Automotive

Signed contract but 0% financing turned down due to no income but with excellent credit score. Contract still binding?

  • Last Updated:
  • Aug 23rd, 2021 8:51 pm
Deal Fanatic
Apr 5, 2016
5979 posts
4426 upvotes
Calgary/Vancouver
StatsGuy wrote: They still need to declare more income even if mortgage stress test is relaxed
Depends on what they change. If they explicitly allow the use of retained earnings then you don't need to take out income.
Deal Addict
Nov 27, 2013
1617 posts
2298 upvotes
tim-x wrote: The cash discount is rarely worth it if it's even being offered at all. 0% on 6 years on $40k is going to be worth a hell of a lot more than a $2000 cash discount. Not to mention, there often isn't a cash discount anymore.
For a 40k they would offer more than 2k cash discount. More along the lines of 3-4k

I've never seen a case where the 0% financing was worth it. It's a manufacturer gimmick for people who can't math.
Deal Addict
Nov 8, 2005
3202 posts
2694 upvotes
RaphaelG041 wrote: For a 40k they would offer more than 2k cash discount. More along the lines of 3-4k

I've never seen a case where the 0% financing was worth it. It's a manufacturer gimmick for people who can't math.
Please find me an example of a manufacturer offering 0% rebate and a cash discount. Rarely is the cash discount ever worth it.

Even with a 3-4k cash discount, a 40k loan at 0% for 60 months comes out ahead of your cash discount example.
Deal Addict
Nov 27, 2013
1617 posts
2298 upvotes
tim-x wrote: Please find me an example of a manufacturer offering 0% rebate and a cash discount. Rarely is the cash discount ever worth it.

Even with a 3-4k cash discount, a 40k loan at 0% for 60 months comes out ahead of your cash discount example.

Sure.

Quicl Google search Nissan had their Pathfinder platinum 56k msrp had either 0% financing or 7k cash discount.

If you get a loan 72 months at 4% that's $7,081 in interests. Pretty even.

But here's the thing. you buy the car today, and 12 months from now, you have an accident and it's totalled. Or you need to trade in the car for a new one. Or you get a nice bonus from work and pay off the balance

With the 0% financing you owe $45,889. But if you got the cash discount instead, you would owe 40,998 .

5,000 bucks more in your pocket .


If you keep the car for 7 years you end up even but who keeps their cars this long? Not the majority of people for sure.
Why gamble?
Last edited by RaphaelG041 on Aug 22nd, 2021 5:01 pm, edited 1 time in total.
Deal Addict
Jun 15, 2021
1233 posts
1141 upvotes
RaphaelG041 wrote: Why would you want to finance a car if you have no income
How do you know he doesn't have a mil in savings and stocks? And a house paid for?

Why work anymore if you managed to build a nest egg so big? I'm in the same situation by the time I reach 40.
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Deal Addict
Nov 27, 2013
1617 posts
2298 upvotes
MrBungal wrote: How do you know he doesn't have a mil in savings and stocks? And a house paid for?

Why work anymore if you managed to build a nest egg so big? I'm in the same situation by the time I reach 40.
Then you could show income from your investments. You wouldn't have zero income.
Deal Addict
Nov 8, 2005
3202 posts
2694 upvotes
RaphaelG041 wrote: Sure.

Quicl Google search Nissan had their Pathfinder platinum 56k msrp had either 0% financing or 7k cash discount.

If you get a loan 72 months at 4% that's $7,081 in interests. Pretty even.

But here's the thing. you buy the car today, and 12 months from now, you have an accident and it's totalled. Or you need to trade in the car for a new one. Or you get a nice bonus from work and pay off the balance

With the 0% financing you owe $45,889. But if you got the cash discount instead, you would owe 40,998 .

5,000 bucks more in your pocket .


If you keep the car for 7 years you end up even but who keeps their cars this long? Not the majority of people for sure.
Why gamble?
Sorry I do not see that on the Nissan website. I'm assuming that it was for last year's model and that has since passed. I also do not see that amount of cash being offered very often. It's more in the range of 2-4k. But even in your example, I will make much more than $7500 over 6 years in the market with MSRP+ tax in the market, especially in a TFSA. It comes down to financial discipline.

My point is that manufacturers often have 0% or very low financing rate promotions, and cash discounts are not as common, and often when they are offered, they are not as good of a deal as you think.
Deal Addict
Jun 15, 2021
1233 posts
1141 upvotes
RaphaelG041 wrote: Then you could show income from your investments. You wouldn't have zero income.
You would if you would have stocks with no dividends.

Basically it's networth vs income. So you can have 0 income but very high networth. But not sure how some banks might see that since I never tried it.
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Deal Addict
Nov 27, 2013
1617 posts
2298 upvotes
tim-x wrote: Sorry I do not see that on the Nissan website. I'm assuming that it was for last year's model and that has since passed. I also do not see that amount of cash being offered very often. It's more in the range of 2-4k. But even in your example, I will make much more than $7500 over 6 years in the market with MSRP+ tax in the market, especially in a TFSA. It comes down to financial discipline.

My point is that manufacturers often have 0% or very low financing rate promotions, and cash discounts are not as common, and often when they are offered, they are not as good of a deal as you think.
Nissan Cash Buyer Program. Manufacturer Offers. $7,000 cash back. Offer only valid 01/7/2021 through 03/8/2021

Current offers:

Mitsubishi $3k cash discount or 0% on RVR with msrp $25k

Not going to go thru every mfgr offers right now but they are still here and the are very common. Almost Every time you see 0% there is a cash discount.

Don't prepay interest, Skip the 0% gimmick and finance with the bank that has best rate or even better with a heloc if you can.
[OP]
Jr. Member
Oct 29, 2011
149 posts
16 upvotes
Ontario
Great discussion guys!
There are no right or wrong answers. Just way too many variables. In my case, i needed to upgrade my vehicle and the dealer is offering 0% financing and a car, of course i will take the car and your money!
There are arguments to take the money for instant discount or take the financing and grow the money you're given. The solution is not black and white. Investing the money is risky and no guarantees but there's definitely potential.
But what bugs me is the reason why i was declined. Was it really because of no income or the dealer knew i had the ability to pay cash and tried to steer me in that direction?
I think MrBungal nailed it when he said "networth vs income" and how lenders calculate their risks.
To me a credit score indicates ones ability or probability to repay the loan, what difference does it make how it is repaid. Income is only one source. Other sources can include investments or even another loan.
I guess i will never know.
Deal Fanatic
Mar 21, 2010
6591 posts
3764 upvotes
Toronto
whizzard wrote: To me a credit score indicates ones ability or probability to repay the loan, what difference does it make how it is repaid. Income is only one source. Other sources can include investments or even another loan.
What I've been told is that income is seen as more reliable than other sources. If you have a lot of money in the bank, you could blow it all at the casino tomorrow. Your investments could all be in a company that goes bankrupt. Or you could just move it to a bank in another country and skip town. But if you have regular permanent full-time employment and have had it for some time, it's relatively unlikely that you will get fired with no severance/EI or that you'll quit and not get another job. You are more tied down and therefore seen as less risky.
Deal Addict
Sep 13, 2012
2452 posts
1963 upvotes
Vaughan, ON
whizzard wrote: Great discussion guys!
There are no right or wrong answers. Just way too many variables. In my case, i needed to upgrade my vehicle and the dealer is offering 0% financing and a car, of course i will take the car and your money!
There are arguments to take the money for instant discount or take the financing and grow the money you're given. The solution is not black and white. Investing the money is risky and no guarantees but there's definitely potential.
But what bugs me is the reason why i was declined. Was it really because of no income or the dealer knew i had the ability to pay cash and tried to steer me in that direction?
I think MrBungal nailed it when he said "networth vs income" and how lenders calculate their risks.
To me a credit score indicates ones ability or probability to repay the loan, what difference does it make how it is repaid. Income is only one source. Other sources can include investments or even another loan.
I guess i will never know.
Credit score essentially considers the risk you pose to the lender which I would argue is different than your ability to service your debt.

A friend that works at TD explained recently what’s not being discussed much publicly right now is the big banks tightening up their criteria for extending credit which could pose a significant issue once Covid related support winds down. Whether a business or personal account applies for the product and whether they see CERB was collected or CEWS the focus shifts to limiting exposure in the short term and denying applications in most cases.
Newbie
Dec 3, 2009
86 posts
117 upvotes
Ottawa-ish
A credit score is only part of the story.

A lender looks at the ability to repay, credit history and income are usually the key factors.

I've seen people with great credit scores, they have had a 1K credit card that they never used over 10+ years so they have an 800+ score but no good income.

Your situation is your own but the score just isn't usually enough.
[OP]
Jr. Member
Oct 29, 2011
149 posts
16 upvotes
Ontario
Manatus wrote: What I've been told is that income is seen as more reliable than other sources. If you have a lot of money in the bank, you could blow it all at the casino tomorrow. Your investments could all be in a company that goes bankrupt. Or you could just move it to a bank in another country and skip town. But if you have regular permanent full-time employment and have had it for some time, it's relatively unlikely that you will get fired with no severance/EI or that you'll quit and not get another job. You are more tied down and therefore seen as less risky.
Fair enough but everything you said can apply to people with or without income. A person can spend their savings before paying their bills or loans. A person with income who has a high monthly budget really can't afford the car in the first place. Often you see OAC, On Approved Credit, never On Approved Income.
Now I am curious. Not that i would try but what if i made up the income? Would i have been approved then? Do dealers and banks verify income? Do they actually call employer to ask how long someone has worked there, if they are full time or part time, and what their hour wage is? Do they actually verify income as they do credit ratings? Is there a minimum income requirement? To purchase a $40k vehicle, is $30k/yr salary enough? Making $50k/yr with annual budget of $45k qualify? Or is income just a number written on the application?
I fail to understand but it is what it is.
[OP]
Jr. Member
Oct 29, 2011
149 posts
16 upvotes
Ontario
100Pacer wrote: Credit score essentially considers the risk you pose to the lender which I would argue is different than your ability to service your debt.

A friend that works at TD explained recently what’s not being discussed much publicly right now is the big banks tightening up their criteria for extending credit which could pose a significant issue once Covid related support winds down. Whether a business or personal account applies for the product and whether they see CERB was collected or CEWS the focus shifts to limiting exposure in the short term and denying applications in most cases.
Appreciate your insight.
[OP]
Jr. Member
Oct 29, 2011
149 posts
16 upvotes
Ontario
ottawalurker wrote: A credit score is only part of the story.

A lender looks at the ability to repay, credit history and income are usually the key factors.

I've seen people with great credit scores, they have had a 1K credit card that they never used over 10+ years so they have an 800+ score but no good income.

Your situation is your own but the score just isn't usually enough.
I partially agree with your explanation. Ability to repay, to me is the credit score. Credit history is all there when they look and see all the activities. The only factor i am missing at the moment is income. And i have not worked lately is due to covid.
I suppose that is not enough.
C'est la vie.
Deal Fanatic
Sep 1, 2004
9651 posts
9184 upvotes
bomber17 wrote: That's why I'm interested in Conservative's promise to fix the stress test for self employed people. Hopefully this will help self employed people compete better for housing and also help promote more people to go self employed.
So you think to fix an unaffordable overheated market is to let more people approved for mortgages?
Deal Fanatic
Apr 5, 2016
5979 posts
4426 upvotes
Calgary/Vancouver
Xtrema wrote: So you think to fix an unaffordable overheated market is to let more people approved for mortgages?
No but at least it gives a chance for self employed people to compete instead of being alienated. The only way to solve our housing crisis is to build more homes and public housing. Plain and simple.
Sr. Member
May 22, 2007
510 posts
313 upvotes
cambridge
whizzard wrote: I partially agree with your explanation. Ability to repay, to me is the credit score. Credit history is all there when they look and see all the activities. The only factor i am missing at the moment is income. And i have not worked lately is due to covid.
I suppose that is not enough.
C'est la vie.
I don't understand...you want a loan, have a great credit score but have no income and have not worked due to C-19...how are you planning on repaying the loan?
Deal Fanatic
Sep 1, 2004
9651 posts
9184 upvotes
bomber17 wrote: No but at least it gives a chance for self employed people to compete instead of being alienated. The only way to solve our housing crisis is to build more homes and public housing. Plain and simple.
I'm not sure what rule changed lately but I don't think my friends who are self employed had any issue getting a mortgage pre 2019.

Now Calgary's real estate is much cheaper than GVA/GTA so I am not sure that's a factor. Our $700k houses would have been $1.2M to 2M in depends on area of GVA/GTA.

So I'm not sure if this is a conservative talking point that isn't really a problem in reality or not a big one. Now foreign buyer tax? I'm all for. But it's not like people have already created loopholes to get around them.
Last edited by Xtrema on Aug 23rd, 2021 12:29 pm, edited 1 time in total.

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