I went to Mercedes today and they denied me a lease even though I was paying cash for the lease. The lease was around 19k with all the fees for 24 months. The cars msrp was $111,435. They said no MB dealer would let me lease a car worth more than 55k total because im 23 about to be 24 in 2 weeks and have not had an auto loan before. I don’t really understand why they would deny me my credit score is a 790 and I make enough money to finance the car not just lease it. Really left a bad taste in my mouth after leaving the dealership. Does anyone know if this is normal across all dealerships?
Unfortunately credit underwriting for automobiles has tightened as lenders faced rising delinquencies and losses. They draw a credit box to lend into, and people who don’t fit well have higher interest rates. People who don’t fit at all can’t get financing.
Ultimately it’s not really the lender that is to blame, it’s the entities that provide liquidity from asset backed security sales, collateralized lending warehouses, and other asset sale arrangements that set the rules. Your lease or loan may not fit in those structures and Mercedes Financial won’t be able to sell or finance your loan. They sure won’t want to equity fund your lease or loan.
Your local credit union may be more favorable.
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Interesting. I never thought about my local credit union. I don’t even understand why I had to do a credit check if I was gonna pay for the lease upfront. My plan now would be to buy a cheap Toyota and make payments on it for a year and then try to get something else when a new lease deal comes up. I also wonder if bmw has the same rules set up with their lending company?
You have to run credit because this isnt a “cash deal”, you are requesting a bank to let you borrow a $111000 vehicle for two years, VERY different
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I should have put the sale price on it instead of msrp but the sale price was $73,615.54. But I get what you are saying I would be borrowing 54k since of car during that time.
Sounds like you were looking at an EQS? Generally, this would be an advice frowned upon, but it may be needed to buy your way in if you cannot find a co-signer: consider either buying a used one (preferably a CPO with long enough warranty) or see if there’s a balloon lease option thru a third party available to you.
@z0lt3c provided quite some detail on his 580 balloon deal. Find that thread and see if that’s an option for you.
Otherwise, keep in mind that even though used EQS look cheap, they are still very much in free fall with no support in sight. Say, you find one for 40K+, don’t know your taxes and fees, but here in CA you’re looking at about 10-11% for most cities, so you’re at about $45K. If - big if - you can sell it for about $25K in two years, you’re close to your lease numbers. The main difference is that you’re taking the downside risk in this case vs MBFS.
Good credit, but you’re what’s called a ‘thin file’. Your credit may be decent, but there’s just not enough of it to make the bank comfortable with letting you hold onto their asset for a few years.
But why does that really matter? How does one’s credit history determine how they will treat or use the bank’s $110K asset that they only paid about $80K for based on the terms of the lease? This is a one -pay lease so bank is getting all their money including interest upfront. I just don’t see how a persons credit file impacts the subsequent use of the asset. Even if the vehicle is trashed, the bank is going to get their money back through wear and tear fees in 2 years. If it is totaled they get it back through insurance.
More likely it is that MB can’t bundle and sell the loan to investors with such a credit history.
Also check out Marketplace for 12-24 month lease deals
I get what you’re saying, but MBFS isn’t going to get squat back if the OP leases a EQS on Tuesday then puts it on a boat to Dubai on Wednesday for it never to be seen again.
I’m sure there’s all sorts of things like export, straw purchases, etc. where MBFS has determined their risk increases exponentially for a thin credit file vs. someone that has had a few auto lines in good standing.
This is a tale as old as time, you can have great income and a great credit score but if your credit file is otherwise thin with no auto history then most banks aren’t going to lease you a $100k car, one-pay or not.
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You’re assuming that the consumer is going to honor financial obligations, which a thin file cannot establish.
Imagine mailing a consumer a bill for $3,000 in damages, which they never pay.
Delinquent accounts are expensive to service and may never yield even a partial a payment.
There’s also no guarantee that in the event of an accident that the consumer won’t just abandon the car and not bother to turn in an insurance claim.
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That’s your best option. There are always going to be deals on cars.
Makes sense I guess. Companies use your credit file to establish your character as much as your ability to pay.
The bank doesn’t care about your character, they care whether or not you’re going to default on your financial obligations.
One can have sterling character and still make terrible financial decisions.
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As long you are making payment on time. YOU are the sterling character in bank’s eyes.
On the other hand , if you are revolving borrower who pays balance in full, keeps debt ratio zero, some bank will deny you ( I am looking at you capital one).
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Did you get any quotes on insurance on the MB? I am curious as to how much it would be given your age.
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i’ve had people get declined on 24 month onepays for a kia niro. it has nothing to do with paying the lease upfront. the lender uses credit to determine the likelihood that they get their car back at lease end in acceptable condition. they use auto history as such an indicator.
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Yeah this is a tough spot to be in due to your age. People in their 20s have many options to build their credit many ways. Common examples include secured credit cards, lightweight used car loans, and security (CD) backed loans. Whatever you can pay consistently on time and gets reported to the credit bureaus as responsible payments. This leads to more access to credit and so-on.
Unfortunately there is a massive amount of scamming going on in this field as well. There used to be a cottage industry of fintech startups that all were trying to help people build credit. Unfortunately a bunch folded because… scammers going to scam. Basically if a company purports to be able to juice your credit basically overnight. It’s a scam. Any mechanism that truly builds creditworthiness will not occur overnight. It will require consistent reporting to the bureaus of on-time payments.
Anyway, if you go to a bank you trust, they should be able to walk you through options that can help you instead of making your first major use of credit a $110k Benz or Bimmer.
$317 a month with Allstate but that was the only quote i received
Thats annoying my credit is perfect. I spend a ton on my credit cards and pay them off in full each month. I even have big purchases on there. I had a 26k purchase last year and paid it in full. My friend who is 19 just got a 75k corvette but has had 1 auto loan before was able to finance it through his credit union.