How much does income affect credit lending?

Question

I'm trying to get a new car (2008 Dodge Avenger SXT), and I have the money to finance it myself, but I have very little credit history established. I have two student loans in my name with deferred payments until after I graduate, and one credit card to which I have only made 3 payments, each in full.

The only person in my family with good enough credit to co-sign for me would be my grandmother. My grandpa died 2 months ago, so her income was cut in half - as she only is able to receive half of his pension and his social security and not her own anymore. We discussed her situation, and she has an income of 2200 dollars a month, with 750 dollars left over for frivelous spending (as in, for whatever she wants.. this figure is AFTER her mortgage, own car payment, etc.).

With my 800 dollar income and 0 bills in my name, would lenders look at our income TOGETHER to determine the debt-to-income ratio and grant us a loan?

And would we be able to get the loan?

In response to the first answer, I want to make some things clearer. First of all, I am not going above a $250 monthly payment. You missed the part about having the money to afford a new car comfortably. In my family we have brand new: Chevy Trailblazer, Chevy Avalanche, Ford Explorer, Pontiac Grand Prix, and none have a payment of $425, that's ridiculous.

Anyway, my grandmother's credit is nearly perfect, and I am asking about the debt-to-income ratio. I appreciate the quick and detailed response, but if you could pay more attention to what I am asking, it would work out better. Thanks.

Answer 1

Ditto's to Bostonian! Great advice!
Banks will also look at your "stability" How long have you had the same job? How long at the same address? Etc.
My first car was used and I financed $3,000 with my dad co-signing. I was 18. I could BARELY make the payment on that due to all the other "essential" items I needed as a teenager, you know $100 shoes, designer clothes, Playboy subscription, beer. Save your money and buy something outright! Insurance will be MUCH cheaper and you will feel much better about it. I spent years of my life living on credit that I had no business utilizing. Now, I barely have any, and what I do have I rarely use.
If I had used my credit wisely, I would have been much better off. Some folks are good at controlling their credit "urges", and others are not. Credit can be good for you for sure, but you have GOT to be smart with it.
Check out this free book I have written.
http://www.howtogooru.com/lifeguard.html
It has some good strategies and advice.
Good luck to you!

Answer 2

This is a classic case of Dom Perignon taste and MD 20-20 income.

Income is only part of the picture. Your credit rating and your debt to income ratio are the other (and probably most important) parts.

With the income that you listed, a new car would clearly not be in your best interest. Consider the monthly payments of around $425 for a typically optioned one if you can get 8% money. Then add for insurance. If you're under 25 and live in or near a major city that could easily add another $200 a month or more. If your driving record has any marks on it at all, probably a LOT more. Now add another $200 a month for gas and reserves for routine maintenance and you've spent your entire income on a car. Pretty dumb, IMHO! And if you crash and burn on your payments, your grandmother doesn't have enough disposable income to absorb the costs making the whole scenario "double dumb."

With your income, you need to ratchet down your expectations substantially. Bank your income until you can afford a basic $3,000 to $4,000 used car. If you can "afford" to put all of your money into a new car then you can afford to save towards a cash purchase in a few months.

Addendum: I DID read your question. With an income of $800 per month you do NOT have enough income to finance this vehicle. What other vehicles your family owns is immaterial to the question you asked and the details you provided!

You can't buy a $21,000 vehicle with $250 per month and you mentioned nothing about having around $8,000 or more to put down on the vehicle which is what it would take to get the payments down to that level.

The fact that the rest of your family's credit is so poor that they cannot assist on the purchase only butresses my position. I wasn't going to comment on that but since you raised it as an issue I will. Your proposed purchase is financial suicide IMHO and I stand by my answer. Good luck!