Buying a Car with Imperfect Credit

October 15th, 2015 by A Licensed Insolvency Trustee

What you need to know when buying a car

The first principle in buying a car is, save up your monauto financingey and buy a car that you can afford. If you finance the car there are some serious pitfalls to consider. Firstly, the car will deprecate faster than you pay it off and second, the interest rate that you are going to be paying on the loan to buy the car is going to add substantially to the total price of the car.

The first principle in buying a car is, save up your money and buy a car that you can afford. If you finance the car there are some serious pitfalls to consider. Firstly, the car will deprecate faster than you pay it off and second, the interest rate that you are going to be paying on the loan to buy the car is going to add substantially to the total price of the car.

If paying cash is not a practical option, as is often the case, then the use of credit may be necessitated – but be careful.

Not all car retailers are equal. Some will charge a reasonable rate of interest on a car loan. Others may view you as a higher credit risk and may charge 15 % – 35% interest. Where other retailers will charge you a reasonable interest rate but will charge you twice as much as the car is worth. Be leery of retailers who want to take security on all of our assets (even a second mortgage on your house) as well as personal guarantees from relatives. Well there are many dealers with questionable ethics there are still some dealerships that are very straight forward. They may offer 0% financing over a number of years, and this can be a good thing (if you qualify). These types of offers are usually loaned to new car purchase but there continues to be a debate over if one should buy new or used.

In buying a new car one can get a warranty which can alleviate surprise What you need to know when buying a carrepairs and who doesn’t like the “new car smell”. The downside is that the vast majority of depreciation of a motor vehicle takes place in the first 2 or 3 years. When buying a used car you can avoid a lot of the depreciation but there may be surprise repair bills as the car gets older.

Before you actually go out and cut the deal with the dealership you may want to take a serious look at how much credit you actually qualify for (your credit rating). You can order periodical reports from the credit reporting agencies and you can also talk to your local bank or credit union to see if you qualify for a bank loan. Knowing how much money the bank might loan you to buy a car will help you considerably in focusing on the kind of car you can afford. If you have a poor credit rating, it means that the lender doesn’t think that you are going to be in a position to pay back the loan. You may want to reconsider buying the car or look for one that is more affordable. If the lender or the financial company at the dealerships is charging you 35.8% interest or some such figure or wants a mortgage on your house, think twice about entering into the deal.