Is Financing a Car The Right Thing To Do
June 19, 2009 by Henry Ray
Filed under Bad Credit Loan
The world of credit can be difficult to steer through. If we have too little, we can get rejected for mortgages and personal loans on the basis that we haven’t proven our financial responsibility; however, if we have too much, we can get penalized for not living within our means. Of course, credit allows us to make big purchases that we’ve always dreamed of, like a home, holiday or car.
More specifically, credit can sometimes be a helpful tool or a great way to devastate your finances.
When it comes to getting a car loan, the rules are no different. If used sensibly, a car loan can build up your credit, proving to future lenders that you’re a responsible borrower with a great track record. However, you should only take out a car loan under certain conditions, and if any of these circumstances apply to you, do NOT finance your car!
You have a poor or adverse credit rating. Would you pay thousands of dollars in high interest payments just because you have experienced one or two late payments? Almost certainly not. Saving for your next car purchase instead of obtaining credit would save you a bucket load of cash. And if you need a car in a hurry and are not in the position to save up the money in time, then ensure you pay off that loan as soon as physically possible, otherwise you will be flushing your money down the toilet.
Older cars offer a higher spec for my money. It’s a well known statement that you can get more car for your money if you look at models over 3 years old. However, remember that old cars (regardless of make) tend to break down sooner or later, and that would leave you with a car still to pay for that is currently off the road. Watch out for dealerships that offer cheap financing deals on a possible clunker, especially if the life of the loan goes beyond two years.
Thinking about getting an SUV. Whilst SUV’s have grown in status over the last 5 years, the world is finally waking up to the fact that they’re big, clunky and very costly to run. As the vehicle falls out of fashion and prices start to fall, whatever you do don’t finance your SUV, else you’ll be paying more in interest than what the actual vehicle with be worth.
Some Car Manufacturers are on the verge of bankruptcy. Unbelievably, some car manufacturers could be out of business within the next 12 months. As a consequence, they are desperate to sell their cars to say afloat. But watch out, if your Automaker goes bust, you could find that your warranty may not be guaranteed. Take time to research your chosen manufacturer’s state of health, and avoid financing the vehicle at all costs.
Accordingly, do the right thing by saving for a car that is within your means, and avoid financing a car within the current climate – your bank balance will be better off for it.
