Can Your Debt-to-Income Ratio Prevent You From Getting a Car Loan?

by Gabrielle DeSantis

If you’re planning to buy a new or used car with the aid of an auto loan, there are a few different factors that come into play. While your credit score is definitely one of them, the amount of debt that you owe and the income that you make are others. The bank will combine both of those factors in order to calculate your debt-to-income ratio and determine your creditworthiness. But will that ratio prevent you from getting an auto loan?

What is a debt-to-income ratio?

A couple shopping at a dealership. | Tim Boyle/Bloomberg News via Getty Images

RELATED: Is Making a ‘Principal Only’ Payment on a Car Loan a Good Idea?

A debt-to-income ratio (DTI) is your monthly debt divided by your monthly income, Lending Tree reports. Lenders use this information to see if you have enough funds available to afford the car loan’s monthly payments. The DTI is measured in percentages, so the lower the percentage, the better.

For those in challenging credit situations, most lenders are looking for a DTI ratio of no more than 45% to 50%, which includes the proposed monthly payments for the auto loan. The reason for this is that the bank doesn’t want the borrower to go broke, believe it or not.

Calculating your debt-to-income ratio

A customer inspects the window sticker of a 2010 Honda Accord Sedan.
A customer inspects the window sticker of a 2010 Honda Accord Sedan. | Photographer: Jim R. Bounds/Bloomberg

RELATED: Getting A Good Auto Loan is Possible Even with Low Credit

If you would like to calculate your debt-to-income ratio, then you can take the easy route and use the DTI calculator on Nerd Wallet. But if you would rather calculate it yourself, then there is an easy formula to do so.

  • Add up your monthly debt payments: Add up all of your debts every month. This includes your rent/mortgage payment and your credit card bills.
  • Find out your gross monthly income:  If needed, take a look at your paycheck stubs, W2s, or 1099s in order to figure out how much you get paid every month before taxes.

After you find out the total sum of both your debt and your income, you can then divide the debt amount by the income amount. For example, if your total debt amount is $1,250 every month and your total income is $3,200, then you’ll get a total of 0.39 or 39%.

What is a good DTI?

<> on June 9, 2011 in San Francisco, California.

Lending Tree reports that most lenders want to see a DTI ratio of 36% or less, but it can vary. To break it down for you, here are the tiers of DTI ratios:

  • DTI of 0% to 35%: The amount of debt is manageable.
  • DTI of 36% to 49%: The debt amount is manageable, but giving you a loan could cause issues.
  • DTI above 50%: The debt amount could be managed through some counseling or a debt relief program.

Can your DTI be improved?

Yes. The best ways to improve your DTI would be to pay down your monthly debt, increase your income, or do both. The DTI equation only has two factors, so adjusting one or the other will have an effect on the ratio.

Some lenders will have different requirements when it comes to your DTI ratio. However, a high DTI ratio can mean the difference between getting a car loan and not getting one. So it’s wise to take care of your debts first, if possible, before applying for a car loan.

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Report: Lordstown Motors is Just About Cooked

by Gabrielle DeSantis

While maintaining it will produce the first electric truck in the US by this September, Lordstown Motors now says it needs more money to make a number of trucks. It planned on making 2,200 trucks by the end of 2021. But it announced recently it would make Endurance EV pickups “every six minutes when we start production this year.”

Lordstown says without more capital it will make less than 1,000 Endurance trucks this year

Lordstown Endurance EV with Trump | Getty

Now it is saying without more capital it will make less than 1,000 Endurance trucks this year. “We are still in a position to ramp the Endurance, but we do need additional capital to execute on our plans,” CEO Steve Burns said. “We believe we have several opportunities to raise capital in various forms and have begun those discussions.”

So why has Lordstown’s outlook changed so much? According to the New York Times, it says that COVID-19 and the issues all companies are facing right now are the causes. This resulted in a “significantly higher than expected” cost of parts, shipping, and third-party engineering. It also didn’t help that Hindenburg Research, a company that famously takes short positions on EV startup companies, said the company misled the public about its capabilities.

Shorting a stock means you are betting that the stock price will fall. And you borrow shares at the higher price to buy them at the cheaper price to pocket the difference. This raised questions about Lordstown’s operations which brought in scrutiny from the SEC.

Did Lordstown use phony preorder figures to bring in new investors and sell more stock?

Endurance EV pickup | Lordstown
Endurance EV pickup | Lordstown

RELATED: Now We Know Why GM Virtually Gave Away Its Factory To Lordstown Motors

Questions arose about the number of preorders Lordstown said it had received. Hindenburg said the company had highly inflated those claims. Lordstown used those preorder figures to bring in new investors and sell more stock.

“What we are saying is that if we don’t get any funding, we might only make half of what we thought,” Lordstown’s chief executive, Steve Burns, said Monday in a conference call. With all of the moving targets it is hard to determine what the outcome will be. Mostly, it paints a picture of the need for ever escalating costs and no money to draw from, while still months off form being able to produce anything.

Earlier today, its stock dropped 13.75 percent to $8.34 a share

Endurance EV pickup with Pence standing by
Endurance EV pickup | Lordstown

Burns said they are looking at using collateral like the plant itself and other assets as a means to borrow money. That should raise red flags with investors and appears to have. Earlier today, its stock dropped 13.75 percent to $8.34 a share.

“We secured a number of critical parts and equipment in advance, so we are still in a position to ramp the Endurance, but we do need additional capital to execute on our plans,” said Burns in a statement. Does that mean that there is enough capital because they are in a position to begin production? Or does it mean that in spite of securing parts and equipment Lordstown needs more capital before it can begin production?

It is becoming a puzzle of what it can do versus what it will do. But won’t it see a return on investment if it just starts production? After all of these years if it is unable to forecast what it will need and can do then what hope is there for Lordstown?

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Cool Used Cars For Sale Under $5k (Including a Firetruck)

by Gabrielle DeSantis

The internet has been a treasure trove of used cars for sale from around the country. If you are in the market for something cool and unusual, check out some of the options below. Some old Ford trucks, a Bronco, a ladder truck, and an ice cream truck are all for sale.

What is the best used car website?

The Ford Bronco II is a cool used car for sale | John Prieto/The Denver Post via Getty Images

Craigslist is the most casual and interesting place to find used cars for sale. Most cities have a corresponding Craigslist section just for that area where you can find great deals.

The 1989 Ford Bronco was in production from 1984 to 1990. The Bronco II 4×4 was restyled in 1989, which makes this one a rare find. By 1991, the Bronco II turned into the Ford Explorer. This one for sale in Philadelphia has a 2.9L V6 with overdrive and four-wheel-drive. It even has air conditioning and an incredible red cloth interior. $2,000 or best offer takes home this beauty.

What is the best used car for sale under $4k?

RELATED: How to Get a Good Deal Amid Used Car Price Spikes

It isn’t even a car at all! This 1980 Seagrave ladder truck is for sale in New Hampshire. Fredric Seagrave founded Seagrave in 1881. The company not only builds new trucks but helps refurbish older trucks like this 1980s version. The company still operates out of Wisconsin to this day.

OSHA last inspected the boom in March 2018, but it appears to still go up to around 100 feet in the air. This firetruck runs and drives, and the owner says, “all is in working order.” For $3,995, what’s not to love? Restore it or leave it alone. This truck is a part of local history.

A vintage treasure: The 1993 Cadillac Sixty Special

Just like it sounds, the 1993 Cadillac Sixty Special is pretty special. This car was originally made from 1938 through 1976 when it retired for it a bit. Cadillac revived the Sixty Special in 1987 and retired it again in 1993, which is why this one is so rare. Previously, the Sixty Special has been described as one of Cadillac’s most luxurious vehicles. A black leather interior and exterior make this one even rarer. The owner says it was recently appraised for $9,000, but you can snag it today in Chicago for $5,000.

A pair of 1950 and 1952 Ford pickup trucks

RELATED: Most Reliable Used Cars With the Best Fuel Economy

This listing outside of Memphis is for a pair of 1951 and 1950 Ford pickup trucks. The 1952 truck appears very rusty but has the original flathead V8. It is a manual transmission but does not currently run. Conversely, the 1950 truck has “minor rust” (debatable) and does not have an engine. It does come with the transmission, but the owner did not go into more detail. Even so, these trucks do not come with the title. Nonetheless, you can take both home for $4,800.

The classic 2000 Chevy 3500 Ice cream truck

Last but not least, this 2000 Chevy 3500 has a 6.5L diesel engine with 160,000 miles on it. The current owner had the brake system upgraded before you get to take it home. Inside, a Nelson cold plate freezer needs a new radiator before you can store any treats in it. The body needs some paint and the ice cream stickers could be replaced. This Craigslist listing comes in above our budget of $6,000, but the owner says the fridge is worth $3,000 on its own. In conclusion, summer is a great time for an ice cream truck.

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When Does the 2021 Rivian R1T Go on Sale?

by Gabrielle DeSantis

Electric vehicles are fast becoming the rage. And more consumers are embracing EVs than ever before, even if saving the environment isn’t the primary incentive. Today’s EVs are sleek, powerful, capable, and affordable. And next up are highly anticipated electric pickup trucks, with the Ford F-150 Lightning dominating headlines. But what about the new Rivian R1T? 

We’re halfway through the year and one step closer to the Tesla Cybertruck’s debut. So when will the Rivian R1T be available to see in person? And how can shoppers test-drive one for themselves?

What the Rivian R1T brings to the table

Truck enthusiasts will get the muscle they need with all-wheel drive and 754 hp in the quickest 135.0-kWh model, Car and Driver reports. Plus, with an electric motor at each wheel point, the Rivian R1T will be able to “tank turn,” spinning on its own axis like a moon vehicle.

Expect a Launch Edition and an Explore model with a Max battery pack option delivering 400 miles on a single charge. All the interior extras or high-end, too, including heated seats and faux leathers. And as is expected with an electric vehicle, the Rivian R1T is loaded with driver assist technology and modern, almost futuristic capabilities.

Rivian could have a leg up on Tesla

RELATED: When Was Rivian Founded?

Though the Rivian R1T and Tesla Cybertruck offer many similar features, some observers are already suggesting Rivian has a leg up. As the race to launch continues, the R1T might beat the Cybertruck to market. That advantage in timing alone could spark more sales for Rivian.

HotCars points out the R1T will take the lead against Tesla in base model capabilities, too. All Rivian pickups will offer a minimum range of over 300 miles. Additionally, all R1T models will come with level three semiautonomous tech. Notably, this tech is not anywhere near self-driving. And though it offers some guidance in a momentary, hands-free capacity, there’s no safe substitute for driver alertness. 

And Digitaltrends makes a strong point for styling. The Cybertruck’s looks are completely different from any other vehicle on the road today. The boxy lines and beefy stance might attract some consumers, but maybe not the masses. The Rivian R1T offers a more traditional pickup design, which might appeal to the everyday driver. 

The Rivian R1T’s release date and information so far

RELATED: Rivian’s CEO Is the Anti-Elon Musk

The time is now. Rivian says it will start delivering the R1T in June. The Launch Edition will land first, with its $75,000 price tag. The Explore trim will likely join the lineup in 2022. And all three battery pack options — 105 kWh, 135 kWh, and 180 kWh — will be available. 

How can you test-drive this electric truck?

When Rivian says it will deliver the R1T to consumers, it doesn’t mean via dealerships. Much like Tesla does with its independent network of stores and service centers, Rivian will also have its own network of consumer-facing stores. And as this network continues to develop, Rivian also says the R1S electric SUV will join the ranks.

Be on the lookout in your neck of the woods. A Rivian service center or store might pop up nearby. The Rivian R1T is expected to come out in June. And based on the reviews so far, it will be a ground-breaking EV everyone should at least see in person. 

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