With the credit crisis very few people can purchase a car with their own money; most people are struggling. But if you have bad credit and you need a car to go from point A to point B that can be a challenge. There are companies that exclusively furnish car loans and help people with bad credit to find one. As with all other loans, there are pre-conditions to also. The lending institution will have to be convinced of your credit worthiness, or in that case, your ability and willingness to repay. Until you pay back your entire loan the car will be the property of the institution that has lent you money. If you default on payment, the lending institution has the right to re- possess your vehicle. Money lending institutions can be as polite as you please while you are negotiating the loan. But when you default, a different side is revealed and they can be really nasty. Here are some tips to follow before you buy your car:
Buyer is King
Car makers have cut production, but they haven't shut down. Dealers still have to move the cars inventory that roll off assembly lines, so many vehicles are going for near-invoice prices. As icing on the cake, carmakers have turned to low-rate financing and cash rebates.
Vehicle sales for the first three months of 2008 were down 8% compared with the same period in 2007. And incentives are up. For example, GM is spending $3,300 on incentives per vehicle (including cash rebates and subsidized rates and leases), compared with $2,800 a year ago, according to Edmunds.com
If you decide not to take an automaker's low-rate offer, expect to pay 6.8%, on average, for a 60-month loan, according to Bankrate.com. You may do better at some online banks and credit unions, where interest rates are as low as 5% for 60-month loans. Visit companies like that offer bad credit car loans. There system allows lenders to bid on finding you a car loan.
With the economy in limbo, carmakers expect even fewer sales than last year and are not likely to curtail the come-ons. If you want the best bargains along with your choice of options and color, shop before August. After that, the deals improve but selection may be sketchy.
Car Tax Credit
With the government given in 2009, you might want to consider buying an inexpensive new car. The deduction is limited to the state and local sales and excise taxes paid on up to $49,500 of the purchase price of a qualified new car, light truck, motor home or motorcycle. The amount of the deduction is phased out for taxpayers whose modified adjusted gross income is between $125,000 and $135,000 for individual filers and between $250,000 and $260,000 for joint filers.
In addition, if you consider buying a hybrid car look for one that is on the government's list that allow you to file tax credit. This is usually called a Hydrid tax credit.
Purchase a Reliable Used Vehicle
The car market in Silverdale or Oak Harbor is similar to the auto loan market elsewhere in Washington. Used car prices have been on a decline for about a decade, so it is advisable to purchase a used car or truck rather than a new one. In addition, new car losses about 15 to 30 percent of their value as soon as they live the dealership, so used cars are a better option finance wise. A reliable used car with great fuel efficiency is the best option. Here are three cars that are highly recommend based on price, maintenance cost, safety and fuel efficiency.
2003 Mazda Protege
Price range: $6,400 to $7,400.
Fuel mileage, city/highway: 25/30 miles per gallon.
Engine: 2.0-liter four-cylinder, 130 horsepower.
Interior space: room for five.
Safety: optional side airbags, optional anti-lock brakes.
Government safety rating: driver, five stars; passenger, four stars.
2003 Pontiac Vibe
Price range: $6,800 to $9,000.
Fuel mileage, city/highway: 29/36 mpg.
Engine: 1.8-liter four-cylinder, 130 horsepower.
Interior space: room for five.
Safety: side airbags optional; anti-lock brakes optional.
Government safety rating: driver and passenger, four stars.
2004 Scion xB
Price range: $8,900 to $9,700.
Fuel mileage, city/highway: 30/33 mpg.
Engine: 1.5-liter four-cylinder, 108 horsepower.
Interior space: room for four.
Safety: no optional side airbags; anti-lock brakes standard; traction control standard.
Government safety rating: not rated in 2004 (four stars for driver and passenger in 2006).