Car Buying Credit
What is a "down payment"?
A down payment is the amount of money that you are basically putting up against your financing to reduce your month-to-month, or your full financing burden. So if you're going to be financing $20,000 for purchasing a vehicle, down payment would be maybe 10 percent or 15 percent of that, so that's the amount that's going to reduce your complete financing burden.
Can I buy or lease a car with no credit?
With regards to financing your car, credit is a massive consideration when buying a vehicle. Especially when you consider that besides a house, a car is going to be the second largest purchase you are going to make. Credit is a big thing to consider. However, if you have very little credit or potentially damaging credit, there are still ways to get into vehicles. A way to own or lease a car with no credit would be going to particular dealerships that handle the financing themselves, as these dealerships are able to get you a higher interest rate. However, you will get financed.
What is a "credit report"?
A credit report is a compilation of your buying history. They're usually done by the three main companies; Transunion, Equifax, and Experia, and these companies are used as a report card. This basically outlines how you have handled your finances and your buying responsibilities to people who are potentially looking to extend you a new line of credit.
Should I know my credit score before applying for financing?
Knowing your credit score is a very important thing if you're going to be responsible with that number going forward. A good rule of thumb to check that credit score at least once a year, to make sure that it reflects fairly what your buying and financing habits have been. When you're looking to buy a car it's absolutely imperative to know your credit score because, depending on state to state and area to area of the country, a dealer can add a certain amount of points to whatever interest rate they're going to give you, if you're doing the financing there at the dealership. Basically it's an additional profit margin for the dealer, so it's very important to know your credit score, know what sort of interest rate your credit score would deserve, so that when he comes to you and says the best he can get you is 10%, you know that your credit score is worth 8%, and thus you know that 2% is coming from what he's added on. Then that becomes something you may want to go and negotiate on as well.
What can I do to improve my chances for approval on a car loan?
With regards to financing your car, when improving your chances for an approval on a car loan it is very important to make sure that your payment history is number one, solid. You need to be making your payments on time and very up-to-date. So, as you are preparing to go in and negotiate for a car, make sure you've got your ducks in a row and everything clear and ready. The second way of improving your chances for an approval on a car loan would be to have some money available in your checking account or savings account. This is because when the person who's going to be extending you the new loan looks into your report, they see that you do have money at the ready. Therefore when seeking an approval for a loan or finance, you are basically looking at financial things that are going to make the person loaning you the money the most confidence.
What does "upside-down" on my loan mean?
With regards to financing your car, many people find themselves “upside down” on their vehicle loan. Two years into their loan they recognize that the vehicle is not meeting their needs; they go to trade in the vehicle, research the situation and find out that they owe $15 to pay off the loan. However, the vehicle in the marketplace is now worth $10. Therefore now there's now that $5 gap, this is known as being upside down.
Should I buy a car if I am upside-down on my loan?
Looking to purchase a new vehicle when you are upside-down in your current vehicle is a dangerous place to be and dealers will make it easy for you. They will somehow magically take the gap you owe on the vehicle and what the market says the vehicle is worth and make it disappear. They're not making it disappear, they're not being generous and paying off that difference on your behalf. They're just going to take that gap and move it into the financing on your new vehicle. So in essence when you drive off the lot in your new car you are still going to be paying for your old car if you have been upside-down on that vehicle. It's a very bad spiral to find yourself in. So if you're upside-down your first move is to identify if you really need a new car, can you pay off additional per month to close that gap down between the market value of the vehicle, what you owe, or decide if you can keep the vehicle until such time that that ratio balances back out.
Will a car dealer sell me a car if I have bad credit?
Car dealers love to sell vehicles to people with bad credit because the financing part or the credit side of the business is quite often where they make a bulk of their profit. Both kickbacks from the financing company, and ability to add additional percentage points to the financing - these are places that car dealers get very rich on. So, just because you've been approved doesn't necessarily mean you should also buy.
