The mechanic has confirmed that it will cost more to repair your old car than it’s worth. Your best bet is to take the cash you would have used to repair the car and buy another vehicle outright. While you don’t have a lot, there is enough to pay for a decent used car. Instead of financing the purchase, it may make sense to buy it outright. Consider these reasons and how they apply to you.
Being approved for a car loan is not impossible but it will be difficult. Your credit is not the best due to some unfortunate events a few years back. While your score is gradually improving, there is quite a way to go before it will be anything more than fair.
Since you have the cash on hand, why not go ahead and pay for the car outright? You can still move ahead with your plans to incrementally improve your credit score. At the same time, you don’t add more debt to your credit record and adversely affect what is already a fragile debt to income ratio.
One More Monthly Obligation
As you settle existing obligations, there is no desire to add new ones if it can be avoided. Many people want to simplify their budgets by settling debt rather than adding payments for a gently used ford explorer to the mix. While some would say otherwise, this is your call. Pay cash, enjoy your Explorer, and keep on eliminating those budget line items one at a time.
Hate to Pay Interest
Any auto loan you finance will come with fees and interest charges. Even if your credit was better and you could lock in a lower rate of interest, you don’t care for the idea of paying any more for the vehicle than necessary. Take the cash and buy the car that you found. Owing nothing on the vehicle and not paying interest payments on a loan for the next few years will feel great.
Get a Discount
When you find car on Kijiji that you like, it never hurts to find out if the seller will take a slightly lower price if you pay in cash. Used car dealerships as well as private sellers are sometimes willing to negotiate the price when customers are paying cash instead of seeking financing. Even if the difference is only 5%, that’s money you can keep in the bank account and still avoid creating one more debt.
Paying cash for a used vehicle may not be for everyone, but it could be the perfect solution for you. Weigh your options carefully and determine what would be best now and in the long run. Once you understand the pros and cons associated with each choice, it will be easier to settle on the payment option that’s right for you.