PAYING
FOR THE PURCHASE OF YOUR USED CAR
It's
a good idea to have all your questions about paying
for your car resolved before you start to shop. The
most difficult part about buying your used car will
probably be figuring out what you can afford. So how
do you determine what you can afford?
A
good rule of thumb: your monthly auto loan payment should
not be more than 20 percent of the money you have available
each month after you pay for your usual living expenses
— rent or mortgage, utilities, food and transportation,
credit card payments, etc. When reviewing your budget,
you should also take into consideration other associated
costs including fuel, license, registration, personal
property taxes and insurance. Call your insurance company
before you purchase your car to determine what the monthly
insurance cost will be.
If
you're taking out a car loan, figure on a down payment
of at least 10 percent. Lenders might be skeptical otherwise.
If you have enough cash available to boost that percentage,
do so. Cutting the principal of your loan will do more
to slash payments than getting a lower interest rate.
If
you have ailing credit, which can result from late payments,
you may find yourself in the "subprime" financing
arena. If you have credit problems, you should first
try to work with a consumer credit counselor or other
advisor. It may be possible to consolidate debts or
come up with a workable repayment plan. If you show
a loan officer that you are taking action to overcome
the problems, they may be more willing to grant a loan
at a reasonable rate.
In
addition, check out alternate sources for loans such
as the credit union at your workplace, your bank, or
other organization with which you are affiliated. As
a last resort, dealers may offer special financing packages
for those with credit problems. However, you might pay
as much as four percentage points more for a loan.
HAPPY
DRIVING
Buying
a used car involves some uncertainties, but the market
has improved over the past few years. Cars are better
made, have much improved safety systems, and, along
with proper maintenance, can last for many years. You
can avoid many of the common pitfalls by taking a few
steps early in the process and answering certain questions
before you start to shop. More importantly, new technologies
being used by manufacturers and mechanics combined with
the availability of easy to access vehicle history information
go a long way towards leveling the playing field for
today's used car shopper.
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