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Auto Loans - Should You Buy a New or Used
Car After Bankruptcy?
Getting an auto loan after bankruptcy can help you to get your credit back on the right track.
However, you will want to make sure you choose the auto that's right for you and your current
financial situation. This article answers the common question: Should you buy a new or used car
after bankruptcy?
When shopping for a vehicle, one of the hardest decisions to make is whether to buy a new car or
a used car. This is especially true after filing for bankruptcy. You want to make sure that you
purchase a vehicle that is a worthy investment, but you also want to avoid payments that are so
high they could get you back into financial trouble.
Here are two tips that may help you make the
decision:
Consider the Rates You Will Pay on a New Car
vs. a Used Car After Bankruptcy
Anytime that you take out a loan, you are required
to pay interest on the money you borrow. The
interest rates you pay after filing bankruptcy are
typically higher than average interest rates. This
can sometimes make the total amount that you pay for your car over the life of your auto loan
higher than the car's value. In other words, you run the risk of purchasing a bad investment.
To make sure this doesn't happen, you will need to consider the interest rate you will be paying
in addition to the purchase price of the car. There are many auto loan calculators online that can
do the math for you. Be sure to make comparisons on rates for both new and used cares before
making any decisions.
Make Sure You Can Afford the Payment
Because new cars are so expensive and average a purchase price of over $20,000, payments can
be quite high. Used cars loans, on the other hand, have lower purchase prices and can be much
more affordable on a monthly basis. However, used cars are often devoid of any warranty, so
you run the risk of buying a lemon. No matter what you decide to do, the bottom line is that you
need to make sure that you can afford the monthly auto loan payment. The goal of an auto loan
after bankruptcy is to improve your credit, not make it worse.