“Drive away in a new car today with No Money Down!” Offers like these can seem enticing, but how much they will actually benefit you depends largely on the current state of your credit. When thinking long term about the affordability of a car purchase, you will want to consider the total cost of the vehicle when interest rates are figured in, as well as how negative equity may affect your finances down the road.
Being upside down – or “underwater” – on a car loan is a situation in which you owe more money on a vehicle than what it is currently worth. This means that if you attempt to sell it, you still owe your lender money. In Travis’ case, he had bought his car with no down payment and a payment plan of 60 months, and was about halfway through his loan. He owed thousands more than it was now worth.
According to a 2013 study by the Bureau of Labor Statistics, both parents work in 59.1% of married couples families with children. When you take that into consideration, this suggests that when couples split up, both sides are likely to take a significant financial hit to their income and credit. When you go from a two income family to one single income, there are a few things that can negatively affect your chances for getting auto loan approval.
Sometimes your decision to buy a car is based on immediate necessity, and if this is the case, you’re going to want the process to go as quickly as possible. You’re looking for an expedited loan approval, and you may very well be able to get just that. Everything is just going to depend on the current state of your credit and how well you are prepared.
Bill purchased was a 2001 Volkswagen Golf for $1,500 from a private seller. Since he needed it fast, he made a couple of fatal mistakes when he bought it. First of all, he didn’t get it inspected by a mechanic, and he borrowed the money he needed for it from a friend. The car ran like a dream when he bought it. However, about four months later, the engine died. The remaining year for Bill, quite frankly, was hell.
It really comes as no surprise as to why leasing is so popular. First of all, it’s simple and convenient. Secondly, you get the newest and snazziest ride. On top of that, the maintenance you have to perform on it is extremely low. Finally, some lease offers don’t even require a down payment. These are some absolutely fantastic offers…that is, if you have excellent credit.
According to Experian Automotive, 27.6% of new car loans in the first half of 2014 ranged from 73 to 84 months. With these longer payment plans becoming a trend, people might begin to think that extended loans are a good idea since it reduces the monthly payment. But is a long loan term the best approach to getting a new car? Not really, and I’ll tell you why.