of the year with taxes and large purchases before chinese new year things can get tight.

I've got a few things to think about, it seems.
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Old 12-21-2019, 10:03 PM
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I was taking a ton of deductions and doing as much as I could to defer taxes.
To clarify, you weren’t trying to defer, you were trying to avoid.

Anyway, the answer has been stated, but I’ll reiterate and clarify in case anyone reads this thread and doesn’t want to read all the replies.

You’re getting denied for one reason, in two parts. Mainly, bank sees you as high risk because you have no credit depth. To add, you’re applying to a bank with no relationship so without that, you’re giving them no reason to take a chance on you.

Your choices are very simple:
1) apply with BofA, and when you put a loan amount, they won’t straight deny you, they will let you know up to what amount you are approved. Keep in mind with BofA, be sure whether or not you are buying from a dealer or private party. If you apply for one, and want the other, you’ll have to reapply.

2) Apply for a loan through the dealer you want to buy from. They deal with these banks every day and have the most leverage. They’ll get you Quite a bit more than you can get on your own.

25% down is plenty, just might not get you there with no depth. You’ll see after you go through both options. Keep in mind, the cars have close to bottomed out, so if you have to put a hefty down payment, you can sell the car when you need to for a minimal loss and get your money out pretty easily.

Good luck, we’ve all been there.

Oh, by the way..if you’re avoiding going through the dealer because you’re worried they’ll give you a Higher rate, just take it; you can refinance in 6 months.
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Last edited by Jr Mint; 12-21-2019 at 10:09 PM.
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Old 12-22-2019, 06:42 AM
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This is a good thread for others needing a loan. The advice here is brilliant.
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