Please, don’t buy a car because you can ‘Afford the payment’

by cggentry115

Some months ago, my friend, let’s call Marcus, was in the market for a new car. Marcus wanted to buy one from a dealer, as he didn’t want to deal with the possibility of his car breaking down and needing thousands in repairs. An important thing to note about my friend is that, around age 20, he has absolutely no credit history, which impacts his buying decisions.

With no credit history, my friend doesn’t even attempt to apply to a loan from a bank. No, instead he goes to one dealership in total who’s motto is “Bad credit? No Credit? No problem!”, and ends up buying a 2011 vehicle at $12,000, paying approximately 5,000 MORE than what it’s worth at a typical dealership.

The kicker?

23% APR.

Yes, he is paying higher-than-average credit card rates on a car he over payed for, all because he could afford the $200 payment every other week.

Moral of the story? Even if you don’t have credit, try and apply for a loan, if it’s a relatively small one, and you have a good job, some banks would be willing to work with you. Second, don’t look at the payment amount alone. APR is what really matters, and right now he’s going to pay far too much in interest on a car. Finally, shop around. 9 times out of 10 you’re going to find a better car for cheaper price. When you’re spending thousands of dollars, it’s worth the little extra time to look around. Please don’t be like my friend, please be smart.

Edit: This predates the pandemic, as i believe he bought it around February or so, before any market crashes.

Edit 2: Another incentive for him buying the car is that it came with a 2 or 3 year warranty, that covers all the major components and him having to pay nothing.