If you’re in the market for a low cost used car, do yourself a favor and see if you can get approved for personal loans before financing the car. Understand, you probably won’t be able to do it with a new car or even a late model used car. Lenders will generally want you to get an auto loan for those, using the car as collateral.
But, if your credit is good enough to qualify for a personal loan, you can save yourself a boatload of money. Not on interest, so much as on insurance. You might even end up paying a bit more in interest for a personal loan than you would for an auto loan of the same amount. But the difference you can save by not having to have full coverage insurance more than makes up for the little bit of extra interest.
Of course, buying a car this way involves a bit of a different process. Instead of going out to buy a car, and then working the financing out, go see your bank first and see how much of a personal loan you would qualify for. Then go out and shop for the car.
Another advantage to car shopping this way is that you go into it knowing what you have to spend. We don’t recommend buying through a dealership if you’re buying an older car with lots of miles on it. Trust us, they took that used car on trade or bought it at auction from someone else who did, then hiked the price three or four thousand dollars. You’re better off combing the classified ads, or even driving around and looking for “for sale” signs.
But if you do buy a car from a dealership, pick one that is marked between one and two thousand more than you have available. Don’t talk money until you pick out the car, then explain how you intend to use personal loans to pay for it, and how much money you have at your disposal. Make it clear that you will only take the car if you can have it for that amount out the door. Then, refuse to sway, budge, or even discuss other financing options. More often than not, you’ll drive away with the car.
Photo via Elsie esq.