Buying a car on a payment?
I've been wanting to get a car since I got my license but due to financial issues I haven't been able to buy one. I was thinking of maybe getting a car on payment plan but I don't know how they work.
can anyone offer some advice?
- NeilLv 74 weeks ago
What you are talking about is buying a car on Finance.
It works like this: The finance company buys the car, you pay them a deposit (maybe via the dealer, maybe direct to the finance company), and agree to make a number of payments over a set term. The car doesn't belong to you until all payments have been made.
Usually you pay interest on the loan, so the total amount you pay back is more than the original amount you borrowed. There may be occasions where a manufacturer offers 0% finance (i.e. no interest) on a particular new car for a period of time, but this may mean you miss out on other offers so isn't always the best offer.
If you are not certain you will be able to make all the payments for the full term of the agreement, do not take out any car finance. It is only worth doing if you know you will have the spare income (after other expenses such as rent/mortgage, utility bills and general living costs) to make the payments.
- AlCaponeLv 74 weeks ago
Buying a car on a "payment plan" is called "financing" or "auto loan."
You can apply for an auto loan on your own at banks, credit unions, and finance companies — or at your car dealer who will apply on your behalf at the bank or finance company that he partners with. Regardless, in order to be approved you must be at least 18 years old, have a good credit history, and a good steady verifiable income that is sufficient to make the monthly loan payments as well as all your other expenses.
If you're approved, you may get the full amount of the cost of the car, or not. If only approved for part of the cost, you will need cash to cover the remaining amount, called a "down payment." Down payments are very commonly required for car loans. A down payment is not a returnable "deposit" ( a common misunderstanding) — it's a partial payment for your car and reduces the amount you need to borrow, which reduces your monthly payment amount.
It's good to make about a 20% cash down payment which not only reduces your monthly payment but helps keep you from being "upside down" (owing more than your car is worth) which can create problems of its own.
Your loan payment will include "interest", which is a finance charge which is the fee you're charged for using the bank's money. The total amount of interest you'll pay is based on the length of your loan and the APR (annual percentage rate) which is based in part on your credit score. The lower your score, the higher the rate.
Repaying your loan means making the first payment a month after signing your loan contract, not being late on or missing any following payments. Otherwise, you risk repossession, full payoff of deficiencies, and damage to your credit score. According to the way car loans work, each of your early payments will pay a large amount of interest and not much to the loan amount ("principal"). As time goes on, the amount of interest in each payment decreases.
- PoppyLv 74 weeks ago
After you turn 18 and have a year or more of work history, you may qualify for an auto loan. You will need a 10-20% down payment.
- MichaelLv 74 weeks ago
It's called an auto loan. You borrow money from a lender and pay them back over time, with interest. Reputable lenders who charge reasonable interest rates do not like to lend money to people with financial issues. There are non-reputable lenders who will lend money at unreasonable interest rates to people with financial issues, thus making that person's financial issues much worse.
My advice would be to ensure that you have steady employment and to resolve your financial issues before attempting to buy a car.