You have several payment options to choose from when purchasing a vehicle. Some purchase options require excellent credit, such as leasing, although some lenders and dealers market specifically to poor credit buyers. Before you start car shopping, consider your various purchase options and which best suits your budget.
Financing
If you don't have the cash on hand to purchase a car, you can finance it with an auto loan provider, regardless of whether you purchase from a dealership or a private seller. Many dealerships use a variety of banks and local credit unions to provide loans for its buyers. You can also pursue an auto loan at any lender you'd like. Rates differ by lender; be sure to check rates before you decide where to apply. Credit unions, local banks or online lenders are available. Obtain a preapproval before you shop. Doing so allows you to determine your interest rate and price range so you can stick to a budget.
Leasing
Leasing is an option for new cars; used car leasing may exist, but the monthly payments aren't usually worthwhile. For a lease, a bank purchases the vehicle you want from the dealership and then leases it to you, similar to renting with the intent to return at the end of the contract. Rather pay for the entire vehicle's cost, you only pay for its depreciation, which is based on the mileage and term that you choose. Because you end up paying for about half of the vehicle's value over a period of usually 3 years, your payments are cheaper than a comparable finance. Good to excellent credit is required for leasing.
Cash Payment
Dealerships and private sellers alike accept cash for a vehicle purchase. If you have the cash on hand, search within your price range to find an affordable car, but ensure you budget for taxes and motor vehicle fees, as well. Taxes can add thousands more to your purchase price. If you plan to purchase from a dealer, cash does not warrant a lower sales price. When consumers finance a vehicle, the dealership receives a check that is as good as cash. If purchasing a low-priced car, avoid having to spend additional cash on repairs after the purchase. Have a mechanic inspect a car out of warranty before you buy it.
Other Options
If you lack the cash needed to purchase a car and can't obtain a loan, you may have other options. Buy-here, pay-here dealers exist in many areas; or dealerships that do not check credit for a vehicle purchase. These dealers usually require a down payment and a monthly payment arrangement to pay off the car within one year. Subprime financing, which offers high interest rate loans to risky buyers, may also prove an option. These lenders exist locally and online. You may also pursue a loan using a co-signer, or find a person with good credit and sufficient income to secure your loan.
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