Do you need a car but are short on funds? There are many different ways for you to finance your next vehicle purchase without shelling out a treasure chest of cash you don’t have.
Get Prepared To Meet The Salesman
The number one thing to consider before a car purchase is the ultimate function of the vehicle. What is the car being used for? If you can answer this question clearly, then you stand a much better chance when you walk into the dealership door and enter into negotiations with a sales agent who is essentially a professional trained in the explicit art of getting you to throw your money at them.
Go Without Down Payment
The first issue many people struggle with is the down payment. There is a very common misconception that you need to have a down payment to be able to buy a car, and this is where many people who are short on cash worry they may not be able to afford the car.
Down payments are helpful in lowering your monthly cost, but the ratio of costs lowered monthly to your down payment amount isn’t very good on your end. If you can’t afford the down payment, then negotiate hard to get a deal without a down payment. Be prepared to walk away if they don’t look like they’ll budge and move on to a different dealer if they don’t.
When you’re in a pinch, a down payment just doesn’t make financial sense. You’ll end up paying more for the car later, but you’ll have your vehicle if everything else goes smooth and you can afford your monthly payments. Some dealerships are even offering 10 year financing options, so make sure you explore your options thoroughly with the dealership.
Look For Used
Another idea is to avoid buying a new car altogether, and buy a used one. While there are many great resources for buying a used car online, dealerships usually have a few good pre-owned cars in their lots and these may just be in your budget if you are short on cash. In fact, even if you aren’t in a bind, you should still consider buying used.
A car is not an investment; it is a liability as soon as you buy it! Buying a new car can seem enticing, but know that a brand new car depreciates value very fast. You are much more likely to get an affordable deal if you decide to purchase a pre-owned vehicle that’s one to two years older than the one you want new. If you really like the features of the newest model, then opt to wait a few months and buy a used one then.
Look For The Best Credit
The last factor to consider is the actual financing of the vehicle. Car dealerships offer you deals based on their interest rates and the payments they want to receive, but dealerships are also known for marking up the interest on your end, collecting the difference as pure commission for the salesperson who made the deal.
It may be convenient to negotiate with the dealership itself, but if your credit is good, you may opt to take the loan out at your bank beforehand for a predetermined amount and purchase within that budget range. This way you can buy the car outright from the dealership and pay the (usually) lower rate to your bank or lender. This option is particularly useful for purchasing used cars that are a few years old and are slightly out of your financial means at the moment.
Like with any type of financing, be careful to read the fine print and understand how often the interest on the payments compound and if they are subject to change or locked. Even if you have bad credit will be able to finance a vehicle, but you have to search for the financial institution that will give you the loan you need.
Don’t Buy: Lease
An alternative option that doesn’t involve ownership is leasing. Leasing a car gives you the option of having newer cars without having to put down as much down payment and for lower monthly fees. However, the details can differ greatly depending on the car and some models may indeed require a high down payment. Overall, if you lease a car and decide to buy it at the end of the lease, then it will cost you more. Leasing is definitely an option for those who can afford a constant stream of monthly payments and down payments, but chances are if you’re in a bind and need a car, you aren’t going to be looking to lease.
This is a guest post by Nate Miller, a regular writer on business and personal finances. Nate is a huge car and motorsports fan and he is currently working for a UK based car finance company, Car Finance 24/7 who can help you get your dream ride.