When Getting A Car Loan Is A Bad Idea
The world of credit can be difficult to navigate. If we have too little, we can get rejected for home loans and personal loans on the basis that we haven’t proven our financial responsibility; however, if we have too much, we can get penalized for not living within our means. Of course, credit allows us to make big purchases that we’ve always dreamed of, like a home, holiday or car.
In other words, sometimes credit can be a useful tool or a great way to destroy your finances.
If you are looking to get a car loan then rules are no different. Lenders will always take a positive view of you if you’re able to show a responsible repayment track record. On the other hand, you should only take out car finance under very specific conditions, and if any of these conditions apply to you, think twice about financing car!
You have a poor or adverse credit rating. Would you pay thousands of dollars in high interest payments just because you have experienced one or two late payments? Almost certainly not. Saving for your next car purchase instead of obtaining credit would save you a bucket load of cash. And if you need a car in a hurry and are not in the position to save up the money in time, then ensure you pay off that loan as soon as physically possible, otherwise you will be flushing your money down the toilet.
It’s An Old Car. Dealership financers are notorious for pushing dirt-cheap financing terms onto otherwise ignorant consumers. Why is this, you might ask? Simple: old cars break down faster, but you’ll still be forced to pay off the loan, even when you can’t drive the car. Feel like paying two car loans for the price of one car? Didn’t think so – so do yourself a favor by not financing a clunker or a car that’s more than four years old, especially if the life of the loan extends longer than two years.
SUV’s are safer. Although it’s a well known fact that SUVs boast a good safety record, they are rapidly going out of fashion. Let’s face it, they’re BIG, noisy and not easy on the wallet either! Whatever you do don’t finance an SUV!. You’ll be paying more in interest for the foreseeable future than what the vehicle would be worth in a year or two.
The Automaker Is Going Under. Yes, the dealers of dying automakers are absolutely desperate to sell their cars – however, you need to be careful of financing these cars, since your warranty is not guaranteed. This means that should you get into an accident, you’ll have to pay thousands out of pocket for repairs, or buy a new car altogether. Again, the option of paying off two loans for the price of one is not too appealing – so don’t do it!
Accordingly, do the right thing by saving for a car that is within your means, and avoid financing a car within the current climate – your bank balance will be better off for it.