Used Car Financing

If you are in the market for another car, you are probably wondering whether it is better financially to buy a new car or a used car. There are a lot of pros and cons to each and it really comes down to the choice that is best for your situation.

If you are looking to finance the car, the rates are much better for new cars. In addition, you will get the latest style, technology and safety features with a new car. Currently, you will get special factory incentives, rebates, discounts and free extra features on a new vehicle. New car warranties cover a lot more than they did just a few years ago and most new cars come with free roadside assistance during the warranty period. The short term maintenance costs are much lower for new cars as well. If you do end up buying a car that develops significant problems, there are lemon laws in most states that will protect you.

One big negative associated with buying a new car is that the sales tax is usually calculated before the incentives and rebates are tallied. Another big problem with buying a new car is that it depreciates as soon as you drive it off the lot. Some car buying guides suggest that new cars depreciate between 20% and 40% over the first 2 to 3 years.

One advantage of buying a used car is that you avoid that huge depreciation. If you purchase a late model used car, you will also get the remainder of the factory warranty. Since the purchase price is less on a used car, you will pay less sales tax and your car insurance will be less. These savings will be offset by the higher interest rate you will have to pay for the loan on the used vehicle.

Perhaps the biggest disadvantage of buying a used car is that you may be buying someone else’s problem. In most states, used cars are not covered under the lemon laws. You are also subject to getting scammed by an unscrupulous dealer or person trying to sell you a previously salvaged, wrecked or flooded vehicle. You can avoid this by getting a Carfax report on the car and having it inspected by a qualified mechanic.

Of course another issue with buying a used car is that it already has the wear and tear associated with its age and mileage. For this reason, your maintenance costs will be higher on a used car. Also, you will not know how well the car was maintained by its previous owner. Again, you should have the car inspected. The mechanic will be able to give you a lot of information about the condition of the car. Those things will include the condition of the brakes, tires, hoses, belts etc. You should never purchase a used car from a private party without having it inspected first.

There are a lot of things to consider when making the decision between buying a new car or an older one. It really comes down to your financial situation and your comfort level.

So where exactly is the best place to get a car loan when you’ve got bad credit?

First of all, you certainly want to avoid the following…

Avoid Buy Here Pay Here Dealerships. These types of establishments that offer in-house financing charge extremely high interest rates, price their cars at retail or above, and generally always want a down payment. This is not the best place to get a car loan and certainly not if you’re wanting to save money. Buy a car from one of these places and you’ll be paying not hundreds, but thousands of dollars more for finance charges than you have to.

Avoid Dealer to Dealer Hopping. Don’t go hopping from one dealership to another trying to get approved. So many people with bad credit do this and it leaves large numbers of credit inquiries on your credit report. Those inquiries stay on your credit report for two years and they show that you’re having a hard time getting approved. When you go to a second or third dealership trying to get approved, the dealer can see the banks and loan companies that you’ve been sent to already and have been turned down. So, if you’re doing the dealer to dealer hop, stop now!

Online Lenders Save the Day. If you have bad credit, the best place to get approved for a car loan is online. Now don’t go entering your information into 15 websites. There are a couple legitimate sources on the internet that allow you to either search through a database of lenders. There are also sources online that will pair your credit history with lenders that are guaranteed to approved you. In my opinion, online sources are the best place to get a car loan if you have bad credit.