Making the Right Decisions

It is no secret that it can be very difficult to afford a new vehicle if you have bad credit or a challenging financial situation. Even when everything is in order, new vehicles are expensive. If you don’t have the ability to buy it outright, you have to think about and research all the different options to afford something new.

Used vehicles are often in the same boat. The price tag may be lower on average, but depending on the type of vehicle you’re looking at, it still may be expensive. Payment options may also be more limited if the selling dealership doesn’t have as many financing routes to explore. In the end, you may feel frustrated by the lack of options that are present and clear to you.

This doesn’t have to be the case, however. Knowing more than the simple “buy here pay here” strategy can go along way. In other words, knowing the different options you have and how they work will help you make the best decision for yourself. If you know the details when your options are limited, you’ll begin to understand how each one may affect you and your financial situation. More importantly, you’ll begin to recognize or be able to explore other options you didn’t know you had initially.

Buy it Outright

Initially, you may think this is an impossible thing to do: buy a car outright without any payment plan or loan. For most people, this is true at the start. However, if you have some time and ability to save up, this can be the best option.

Buying the full price of the car means you are done after the purchase. You won’t have any more payment plans to worry about or a complicated loan application process to go through. Regardless of your credit history or financial situation, dealerships will always sell you a vehicle this way.

This can also give you more room for negotiation when it comes time to haggle the final price. Even though some dealerships offer their own financing programs, many sellers prefer a simple sale and will be willing to work with you to make that sale happen. Whether it is lowering the final price, adding extra features, or expanding your coverage through the dealership or manufacturer, this extra room for negotiation will only benefit you in the long run. Lower costs, more substance, and a better peace of mind are all possibilities when you buy a car outright.

The thing is, it doesn’t take being rich to do this. It only takes a little bit of planning. If you don’t need a new car for a while, save up. Take out as much as you can each month to build up the fund before buying the vehicle. When it comes time, set a clear budget so you don’t go over. If you can keep your budget in check, you will be able to filter through different possibilities rather quickly. Anything that goes over shouldn’t be on your radar.

Traditional Financing

For many people, buying a car outright just isn’t a possibility. Maybe your usual expenses are too much or you need a car a lot sooner. Either way, there are other options available.

The most common is the traditional auto loan. Whether it’s through a bank, credit union, or dealership, an auto loan gives you the money up front to afford a vehicle. The amount they provide will depend on your credit history, current financial situation, and the amount you’re asking for. In order to really get the best deal on an auto loan, you need to know as much as possible upfront about what you’re getting yourself into.

All auto loans come at a particular rate. This means that you will be paying more in the long run for the vehicle than you would buying it outright. The beauty of an auto loan, however, is time. Typical loan terms are around five or six years with monthly payments. This type of setup allows you to budget each month so you aren’t overstretching your funds. This also allows you to continue to pay for other expenses like home or apartment, insurance, and smaller things like food. You may even keep some for the fun stuff as well.

To keep yourself from getting into a bad financial situation, do your research upfront. Before you apply for loans, explore the terms of different banks and dealerships to see what the best options are. If you have any questions about them, get them answered upfront. Most people have issues with auto loans because they don’t understand the fine details before signing on the dotted line. You will save yourself from a lot of headache by doing your homework ahead of time.

Challenging Credit

If you feel that a traditional auto loan just isn’t possible given your credit history, there are still options. While typical auto loans have high standards on the type of credit they consider and accept, other loan providers may be willing to work with you.

Bad credit auto loans, for example, are a common solution many people pursue when their credit is less than ideal. These loans come with higher rates, meaning you will be paying more in the long run than a traditional loan. However, the monthly payments are often about the same amount so you won’t have to sacrifice as much in the short term.

This kind of loan not only helps people afford the car they want, but it can also allow them to fix their financial issues at the same time. Having more money to spend each month on other things, such as credit card bills and other debt, will reduce the financial hardships over time. Making reliable and consistent monthly payments on a major item like a new vehicle also improves your credit score. This shows credit reporting bureaus that you’re capable of making reliable payments so a future loan application may be an easier time.

You should also explore simple steps you can make before applying for a loan to improve your credit score. Look for any flaws or mistakes made by credit card companies and reporting bureaus. For example, sometimes they’ll neglect to mark that you have paid a bill on time. This will negatively impact your score when it shouldn’t. Challenge these mistakes immediately so you can get them fixed before applying for the loan.

Any kind of debt you can also pay off will help. Small amounts, even if it’s not the total, will slowly improve the score since it is partly based on your debt to credit limit ratio. The more space you have between your credit limit and actual debt, the better.

Making the Right Decisions

More than anything else, it is important to explore your payment options with all the information available. If there’s anything you don’t understand, ask people for help. Accurate and clear information will ensure you have everything you need to make the right decision.

Take some time to think about your options as well before making a final decision. As you learn more and more about each option, it can quickly become overwhelming. You have to give your brain time to process all the information before it is ready to decide. Take a few days if you don’t need a new vehicle right this minute. In the end, you should feel confident about your choice.

You Can Still Get a Great Vehicle with BHPH Financing

Some people think that choosing a Buy Here Pay Here loan or other bad-credit financing means that you’re stuck with only the worst options for a vehicle. While it’s true that your options will be somewhat limited when compared to someone with excellent credit and a high income, that doesn’t mean you have to settle or give up on getting a car you’ll love. It really comes down to understanding what your limitations are and then working within that to still get something great that you’ll enjoy for a long time.

With that in mind, it all starts by understanding how Buy Here Pay Here financing works and then using that to your advantage. With a traditional loan, you’ll typically go to a dealership, find a vehicle you like, and then find financing that will help you pay for it. If you have good credit, then that kind of shopping experience can be a lot of fun. But if your credit is in rough shape, then it’s easy to fall in love with a vehicle only to discover that you can’t afford it, and you can feel like you’ve wasted your time.

Buy Here Pay Here financing turns the process upside down: first, you figure out what kind of loan you can get, so you know your budget, and then you look at vehicles that fall into that. If you’re expecting the process to be like shopping with traditional financing, then you could be in for some disappointment, so knowing what to expect helps quite a bit. By knowing what you’re in for, you can start off the right way – don’t waste your time looking at every vehicle that’s available when you won’t be able to afford them. Instead, use this process to your advantage and focus on only those models that fit into your budget so that you can find the right one.

Finding the Right Car

If your credit is in bad shape and you’re going to need Buy Here Pay Here financing or a similar bad-credit loan option, then the most important thing you can do is use this situation to your advantage. First things first: stick to a budget. You can talk with your dealership to figure out exactly what your budget looks like based on your credit score, then use that information to focus on vehicles you can afford. If you know that you qualify for an $8,000 loan, for example, then don’t start looking at SUVs starting at $20,000 – that’s just going to leave you exhausted and angry.

Instead, use that information and look at vehicles under $10,000 to find one that will work for you. This is where going to the right dealership is really going to help you out – a small dealer with just a few dozen vehicles on hand might only have one or two models that fit your budget for you to choose from. Who wants that? Just because you need BHPH financing and you have a strict budget doesn’t mean you should have to settle for the slimmest of slim pickings.

A large dealership with hundreds of different models available is going to have a larger selection of low-price cars for you to choose from. You can also use your budget to guide you in what vehicles you’re looking at and how you compare their specs and features. Every extra option and feature increases the price of a vehicle – so you’ll need to decide on if you’d rather have a more powerful engine but a weaker sound system or more of the bells and whistles inside but only a standard engine. Keep in mind that aftermarket additions are always a possibility down the road, and it’s typically easier and cheaper to do something like adding a new sound system with better speakers rather than changing the engine, exhaust, or other mechanical systems.

Things to Consider when Shopping BHPH

One of the best ways to stay within a limited budget, such as what you’ll likely have with Buy Here Pay Here financing, is to increase the down payment you can make. Consider this: you visit us and tell us up-front that your credit is in rough shape, so we walk you through figuring out your options and find that a BHPH loan is your best bet. Looking at your finances and income, we determine that you can get a loan for $8,000 (just using an example), so now you can look at vehicles to figure out what you can afford.

With this example in mind, if you have $2,000 saved up for a down payment, then you’re looking at vehicles less than $10,000 as your absolute highest prices. On the other hand, if you’ve managed to save $4,000 for a down payment, then you can look at cars costing up to $12,000. In both cases, you’re getting the same loan and paying the same per month, but having saved more for a downpayment means you can get a nicer car. If you have $4,000 and you find something you like for $9,000 (for example), then you only need a loan for $5,000 – whereas if you only have enough for a $2,000 down payment, you’ll need a $7,000 loan. The difference that makes in interest while paying off the loan can be significant.

You still want to stick to a reasonable budget, of course. There’s no sense in making a bigger down payment if it stretches you too thin and you end up missing your loan payments, or you go into credit card debt because you spent too much. You always need to have a budget in mind and stick to it to ensure you’re able to afford your expenses – that’s the key to building good credit and taking control of your finances. As long as you plan ahead and stick to your budget, you can easily get a terrific vehicle that will treat you well, even with a BHPH loan.

Looking Ahead to Next Time

The other thing to keep in mind is that you’re probably not going to have your vehicle for 20 years – unless that’s something you really want to do. Even if you get a great vehicle with your BHPH financing, there’s a good chance that you’ll want to replace it within the next 10 years. Taking control of your finances often relies on sound financial planning; part of that is looking ahead to consider the future and how you’ll be spending in the years to come.

If you take advantage of your BHPH loan and make on-time payments, it can help you rebuild your credit, so you’ll have more options available to you next time. You can think of this as a practice run: with the limits on your budget and options, you’ll learn significant lessons about how to get the most from your money and what features are really important to you in a vehicle. So in five years, when you’re ready for your next vehicle and have more of a budget to use, you’ll be able to better narrow down your choices and get exactly what you want. Making the most of a BHPH loan and learning from this experience can really help you the next time you shop for a vehicle and make you a savvier, more knowledgeable shopper.