In the movie "Indiana Jones and the Last Crusade", an old knight says to Indiana Jones, "You must choose, but choose wisely." If you've ever visited a car lot, the choices between new cars and used cars can be dizzying. On one hand the price of used cars is certainly enticing, but on the other there is the risk factor...what has this car been through in the past? What if you need expensive repairs? Here are some reasons why getting a used car is nearly always a good choice.
1) Less of a chance of being upside down.
If you are getting a used car loan with bad credit, odds are good that you'll be required to make a substantial down payment. However even if you have good credit you should still make a substantial down payment, to avoid being upside down on your car loan. As everyone knows, all cars depreciate over time, but those over three years old depreciate more slowly. By buying a used car there is less possibility that you'll be upside down on the loan, meaning that you won't owe more on the loan than the car is worth. The larger your down payment, the less likely it is that this will happen.
2) More affordable payments.
Even with a small down payment, a used car will most definitely be more affordable than its new counterpart, for the simple reason that used cars cost less. If less money is needed for the car loan, then the payments will also be smaller, and easier to fit into your budget. This will mean that you'll have more money left over each month to tackle your other debt. If you have bad credit and are working on rebuilding your FICO score, more money is most certainly a welcome thing.
3) Eliminating the risk element.
OK, you see the point in getting a used car, but what about the possibility that it might be a lemon? If you end up having costly repairs, they might wipe out the financial advantage of buying new. Fortunately there are ways to help safeguard yourself. First, read reviews of the car you are considering. Although it might look great on the lot, certain cars are notorious for requiring major maintenance as they get older. If you have a friend who is a mechanic, get their opinion on which used cars are the most reliable. This same mechanic can also look over the specific car you are considering. Other sites can help you find out the history of the car, as well.
Even with the added risk of getting a used car, it is still a wise choice to buy used rather than new. Remember that cars are great for transportation, but they are lousy investment. Spend as little as possible for your bad credit car loan and use the rest to attack your debt or save in real investments.