Making the Right Decisions

January 26th, 2018 by

Buy Here Pay Here

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.

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