Financing Issues

[tsukiakari]

I'm a Model 3 reservation holder (stood in line at the local gallery on reveal day morning, in central time zone) and while browsing some inventory on Tesla.com, I found one that struck my fancy and decided I'd really rather go in for an S.

My minimum requirements for purchase are AP2, Premium Upgrades, glass roof or sunroof, and any battery and drive.
My minimum requirements for leasing are AP1 and a low price. I can be happy with any Tesla with Autopilot if I'm just leasing and not fully committed.

So, the inventory car I was eyeing was approximately a new S75 (not D), glass roof, Enhanced Autopilot, and Premium Upgrades, plus paint and carbon fiber interior. After much anxiety I decided that I was ready to do it and started the work of weighing leases vs. loans. Ultimately, I decided that I wanted to buy, so I started applying for financing. I've applied at most of the banks/credit unions people suggest here as well as a few others, but I've not had any luck. The most I've been offered is $50,000 and several of them have just turned me down outright. I've applied for Tesla Leasing also, but they've told me that it'll be several days to get an answer on that and if the loan denials are any indication, it's not looking good. (Tesla Lending isn't available in my state.)

The situation is like this: I don't have a huge amount of savings to put toward a down payment, but I'm absolutely good on a monthly payment of $1,000-1,200. The problem is--according to some who have denied me--that my credit "experience" is too low, i.e., I've never taken out a loan this large before and the loans I have taken were too small and short. Additionally, the monthly payment I'm willing to go in on is easily doable for me, but it's my understanding that they're looking for 10-15% of income as monthly payment, which mine is closer to 20 or 25%. As I said, the max up-front out-of-pocket I can realistically stomach is small (10k or less), so reducing the price with a down payment is not an option.

As an aside, I also looked into taking over a lease via some of those lease swapping sites, but I'm afraid I'd run into the same situation where I'd spend the cash to get all the credit check and stuff done then end up being denied anyway.

So I know there's plenty of advice like "just save up more" or "just wait until later/wait for the 3/whatever" or "be less picky and get CPO". I don't want to compromise if I'm going to spend this much cash to begin with. In this case, I feel like I really can afford this and it's not an unreasonable risk--do I really not have any options?

 

[OilSucks]

I wouldn't worry about the lease option. Unless you aren't making anything near the cost of the car?

 

[tsukiakari]

I wouldn't worry about the lease option. Unless you aren't making anything near the cost of the car?

For reference, my annual salary is right around the price of the car.

 

[byeLT4]

I wonder if it has anything to do with it being a Tesla in general? I am having similar issues and HAVE taken out large loans on vehicles before. I thought I'd be able to get a used P85/90D easily but am having trouble getting financed as well. Early last year when I bought my Z06 I had several lenders to choose from for around the same amount I am looking to finance now. Or maybe the market has changed?

 

[chillaban]

Financing approval is not always (in fact it's rarely) about the salary or take home income. It has a lot more to do with whether or not you have previous credit/lending history that's comparable to the loan you're trying to take out. While you can probably get approved for a $30-40k starter car using credit card payment history, to get approved for larger car loans, you probably want to have had payment history for smaller car loans or student loans….

For reference, my annual salary is several multiples of the last Tesla I financed (and I could've liquidated assets to pay for quite a number of the cars) but two of the banks shot down my financing because it was almost double the loan principal of my next largest car loan.


EDIT: It also doesn't help that for the most part, Tesla is just being a middle man to helping you get car loans at Chase, TD, and other large banks. Most automotive companies' financing arms do attempt to subsidize their loans and will offer more subprime loans.

 

[Brandon332]

@Tatsumaru I completely understand how you feel, I am 23 with limited credit history and had a difficult time myself when weighing financing options. I would definitely stay with a new inventory ones, CPO's can be spotty. I have a couple of recommendations:

1) I put on the credit applications that I made income in excess of my salary. For example, in addition to my salary, I have a mini eBay business that makes me around $750 a month. I put this amount as additional income on all of my credit applications, and none asked for verification of it. It worked wonders for me, perhaps you have or can get away with saying you make some money in addition to salary.

2) I know it's not usually a popular choice, but getting someone with credit experience to co-sign for you is always an option. Might be worth looking into whether you can do this, you'd be surprised that family (at least in my case) was super willing to help, although I didn't end up needing it.

3) Don't forget the $7500 tax credit. What you could possibly do is spend a bit more on the down payment than you'd otherwise be willing (say $15,000 vs $10,000), and replenish that difference with the $7500 tax credit. I know the tax credit is ~6 months away at least, but it's still "guaranteed" money you can rely on.

4) Renting out your new Tesla. I make a lot of money on the side renting out my Tesla on the site Turo. I rent it out for $350 a day, and usually rent it at least 4 days a month. On about half the months, I've made more than the monthly payment of the car. If I had known that I could make this much money, I would have been a lot more ambitious with the down payment. If you feel comfortable renting your car out to people a couple days a month, this is definitely worth looking in to. Of the few dozen people I've had, all have been professional, usually business, trips with family etc. Such a high amount for a daily rental weeds out the irresponsible people.

5) Don't forget to get $1000 off the car price with a Tesla referral code! Using a referral code gets you $1000 off the price of the car and give free supercharging for life. Definitely worth doing, every bit helps! If you're interested, I have a code I'm looking to get used since I'm only 1 away from a cool big prize, since Tesla gives owners prizes too when others use their code. If you're interested, I also have custom Model S floormats that I have but can't use, if you end up going ahead with a purchase, maybe you'd like these too!?

 

[boaterva]

In reply to @chillaban So, paying a multi-thousand dollar mortgage for twenty years is a good thing?

 

[chillaban]

In reply to @chillaban So, paying a multi-thousand dollar mortgage for twenty years is a good thing?

I bet you'll get approved for any Tesla you want!

Too bad I'm in Silicon Valley. I heard those "house" things are nice.

 

[OilSucks]

@Tatsumaru

3) Don't forget the $7500 tax credit. What you could possibly do is spend a bit more on the down payment than you'd otherwise be willing (say $15,000 vs $10,000), and replenish that difference with the $7500 tax credit. I know the tax credit is ~6 months away at least, but it's still "guaranteed" money you can rely on.

If you are leasing that $7500 gets applied to the residual price of the car after three years. Kind of shitty but it does make the monthly payments go down.

 

[Max*]

For reference, my annual salary is right around the price of the car.

What's your DTI and your credit score?

It's been 2 years, I don't remember the details anymore. I think my credit union required a DTI of less than 30% (though that seems high...?) and a credit score of 720+ (maybe 750+).

 

[Oyinko]

The situation is like this: I don't have a huge amount of savings to put toward a down payment, but I'm absolutely good on a monthly payment of $1,000-1,200.

So I know there's plenty of advice like "just save up more" or "just wait until later/wait for the 3/whatever" or "be less picky and get CPO". I don't want to compromise if I'm going to spend this much cash to begin with. In this case, I feel like I really can afford this and it's not an unreasonable risk--do I really not have any options?

You might not like what I will say but it looks like you cannot afford yet to buy such expensive car. If you cannot put easily 10K as a down payment and that you have been turned down by several banks, you might want to re-consider the purchase.

Before buying an expensive car they are many others things to consider in order to maximize your long term financial situation. First, do you have at least 3 to 6 months in savings to face an emergency situation? Do you contribute to a retirement fund? You should have a look at this chart to help you understand what are the priorities. Imgur: The most awesome images on the Internet

Also this forum offers great financial advice: Bogleheads Investing Advice and Info

 

[tsukiakari]

What's your DTI and your credit score?

Credit score is slightly north of 800. It looks like my DTI is about 35% but I'm not sure I'm calculating that right.

 

[Max*]

You might not like what I will say but it looks like you cannot afford yet to buy such expensive car. If you cannot put easily 10K as a down payment ant that you have been turned down many time, you might want to re-consider the purchase.

Before buying an expensive car they are many others things ton consider to maximize your long term financial situation. First, do you have at least 3 to 6 months in savings to face an emergency situation? Do you contribute to a retirement fund? You should have a look at this chart to help you understand what are the priorities. Imgur: The most awesome images on the Internet

Also this forum offers great financial advice: Bogleheads Investing Advice and Info

While I agree with everything you said; we know little of the OPs circumstances and the OP didn't come here asking if he can afford it or not. He said he can afford it (to whatever level makes him comfortable), but he can't get financed.

 

[Max*]

Credit score is slightly north of 800. It looks like my DTI is about 35% but I'm not sure I'm calculating that right.

I did a quick edit on my above post, based on your numbers, it seems the DTI might be part of the problem.

It's been 2 years, and IIRC, my credit union wanted below 30%, I'm not sure how much 5% plays a role here, but that might be something to look into. It's either this or the income.

The credit score is not causing you any problems. That's well north of what most places will accept.

 

[Oyinko]

While I agree with everything you said; we know little of the OPs circumstances and the OP didn't come here asking if he can afford it or not. He said he can afford it (to whatever level makes him comfortable), but he can't get financed.

I agree that we might need more information to provide some advice but looking at some facts glanced on the thread, it looks like buying this car might be a stretch.

 

[whttiger25]

For reference, my annual salary is right around the price of the car.

Honestly, my advice in general is to never purchase a car that costs more than 50% your annual salary. JMHO. That's conservative, but purchasing a vehicle that is 100% of your salary I think is very aggressive. I think you can be aggressive if you have a substantial safety net saved up, much of it invested in retirement accounts for hte long term and much available as an emergency fund. Owning real estate for which you have an affordable mortgage payment is a huge plus as well, as this makes your long term housing cost very predictable and is an appreciating/equity building payment (as opposed to rent).

I think if you are struggling to come up with a sizeable down payment for the vehicle, I worry you are leveraging yourself too much, and you don't have the requisite savings, investments, and emergency funds to risk buying such an expensive vehicle. If that is the case, I think you should be aiming more towards that 50% car than the 100% car.

 

[Brandon332]

@Tatsumaru I completely understand how you feel, I am 23 with limited credit history and had a difficult time myself when weighing financing options. I would definitely stay with a new inventory ones, CPO's can be spotty. I have a couple of recommendations:

1) I put on the credit applications that I made income in excess of my salary. For example, in addition to my salary, I have a mini eBay business that makes me around $750 a month. I put this amount as additional income on all of my credit applications, and none asked for verification of it. It worked wonders for me, perhaps you have or can get away with saying you make some money in addition to salary.

2) I know it's not usually a popular choice, but getting someone with credit experience to co-sign for you is always an option. Might be worth looking into whether you can do this, you'd be surprised that family (at least in my case) was super willing to help, although I didn't end up needing it.

3) Don't forget the $7500 tax credit. What you could possibly do is spend a bit more on the down payment than you'd otherwise be willing (say $15,000 vs $10,000), and replenish that difference with the $7500 tax credit. I know the tax credit is ~6 months away at least, but it's still "guaranteed" money you can rely on.

4) Renting out your new Tesla. I make a lot of money on the side renting out my Tesla on the site Turo. I rent it out for $350 a day, and usually rent it at least 4 days a month. On about half the months, I've made more than the monthly payment of the car. If I had known that I could make this much money, I would have been a lot more ambitious with the down payment. If you feel comfortable renting your car out to people a couple days a month, this is definitely worth looking in to. Of the few dozen people I've had, all have been professional, usually business, trips with family etc. Such a high amount for a daily rental weeds out the irresponsible people.

5) Don't forget to get $1000 off the car price with a Tesla referral code! Using a referral code gets you $1000 off the price of the car and give free supercharging for life. Definitely worth doing, every bit helps! If you're interested, I have a code I'm looking to get used since I'm only 1 away from a cool big prize, since Tesla gives owners prizes too when others use their code. If you're interested, I also have custom Model S floormats that I have but can't use, if you end up going ahead with a purchase, maybe you'd like these too!? In any case good luck and my referral code is My Tesla Referral Code . Hopefully all works out, such an amazing car!

The OP said he can afford it, it's just the technical regulations of the banks that are prohibiting the sale to continue. So the OP is going to have to do some financial engineering to make it work, see my comments above. Claim more income, or find a creative way to put more down.

 

[tsukiakari]

@Brandon332

Your previous suggestions are good, but I've considered most of them already.
1) I won't lie on my applications (though I suppose I could include my bonus from this year as part of my income).
2) The only other person in my family who doesn't suck with money is my grandmother who is basically on her deathbed. Getting any cosigner help from her would be an extreme stretch.
3) Even if I stacked the 7,500 into my down payment, it still doesn't bring the loan amount down enough.
4) I thought about this but I don't want to rack up a bunch of up-front debt and hate myself later because Turo didn't come through for me--Turo is hit or miss where I live.
5) I've got referral codes coming out the wazoo. Thanks.

I had a similar problem with the first apartment I rented (albeit on a slightly different scale). I had no history and small-ish income, but I had the lump sum to pay for it. Finally I was able to find a place that excused my small income in favor of the large chunk of cash savings.

 

[Max*]

The OP said he can afford it, it's just the technical regulations of the banks that are prohibiting the sale to continue. So the OP is going to have to do some financial engineering to make it work, see my comments above. Claim more income, or find a creative way to put more down.

That would also reduce his DTI.

You can claim:
-Investment returns (if you have anything significant)
-Rental income
-Spousal income, if you cosign
-etc.

 

[whttiger25]

The OP said he can afford it, it's just the technical regulations of the banks that are prohibiting the sale to continue. So the OP is going to have to do some financial engineering to make it work, see my comments above. Claim more income, or find a creative way to put more down.

" Additionally, the monthly payment I'm willing to go in on is easily doable for me, but it's my understanding that they're looking for 10-15% of income as monthly payment, which mine is closer to 20 or 25%. As I said, the max up-front out-of-pocket I can realistically stomach is small (10k or less), so reducing the price with a down payment is not an option."

Can he?