Buying a vehicle with that new car smell is most people's preference. The good news is that there are car dealers that will sell a new car to a consumer with less than perfect credit. However, with the terms offered on these types of loans, you should carefully consider whether or not this is the wisest financial decision for your situation.
There are many reasons you might prefer a new vehicle over a used one. For instance, there is the peace of mind of knowing it has no history of use or abuse. The unknown fear of breakdowns and repairs may be too stressful for some.
Even if you find a lender who can finance a new car, it doesn't mean that you should do so. However, do not rule out buying a used vehicle. For a subprime borrower who has poor credit, a new car loan may have a slightly lower interest rate, but, in some cases, the length of the loan is absurdly long in order to make the monthly payments more affordable.
Preparing to Buy a New Car with Poor Credit
Planning before visiting the dealership can help save you money. Order your credit report and thoroughly check it. Dispute any errors or inaccuracies directly with the bureau or information source. Removing them from your credit report can give your score a boost!
Lenders prefer to see situational, rather than habitual, damaged credit. Situational bad credit is when a good overall credit history has been damaged due to an unexpected life event, like a job loss or medical crisis. Whereas habitual bad credit is a pattern of poor financial practices, such as a history of late payments.
Another thing to consider before making the decision to buy new is the depreciation factor. New cars lose a lot of value immediately after you drive them off the lot. If you put little or no money down, you may be 'upside down' on your loan for a long time. That means you owe more than the car is actually worth.
Having poor credit is discouraging, but it doesn't have to stay that way. To help alleviate the risk of negative equity in your purchase, there are some things you can do that will make your car a prudent purchase, and set you up in the future for even better interest rates. To begin with, have at least a 10% down payment to strengthen your buying position and reduce the impact of interest charges. This is also the time to be practical; a smaller car is a more sensible choice than a luxury car or SUV. Finally, do your research and consider costs such as fuel, car insurance and routine maintenance.
With a realistic approach, while not overextending your financial situation, a car purchase can help re-establish your credit with timely payments. Canada Auto Loan specializes in damaged credit, and we can help you find your next auto loan if you fill out our quick and secure application today.