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Buying a Car with Bad Credit in 2013

You need to be more careful with your decisions when buying a car with bad credit. One reason is unscrupulous entities are lurking around the market to take advantage of credit-challenged consumers. To avoid getting into costly car deals just because you have dull credit, we listed down some tips that can help you during the process. Here’s how you can snag the best possible car deal this 2013.

1) Be honest about what you can afford.

If you’re a typical bad-credit holder, you will mind your expenses, find the best way to save money and be careful not to do anything that will make your credit worse. Surprisingly, a lot of car buyers with bad credit apply for an auto loan and write in their application a luxury model as the vehicle they wish to be financed. To remind you, AAA’s 2013 Your Driving Costs study shows that the average cost of owning a vehicle in the U.S. rose to more than $9,000 per year.

Be realistic with your car choice when buying a car with bad credit. Some suggest picking a used car instead of new. But the choice should still depend on how much you can afford to pay every month. And this amount is the remainder of your monthly net income after all your personal expenses. When setting the budget, remember to factor in the actual costs of ownership like maintenance and repair, insurance premiums, fuel, accessories and parking fees along with the purchase price and loan payments.

2) Monitor auto loan rates.

If you are serious about getting the lowest possible rate, you should monitor the current auto loan rates. Let us remind you that the interest rates offered to credit-challenged buyers are higher than what are offered to prime borrowers. But you don’t have to take on a high and burdensome interest rate when you can find the lowest possible rate. is an excellent source of information for current auto loan rates. They post weekly updates of national average rates for new auto loans and used auto loans. It is also wise to shop around, getting several quotes from different lenders in your area and comparing them with each other to find the best rate.

3) Step into a dealership only after arranging financing.

Getting dealership financing may be convenient but dealers mark up auto loan rates. And they are more likely to mark them up when they work with people with bad credit. In March 2013, the Consumer Financial Protection Bureau (CFPB) placed indirect auto lenders, particularly dealerships, under scrutiny for their discriminatory rates.

To avoid getting a higher interest rate at a dealership, get approved for an auto loan beforehand. Auto loans for people with bad credit are also available in several banks, credit unions and other financing institutions. Moreover, you won’t have to discuss financing with the dealer anymore, which could otherwise make things more complicated during the negotiation, if you had arranged financing already.

4) Don’t mind the legalese.

Regardless of the kind of credit you have, you should never sign on the dotted line without reading what the papers say. Although the sales rep would assure you that the contract says this and that, you should still read the terms yourself. A lot of car buyers complain after realizing that they signed up for something with terms they don’t really agree with.

Further, bad credit car buyers are more prone to being ripped off. If the dealership promised you low monthly payments, for instance, make sure it is clearly written in the contract.

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