Purchasing an automobile is often a complicated process that requires many decisions. Individuals have to decide on the car itself, how it will be paid for, and if any warranties will be bought. While expert car buyers may know exactly what to do, others could be left wondering what to buy and which offers to pass on.
When you are purchasing a used car, it may – or may not – have time left on the original manufacturer warranties. If the vehicle has exceeded the terms of the original warranty, you may want to purchase an extended warranty, also known as an extended service contract.
Since leases are typically for brand new vehicles, this means that the same rate of depreciation applies as if it were financed. Brand new vehicles lose at least 10% of the purchase price as soon as they are driven off the lot. And a new car will lose at least 20% of its value in the first year. Gap insurance covers the difference between the purchase price and the actual value of the vehicle.
When you are ready to sign the papers that will close the deal on your next car, make sure that you understand exactly what you’re paying for. Don’t focus on the monthly payments, but consider the whole cost of the vehicle. This way, the dealer won’t be able to sneak in any unnecessary expenses.
Credit-challenged car buyers, especially those on a tight budget, should seriously consider automobile gap insurance when their annual mileage is above average, the finance term is over 60 months and the total down payment is less than 20 percent.
While it is important to watch out for dealer add-ons when you’re buying your car, you don’t have to be too jaded about all of them. A few of your available options are potentially useful, depending on your situation. Just make sure that you’re getting the best deal possible before adding any extra expense to your auto loan.
From our own experience, one key to successfully completing a subprime car loan is the ability to keep a vehicle in running condition. In many cases, a service contract can help borrowers on a tight budget avoid unforeseen expenses while keeping their credit repair plans on track.