ok i have enough money now saved to buy a new vehicle..as in paying it all at once at the dealership…..it would that be smart to do or pay for like half or more and leave a months to pay? would that help to start to rebuild my credit or just paying it all off at once?
i meant to say to not pay for it all and make payments for like a year
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Sat, Mar 13, 2010
March 13th, 2010 at 2:36 pm
Go into the dealership on the last day of month right before they close. They will probably take 20% off the selling price if you put 70% down, take a loan for 24 months and pay it off in 12.
March 13th, 2010 at 2:36 pm
Pay in full. Don’t finance. The interest rate, even for a year, will be ridiculous.
March 13th, 2010 at 2:36 pm
Paying for anything (on time) for at least 6 months will always improve your credit score.
Also if your parents have like excellent credit, ask them to put you on their credit cards as an authorized user ( you don’t even have to have access to their cards or anything) and that will help boost your score. Provided that they always pay on time
March 13th, 2010 at 2:36 pm
You should leave a month or a few months. If you pay it out right there won’t be any record on your credit report – therefore you probably should leave a few months – make the payments on time and there will be record to show that you made your payments.
March 13th, 2010 at 2:36 pm
If you feel that you want to pay interest in order to re-build then go ahead & finance half of it. However if it were me I would pay cash for the car & try to work on paying off old debt little by little. You can also get a secured visa/mastercard to help establish your credit. This is where you pay up front for a line of credit- the bank uses this money just in case you don’t pay- it is put in a savings acct for you. You still make the regular payments to the card. Try to keep your balance less than 50% of the credit line
March 13th, 2010 at 2:36 pm
This can go in your favor both ways…and at the same time, go against you both ways…
You’ve basically have to choose the lesser of two evils.
If you choose to pay for the car in full:
1. Usually the dealership will lower the total cost (as long as you know how to negotiate it right) under the agreement that you are paying in full right then and there. Kinda of an incentive so the dealership can get all their money right then instead of dealing with a loan and such.
2. You won’t be paying as much in the end because you won’t have ANY finance charges to factor in. So you save money in that regards. And those finance charges could have been high or low…depending on how good/bad your credit is.
BUT…
If you do a partial payment and finance the rest:
1. You will help your credit score by adding a car payment to your history. And as long as you keep up with the payment, it definately will help you in the long run (as long as your payment doesn’t off-set your income-to-debt ratio). If you don’t ever put anything on credit, then how will the credit bureaus ever know if you’re trust worthy enought to pay anything off? Keep in mind that its just not bad payment history that will ruin your credit score and get you denied for credit. LACK of payment history will also hurt you as well.
2. You will be able to save that extra cash you didn’t put down and put it into savings. You can save it for an emergency and it can act as a ‘finacial cushion’. You can also invest it into a CD and make pretty decent interest off of it at the bank.
3. But you will end up paying more for the car that you should have because of interest over the course of a year…depending on how high/low of an interest rate you get.
4. You are giving yourself another bill to keep track of
But in the end…the short answer would be "yes". It will help your credit. Just make sure the payment won’t be too high because if your debt ratio is not even, it will lower your credit.
Just recently paid off a whole ton of credit cards and stuff because my debt ratio was really bad. My payment history is perfect, but I just had too much debt.
So now, my score went from 650 to 706. Now I got approved for a re-finance and a very low APR credit card of $12,000
It takes time, but the security is worth it.
March 13th, 2010 at 2:36 pm
If you want to fix your credit, YES, definitely finance part of this car. Auto trade lines, if paid perfectly, have a significant impact on credit score, more that credit cards, second only to a mortgage. You need to keep it open and paid perfect for at least 12 months, and if eventually going for a mortgage, they want at least one installment loan paid on for 24 months or better.
Also, please don’t believe anyone who tells you that you will get a better deal at an auto dealership because you offer to pay cash for the car. It actually works AGAINST you and here is why. I was a finance manager for a dealership for 5 years. Did you know that 33% of all dealership profit is made in the finance office? How you ask? Well, when someone finances a car, the finance manager shops around for the best rate he can get based on your credit. Then he gets what is called a ‘buy’ rate. Let’s say it is 5% for example. Now, let’s say he says you qualify for 6.9% and you think that sounds great. He get’s paid on the spread of the 1.9% difference. That’s part of it. Now, the other thing is if you go in and say you have 10000 to spend and you buy a car along with tax, title and plates, for that 10000, what is left? Nothing! When you go into the finance office and he asks if you want a warranty, you will say no, I don’t have the money. What about rustproofing or fabric protection? No, I don’t have the money. But, if you finance, all he has to do is show you how it will affect your payment by 20 or 30 bucks a month. Easy to tack on and roll into the deal. He makes money on those warranty and aftermarket products as well. This is why saying you are paying cash up front is a BAD idea because it limits the amount of profit they can make in the biggest profit center in the entire dealership. If you pay cash, you always want to hold that info until the end.
Another reason not to go pay cash is you really need to have an emergency fund available. Put it into savings or CD’s. The lack of one is how most people get into bad credit situations to begin with.
As far as how much you will actually pay for the car in the long run, it really won’t be that much more. Interest rates are super low right now and if you look at what the finance charge on 10k over 3 (at 6% only $951)or 4(at 6% about $1200) or 5 years(at 6% about $1600) will be, it will be worth it for you to do so, build your credit, get a better deal on your car, and give you an emergency fund. Over the course of 60 months, that averages out to spending $27/month to borrow someone elses 10 grand. The peace of mind of having 10 grand in the bank for emergencies would be worth $27/mo to me any day of the week!!
I hope this helps and good luck to you!