Everyone knows it's not cheap living in Los Angeles. If La La Land is putting the squeeze on your finances but you need personal transportation, you may be wondering how much car you can finance. Many factors go into determining how much vehicle you can afford, but your credit is the big one.
Preparing to Get a Car Loan
Doing your research and preparing a budget is a big help when it comes to knowing how much car you can afford in LA. The first thing you should look at is your credit.
Looking into your own credit doesn't lower your credit score, unlike having a bunch of lenders checking your credit. This can also help you figure out the best loan for your situation, so that you don't waste your time driving from Hollywood Hills to Santa Monica looking for lending from banks and dealerships in Los Angeles that can't help you.
When you check your credit, make sure that you get both your credit score and your credit reports. This way, you know where your credit stands, and you can check your credit reports for errors. If you find any mistakes, you should alert the reporting credit agency right away. Having errors removed from your reports has the potential to raise your credit score.
Once you know where your credit stands, you can research the types of loans available to you, and look at the interest rates people with similar credit scores get. This gives you an opportunity to create a realistic budget.
Budgeting for an Auto Loan
Now that you know your credit situation, you should research vehicles that fit your needs – both new and used – in your price range. But how do you know what's in your price range? This is where your budget comes into play.
You can use online tools such as our Car Loan Estimator to find out the size of loan you might be eligible for. You can also use calculations for debt to income (DTI) and payment to income (PTI) ratios to help you stay within a comfortable budget.
Lenders use your DTI and PTI to help determine the size of the loan you qualify for. Believe it or not, lenders don't want you to go broke financing a vehicle. DTI shows the lender how much of your income you need for your bills, and PTI helps them to see the percentage of your income needed for a monthly car payment. You can calculate these yourself to come up with a realistic budget.
To calculate your DTI, add up all your monthly bills, including an estimated vehicle and insurance payment, and divide it by your pre-tax monthly income. For PTI, divide your estimated monthly car payment by your pre-tax monthly income. This number is the percentage of your income needed for your monthly payment. Lenders don't want your limits to be stretched, so they generally put a 50 percent cap on your DTI and a 15 to 20 percent cap on your PTI.
Finding a Dealership to Work with in Los Angeles
Now that you know how much vehicle you can afford, you need to make sure you're working with the right lender. If your credit is less than perfect, you may need to visit a special finance dealer that has lenders available that are able to help people in many different credit situations. These lenders look beyond your credit scores to help you get the car you need.
Since you don't want the headache of driving around the City of Angels to find that perfect dealership, start here instead. At Auto Credit Express, we work with many dealers in and around Los Angeles that can get you the loan you're looking for. Simply fill out our fast, free, and easy auto loan request form today, and we'll get to work connecting you to a dealership near you in LA.