The Scenario: You’ve had your heart set on getting your hands on the wheel of your new Mercedes Benz. You’ve been dreaming about the day that you finally get the keys, and you open the door, press the button and, start the engine. Now is the time to turn that dream into reality.
The Solution: Use this easy-to-follow play to help guide you along. We have curated an easy-to-follow, step-by-step strategy, on how we go about getting approved for our Mercedes and other foreign cars.
THE STEPS:
STEP 1. The first step is to pull your credit and make sure that your TRANSUNION is favorable and up to date. Your Transunion report needs to be strong and tell a story of financial responsibility. If you own your own business be sure to have it listed as an EMPLOYER, you will need to show proof of income it’s best, that you be on payroll. You want to look favorable to lenders. Mercedes uses FICO Auto Score 9. Transunion is commonly used for auto lending because TransUnion offers Credit Vision, which is tailored for auto lenders, financing companies, and dealers. The score ranges from 300 to 850 and helps predict the likelihood of 60-day delinquency within the first 24 months of a new auto loan. You want your score to be 680+.
“Yes. it’s true, the right auto loan can help build your credit.” – Rich Girl Code
STEP 2.
FICO Auto Score 9 is the scoring platform that is used to identify your creditworthiness to lenders. This score utilizes data from TransUnion Credit Vision Data to uncover 30 months (or 2.5 years) of credit history. This small window of data eliminates outdated information and helps offer you a clean slate sooner.
Here are the best ways to actively increase your FICO Auto Score 9:
Pay your credit cards down consistently.
Pay off any debt that has gone to collections (if applicable).
Keep your credit utilization at or below 15% at all times.
STEP 3.
Figure out which way you would like to go about applying for your car or truck. Lease or Finance?
We NOW lean more toward leasing. When you lease it allows you to use the latest technology, you don’t have to worry about maintenance, you can trade up every couple of years so your cars are always new, and it’s just more convenient. Choose what works best for you.
Buying A Car
If you like to keep your vehicle for as long as possible, then buying a vehicle is a great option for you. While payments are typically higher when purchasing, every time you make a payment you are building equity in your vehicle, and eventually, you’ll own your vehicle outright.
Unlike leasing, there are no mileage restrictions when you purchase a vehicle. If you put a lot of miles on your vehicle, then buying is probably your best option.
If you keep your vehicle past the life of the loan, you’ll eventually be free of loan payments.
Insurance costs are generally lower on vehicles you purchase than on vehicles you lease.
You’re free to sell your vehicle at any time.
You don’t have to worry about accidentally spilling coffee on your carpet which might leave a minor stain. -Under a lease agreement, you’ll be held financially responsible for that stain when you turn your vehicle in at the end of the lease.
You can add accessories or make modifications to your vehicle when you own it.
Leasing a Car
If you like to drive a new vehicle and are thinking of trading in your vehicle for a new model every two to three years, leasing is a great option for you.
Lease payments are typically lower than if you were to purchase the same car.
Lease programs that require $0 or little money down might be a good fit for you if you don’t have the cash on hand to make a large down payment.
Leased cars are typically covered under the manufacturer’s warranty for the duration of the lease. Such warranties are usually bumper-to-bumper and cover any needed repairs.
Leases are great if you want your vehicle to have the newest technology. Since you are always driving a car that’s only a couple of years old, you can rest assured that whatever model you lease it will have the latest hi-tech options.
Try it before you buy it. You won’t have to worry about buyer’s remorse with a lease. At the end of your lease, you have the option to trade in your vehicle for a model that’s more to your liking. By the same token, if you’ve fallen in love with your leased vehicle, you can exercise your option to purchase it when your lease is up.
Step 4.
Articles of incorporation (Proof of business)
3-6 Months full bank statements (Business bank account)
1-2 Years Taxes (You can always file back taxes if you need to)
Business info: Phone, Address, Email, & Website
EIN & DUNS number
Proof of Insurance
Driver’s License
4-6 References
Paydex Score 80+
You will need to gather these items if you plan on personally applying for your auto loan using your own name. Some places may require less, but it’s best to be prepared.
Social Security Number
3-6 Months full bank statements (Personal bank account) or Paystubs
Personal info: Phone number and address
Driver’s License
Proof of Insurance
4-6 References
680+ Credit score preferably Transunion
You will need to gather these items for your business verification if you plan on using your business
STEP 5. If possible try to have a PRE-QUALIFICATION done by your credit union. We’ve found that our credit unions always give us the BEST RATES and they can pre-qualify us with soft pulls so it doesn’t affect our credit. When we qualify they cut us a check for what we need to get our auto loan completed. We take that check to the dealership and pick up our car. We’ve found that often times in-house financing can deny you for all sorts of underwriting reasons, so going to a credit union first to get pre-approved has been the easier route for us.
However other banks will use the other bureaus. So keep them all clean!
When a lender looks at someone’s credit for approval, they look at many factors but these are the main factors:
1. ADVANCE 2. DEBT LOAD 3. HISTORY 4. YOU (Your ability to pay)
Almost in that order.
1) How much are you trying to borrow relative to the collateral. The more cash down or equity that you have in your new deal will greatly determine the risk level of the loan. i.e. if you are putting down 50% on your deal then if you fail to pay, the bank will win because of the equity position you have put them in.
2) ON the other side, if you have a trade-in that you are upside down in and are trying to finance 140% of the value of the car (invoice) then the bank will consider you to be a far higher credit risk. Make sense?
3) Your own Debt load. Your “score” is mostly derived from credit that you have available. If you are using more than 50% of your credit cards you are seen as a huge risk to the lenders, so pay down your cards so that you are 15% or under in utilization. If your total outgoing payments are higher than 60% of your income then you are a huge risk to the lender. They will increase the rate to compensate.
4)History is very important. This is one thing that young people struggle most with. When it comes to an auto loan/lease the bank does not want to see anyone go from a Honda Civic loan to a Mercedes GT loan. This is why we said try your CREDIT UNION FIRST. We had this problem once and got denied by the dealership but, got approved the same day by our credit union. We’ve also had to use Swapalease to help with our credit for auto history.
MBFS (Mercedes-Benz Financial Services) uses Transunion reports to determine credit acceptance.
4) It’s all about YOU. Your job, job type, proof of income, etc. When you fill out your app, do it carefully. Take your time WRITE NEATLY. BE HONEST! Remember the finance person needs to paint a good picture of you to the lender. “Please ask to speak with him/her prior to submission.” Make sure you tell them about how long you have been doing what you are doing, even if it is with different companies. Be honest and thorough with anything bad. Being honest goes a long way.
Mercedes has been one of the most amazing lenders we have ever worked with. Mercedes does NOT use the credit score to determine the tier. They truly want to support the dealers and help them to get the approvals they need to sell cars. MBFS will want to see that you can pay for the new car.
They will want to see that they have some equity in the deal. They will want to see that you have not been pursuing large amounts of credit prior to getting your new car. This is why it’s important to have low to no hard inquiries when applying.
Here is an example of a car payment that does not exceed 12-15% of monthly income:
Let’s say that someone has a monthly income of $5,000. They want to find a car payment that does not exceed 12-15% of their monthly income, which is a range of $600-$750.
If they choose a car payment of $600 per month (C-class arena), this would be just within the acceptable range, as it is equal to 12.5% of their monthly income.
On the other hand, if they choose a car payment of $775 per month, this would exceed the acceptable range, of their monthly income.
It’s important to keep in mind that this is just an example and the actual percentage of income that is appropriate for a car payment will vary depending on an individual’s specific financial situation and down payment if negotiated.
They will want to see that the payment does not
exceed 12-15% of your monthly income.
Here are some suggestions to increase your odds of approval.
Have Cash down (you might not have to use it if your credit is good 680+)
Mitigate any negative equity from your trade
Auto loan History
LEASE, LEASE, LEASE (MBFS will almost always give higher tiers on leases)
Keep your credit report clean. NO LATE PAYMENTS (have an explanation letter ready)
Be organized, be prepared to show proof of income (3-6 months) (3x’s payment)
DTI (Debt to income) less than 30%, Credit Utilization 15% or under
Know what you can afford comfortably (registration, insurance, gas, etc.)
Don’t have a lot of hard inquiries on your report
Know your credit scores CLICK HERE
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