When the sounds of your old clunker begin to indicate that its time of demise is certainly drawing near, you may begin to panic at the thought of trying to obtain another vehicle, especially if your credit is less than stellar. This is a natural reaction, but obtaining a reliable vehicle is not impossible for those with a history of bad credit. It just requires a little more care and cautious planning.
The following information will help consumers with shaky credit scores to get the best possible deals and avoid some of the pitfalls of purchasing a vehicle when their past financial behaviors or bad luck has left them in severe financial distress:
Take These Actions
Buying a vehicle when plagued by past credit mistakes can be like traveling a road full of potholes. The following steps will give people with bad credit who need to bargain for a vehicle a greater chance of getting a good deal:
• Before beginning the process of looking for the perfect vehicle, closely examine the family budget. Try to determine a price range within which the family can reasonably expect to make payments and explore only the makes and models of car that would be within this range
• Get a free credit score online and work with an online Federal Savings and Loan Insurance Corporation (FICO) calculator to determine the expected interest rate charged to people with similar scores.
• Work to establish financing before visiting a car dealership of any type. It is possible to get preapproved for an automotive loan online. It may also be possible to get financing from a local bank or a credit union. Some online lenders are set up to work with people who need loans but have had bad credit on the record in the past.
• With pre-approved financing in hand and an excellent idea as to the type of vehicle that the family needs, it is time to begin diligently searching for the best price on a car. This may involve an online search, a vigilant scanning of the newspaper want ads, and a visit to previously-owned vehicle dealerships. The idea is to know the market value of any vehicle that would fit your needs in hand before negotiating a purchase price.
• Bargain with confidence. The car dealers are determined to sell their cars, and buyers have to be just as determined to keep the price as low as possible. State pricing requirements firmly and refuse to listen to suggestions to move beyond the financing that has already been approved, even when promised additional options.
• Provide documentation of current trustworthy credit when possible. This might be a steady employment record, paid utility bill stubs, proof of a permanent address, or any other paperwork that might indicate that you are behaving responsibly.
• Shop for used cars, rather than a new one. Although new cars may be easier to finance originally, they depreciate significantly as soon as the driver takes them off the lot. The better financial choice is always to buy a previously-owned vehicle.
Avoid These Actions
• Do not be moved to go beyond the price that has been budgeted by the idea that a particular car is the only one available. If the price stays too high, move on to other sources. This sometimes results in the owner or dealer calling in a few days with a better offer.
• Do not trust a verbal agreement; get all promises in writing.
• Do not leave a dealership in a vehicle without signing a contract in which the interest rate is clearly stated.
• Stay away from loans that charge the consumer a penalty for paying off the vehicle early.
• Do not let a salesperson convince you that you need extra warranties, credit life insurance, or GAP policies. These will cause a huge leap in the payments each month.
While buying a vehicle through a big dealership may be the easiest method for those with poor credit to get their next car, it is also usually the most expensive. This option should only be taken when all other avenues have been checked and do not work. Exorbitant interest rates can lead to future credit trouble, and the cycle of debt may never be broken.