There are many things to consider before buying a car with bad credit. While some of these items apply to all car buying decisions, they should especially be considered if you have bad credit.
1. Is this car purchase absolutely necessary? - If you have bad credit you should only purchase a car if you absolutely need it. Buying a car simply because you want a newer model is not reason enough to further your debt burden, especially if your current vehicle is in good working condition.
2. Can you afford the monthly payments? - Consider all of your debt and financial obligations before making a decision to buy a car. Be sure to budget for expenses such as groceries, bills, and other items many people forget to consider before taking on a bad credit loan. Don't forget to leave room for emergencies and savings.
3. Would it make sense to wait a few more months and improve your credit score? - Your credit score is one of the main factors in determining the interest rate offered by the lender. If you do not absolutely need to purchase the car now you might be better served by waiting a few months while at the same time begin repairing your credit. Improving your credit score will save you money by having lower interest rates.
4. Did you shop around for the best price and interest rate available? - Make sure that you are getting the best rate that you can. It usually makes sense to shop around and find the best deal you can for the vehicle you want. Remember that the credit bureaus take into account that you are shopping for the best rate so multiple inquiries on your credit history within a reasonable amount of time will not hurt your credit score each time you apply.
5. Is the car practical? - All too often we get questions to help get financing for cars that are well beyond what the potential buyer can afford. If you have bad credit it is not practical to try purchasing a new car that is $40,000 and beyond. It is most practical to look at cars at $25,000 and below and consider buying used. Get your credit in a better situation before buying a dream car.
6. Are you prepared for other costs related to owning a car? - The financial responsibility of a car goes beyond the car loan. You need to budget for regular maintenance such as oil changes, tires, brakes, etc. Also, you need to factor in the yearly insurance fees, state registration, and inspection and emissions fees (if required). Furthermore, consider situational expenses such as daily and monthly parking fees. Finally, take into account for the cost to fuel your vehicle. If you currently do not have a car you should calculate the cost to fuel your vehicle. Whereas if you already own a car you should factor the difference between your current vehicles fuel efficiency and the mpg of the car you intend to purchase.
7. Will this help or hurt my credit situation? - A car loan can have a major impact on your credit score. If you pay your car loan on time every month and do so regularly, the loan will have a positive impact on your credit score (assuming you take care of your other obligations as well). On the other hand if you run the risk of not paying your monthly car loan bill then buying the car is not the best decision. This will lower your score and further complicate matters in the future.
Follow this advice to make sure that your decision to buy a car is the right decision. Remember that the nostalgia of owning a new car only lasts about as long as the new car smell.
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