What should you do if you need to buy a car before you have finished repairing your credit, or while you still have payments to make in a Chapter 13 bankruptcy? If you are used to buying new cars straight from the dealership, be prepared to adjust your approach.
Did you know that a $20,000 car is worth a couple thousand dollars less the second you drive it off the lot? A used car in good condition is often just as a good as a new car, because part of what you pay for in a new car is merely the cachet associated with having something new. A best practice for avoiding financial pitfalls is to make rational purchases that conform to your spending ability. Lest those monthly payments come back to haunt youâ€•the last thing you want after a successful bankruptcy!â€• it's time to think beyond credit traps.
If you find yourself needing to buy a car, why not pay cash for the total price? For a few thousand dollars, you can buy a perfectly good car that can carry you around for years; no credit check, no monthly payments, no worrying about repossessions. Look to make a private purchase from an owner; avoiding a dealership altogether can only save you money and pressure to spend beyond your means. If you need to buy a car while you're still making payments on a Chapter 13 bankruptcy, you may need to obtain permission from the trustee to do so; however, if you buy a sensibly priced (read: not exorbitant) vehicle, this shouldn't present a serious obstacle.
A good place to look for cars is the classified section of the newspaper, or, even better, on-line classified services like Craig's List (www.craigslist.org) where ads will generally contain pictures of the vehicle. Once you've gotten in contact with a seller, you should obtain the car's Vehicle Identification Number (VIN) and run a search on its records to discover whether the auto has been in any serious crashes or required major repairs. Fender-benders are no problem; serious front end crashes requiring reconstruction or electrical problems can spell major trouble. Searching the car's records is a good step, but you should also have a trusted and experienced mechanic examine theÂ vehicle before you buy it. A mechanic will also help you to determine whether a used car will require major repairs. Ideally your car should require no more than tune-ups or perhaps a few inexpensive new parts. A new radiator for a Honda is pushing it at about $300; a new transmission can cost as much as $2000!
If you're just starting out, let a trusty used car do the job. In the meantime, work to rebuild your credit while avoiding interest payments on a rapidly depreciating asset. With careful work, you could save up to finance a new car in your future or even buy one outright! Still, when you get to that point, it might be a good idea to buy a car that's two or three years oldâ€•that way you get most of the benefits of a new car without paying for novelty.