Is Financing a Car Wise

At some point in life we all find it difficult to steer through the world of credit. If we have too little, we can get declined for loans and mortgages on the foundation that we are not able to provide any financial responsibility; however, if we have too much we can get punished for been unable to live within our means. Of course, the world of credit allows us to buy the things we have always dreamed of like a house, car or maybe a holiday.

In particular, sometimes credit can be a useful instrument or a great way to obliterate your existing finances.

Getting a car loan is no different. Used correctly a loan for a car can help build up your credit, enabling future lenders to see that you are a trusted borrower with a great track record. However, you should only obtain car finance under specific conditions, and if any of the following circumstances apply to you, do not take out finance on your car!

You have a poor or adverse credit rating. Would you pay thousands of dollars in high interest payments just because you have performed one or two late payments? Almost certainly not. Saving for your next car purchase instead of obtaining credit would save you a bucket load of cash. And if you need a car in a hurry and are not in the position to save up the money in time, then ensure you pay off that loan as soon as physically possible, otherwise you will be flushing your money down the toilet.

Older cars offer a higher spec for my money. It's a well known statement that you can get more car for your money if you look at models over 3 years old. However, remember that old cars (regardless of make) tend to break down sooner or later, and that would leave you with a car still to pay for that is currently off the road. Watch out for dealerships that offer cheap financing deals on a possible clunker, especially if the life of the loan goes beyond two years.

SUV's are safer. Although it's a well known fact that SUVs brag a good safety record, they are rapidly going out of fashion. Let's face it, they're BIG, noisy and not easy on the wallet either! Whatever you do don't finance an SUV!. You'll be paying more in interest for the foreseeable future than what the vehicle would be worth in a year or two.

The Automaker Is Going Under. Yes, the dealers of dying automakers are absolutely desperate to sell their cars – however, you need to be careful of financing these cars, since your warranty is not guaranteed. This means that should you get into an accident, you'll have to pay thousands out of pocket for repairs, or buy a new car altogether. Again, the option of paying off two loans for the price of one is not too appealing – so don't do it!

Accordingly, do the right thing by saving for a car that is within your budget, and avoid financing a car within the current climate – your bank balance will be better off for it.