A number of things can damage your credit, and if you have just discovered that your credit rating is low due to late payments, loan default, repossession or bankruptcy, you may be wondering about your purchasing power. What happens if you need to buy a car before your credit issues are fixed? Even if you can find financing, will you be able to buy a vehicle that you actually want to drive?
Restoring Credit with Financing
There are lenders that exist to serve the subprime market. This means that they are willing to look past bad credit and judge loan applicants on other factors such as income and job stability. And the financing that is acquired through these lenders provides borrowers with the opportunity to rebuild their challenged credit.
How will you choose to use your car loan when you're approved?
Believe it or not, purchasing a factory fresh vehicle can still be a realistic option even if your credit is compromised. Just make sure that this is the right decision for you and your budget.
- Can you comfortably make the payments?
It should not be surprising that payments on a new vehicle purchase may be higher than they would be if you were to buy a used car. If you calculate your budget and determine that you are able to make a certain payment, but just barely, you may want to rethink the commitment. Leaving no wiggle room in your budget for potential emergencies can easily lead to significant financial problems.
- Have you thought about the depreciation factor?
Your new car will lose approximately 19% of its value in the first year of ownership, so there is a good chance that you will accrue negative equity. This means that if you were to wreck the vehicle or determine that you cannot afford the payments, you could end up owing the difference between the car's actual value and what you still owe on the loan. You can decrease the risk of negative equity by providing a substantial down payment.
If you're trying to be mindful of your budget while in the process of mending your damaged credit, buying a used car may make a lot of sense. Just make sure that you choose your vehicle wisely. Your vehicle bargain may not seem like such a frugal choice if it comes with a heavy amount of repair bills.
- Buy from a dealer.
An auto purchase from a private seller may seem like a tempting option, but it is much more risky than buying from a dealer whose reputation is at stake. And purchasing a certified pre-owned car with a warranty from that dealer is an even safer option.
- Be an informed buyer.
Before signing anything, make sure that you truly know what you're buying. Request a vehicle history report, test drive the car, and have a full inspection conducted by an independent mechanic of your choosing.
Choosing the Right Financing
When you are ready to explore your own car buying options, Drivers Lane can help you find loan approval. You may even be able to purchase your vehicle with little or no money down. Regardless of what your credit looks like, we can find a financing solution that fits your needs and budget. Just fill out our fast and secure online application to get started today.