Friday, March 10, 2017

3 Ways To Avoid Future Debt When Buying A Car



Buying a car usually means taking out a loan that will be the buyer's responsibility for the next several years. However, this does not doom a buyer to future debt obligations just so they can have a reliable means of transport. 

Buying within the limits of one's likely needs for the vehicle, aggressive payments towards the loan, and smartly cutting losses on money-pit vehicles can go a long way towards reducing the possibility of ongoing debt. 

Remember that the extent of future debt is dependent on available cash and other liquid assets that could offset that debt. Smart money management and understanding the value dynamics of cars can go a long way towards minimizing ongoing debt. 

Here are a couple of things to keep in mind.

Stay Within Limits


Buying a car entails making decisions about types of vehicle, additional warranties, features, and so on. A general rule is to keep things as low-cost as possible without sacrificing performance or putting on excessive risk. 


This means that a smaller car with more protection and coverage could be a better deal than a more expensive "tougher" vehicle with bare-bones coverage or repair warranties. 


Pay Ahead


Paying more than the stated minimum, and making more such payments if possible, knocks down car loan principal faster. 

The result is a quicker road to legal ownership of the car's equity, less total loan expense and greater resale value should the owner decide to sell when the loan is paid off. 

Future debt becomes more of a possibility and challenge if existing car payments linger and weigh down a buyer's net liquid cash. In addition to paying ahead, you also must pay attention to the terms of your loan. 


If you’re a first time buyer, you may be eligible for special promotions that will help you pay off the loan faster. Companies like BlueSky Auto Finance can offer these deals, but make sure you ask if they don’t.


Cut Losses


Barring exceptional upkeep and specialized car enthusiasm, a car is certain to be a depreciating asset. 

Be careful not to sink more money in the car than it is likely worth. Kelly Blue Book and similar services can give a close estimate for how much a car can fetch on the market. 

If a buyer ends up sinking as much, or more, into car repairs and insurance than they could extract from it through a trade-in or sale, cutting losses and selling is typically a lesser evil. 

The sale funds and lesser ownership expenses could be used to offset future debt.

Combined with financial maneuvers such as co-signing in case of credit issues, these tricks will go a long way towards warding off future debt when buying a car. 

Services such as Blue Sky Auto Finance are always willing to work with prospective buyers to find a solution that works.


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