People who don’t have a lot of cash but find themselves in great need for a particular asset are often vulnerable to making some big mistakes. It’s important to know that you can acquire a car if you don’t have much money to buy one outright, but you need to consider your options carefully.
A lot of people – and this goes especially for car fans! – don’t think too much about the financial aspects of getting a car. They think only about raising the money required to buy a car in full and then picking the one that’s most aesthetically pleasing to them. You need to take the smarter thinking route.
Don’t rush things!
One of the biggest mistakes you can make here is getting a car before you’re really ready to do so. It’s true that it’s possible to get a car even if you don’t have a substantial amount of money, but this doesn’t mean you should rush into the decision. It’s a financial commitment. If you’re going to go with a finance option, then you’re going to be paying monthly after acquiring the vehicle. You also have maintenance costs to consider, as well as insurance premiums.
The key to getting out of this process with a good car and your wallet intact is to be very careful. This doesn’t just mean shopping around carefully, though you need to do this, of course. You should be setting yourself up to get the best loan option possible. By maintaining steady employment, and remaining at the same address for more than a year, you’ll look a lot more reliable to potential lenders. Work on those things for now.
Why are you strapped for cash?
This is an important question to ask yourself if you don’t have much money but are planning on entering some kind of financial deal (e.g. the type that you have to enter in order to buy a house or a car). If you’re strapped for cash because you don’t have a job, then getting a car isn’t recommended. You should be pouring your energies into getting an income for yourself before thinking about getting a car. You need a steady source of income, a good amount of savings, and, if possible, paying off any debt you already have. While those things aren’t exactly going to make you rich, they will put you in a much better position to buy a car.
If you feel that you’re ready, then the best way to get a car when you don’t have thousands in the bank is to look into getting a loan. Many people in precarious financial situations often don’t see this as a choice. The world ‘loan’ frightens them away, because it comes with another word: ‘debt’.
But if you really need a car and you don’t have the money to buy one upfront, new or used, then a loan could be the best option for you. The way to ensure that you don’t further disrupt your finances – which is what those strapped for cash are afraid of doing! – is to shop around for a loan carefully. Don’t just look for car finance – look for affordable car finance, be it with a hire purchase from a dealership or a secured loan from a trustworthy independent lender.
This may seem like a really obvious suggestion. A number of readers probably said “duh”, or at least thought it. But a lot of people out there have some kind of prejudice against used cars. There’s a mindset among a few people that a used car will, ultimately, turn out to be bad value, because their lifespan can’t be anywhere near as long as that of a new car.
So, on the off-chance this is the sort of thing that’s running through your head currently, rest assured that a good used car can last you for years. Sure, you’ll have to invest in maintenance throughout its lifespan – but this is true for any car you buy.
Another reason people tend to lean towards new cars is that they’re convinced cars make a good investment. This cannot be stressed enough: a vehicle is not a good investment. They decrease in value too fast. In fact, this is why a used car of similar quality to a new car can go for so much less. Your average new car will decrease in value by as much as 40% in the first two years. So buying a car that’s a couple of years old can see a corresponding price slash!