Life After Bankruptcy: Working With Dealers to Finance A Car

Submitted by Jen Jones on Wed, 07/29/2009 - 10:37am

Life After Bankruptcy: Working With Dealers to Finance A Car

After bankruptcy, you're back in control and you want to keep it that way by developing sound financial strategies. When you're ready to make major purchases, such as your first car purchase after bankruptcy, you want to be careful not to repeat mistakes. Let's take a look at one aspect of buying a car: financing a purchase with a dealer. If you can do it, buying from an owner and paying in cash can help you avoid dealers and car debt altogether. These are great solutions, but sometimes you have to deal with dealers, so we want to give you some tips for keeping the upper hand when buying a car. As with all professions, there are good dealers and there are bad dealers out there. Remember that you don't have to work with someone who is trying to rip you off or pressure you. Still, even the best dealer is still trying to sell you something, so you should definitely have a plan before you buy. First, you need to figure out what kind of car you need. Be as pragmatic as possible and do your homework.  With careful planning, you should be able to find a happy medium between a car that meets your needs and a car you can afford comfortably. Don't buy the most expensive car you can afford--buy the cheapest one that meets what you're looking for. Even if you aren't going to buy the car outright, you will need money for a down payment, so you should figure out when you'll need the new car, how much you can save up until that date, and what kind of payments you will be comfortable making. Obviously, the more money you put down, the smaller your payments will be. If you need a car immediately, you might consider buying something cheap direct from an owner until you can save enough for a better vehicle. As long as it doesn't need repairs, there's nothing wrong with driving a clunker just for a few months! Don't make a typical mistake of people budgeting for a car purchase: your monthly payment should not only be affordable for you, it should also be low. When you're calculating the figure, don't come up with the most amount of money you can afford in your current situation; come up with an amount that you'd be able to continue paying should your situation change. Once you've gotten some money together for a down payment, you will need to figure out what you can pay monthly. Here, you and a the financier are at cross purposes. She will want you to commit to as large a payment as you can possibly afford, and you want to pay as little interest as possible. Don't cave to the pressure! This is why it's essential to walk in knowing how much money you want to spend on the total purchase as well as on a month to month basis. Once you've got the figures, don't budge from them, no matter what the dealer tells you. As discussed, you should try to keep your payments low. One way to do this is by spreading the loan out over a longer term--for example, four years instead of two. As people in financial trouble know all too well, your financial situation can change dramatically from one day to the next. You should also be careful about committing to payments for a longer term in order to buy a more expensive car than you budgeted: if you can buy a $7,000 car in two years, don't let the dealer talk you into buying a $14,000 car in four! When buying from a dealer, a good plan is essential. A successful bankruptcy puts you in the driver's seat of your financial life, what comes after is up to you!

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