Buying a Car While Building Your Credit

Considering how many Latinos seem to avoid credit cards and loans like the plague, it should

be no surprise to learn how frequently they pay cash when buying vehicles. From the financial

discipline learned in immigrant families to reports of predatory lending practices faced by

minorities seeking loans at dealerships, today’s Latino car buyer has muy bien razon to be

cautious when considering the different routes to having a car.

You may be tempted to take your tax refund and throw it towards an inexpensive used car for

the immediate satisfaction of a debt-free vehicle. Pero ten cuidado, you could be missing out on

an opportunity to build the credit history that will help you buy that home of your dreams. As with

so many of life’s choices, when deciding whether to lease or buy there are pros and cons on

both sides. For the millennial with money on the mind, there’s a strong case to be made for

leasing instead of buying a new vehicle.

While living debt-free has its advantages, the disciplined, cash-oriented habits of Latinos can

lead to costly consequences.

Even if you don’t have bad credit, you can still find yourself paying higher interest rates

due to a limited credit history. The habits that help you today may hurt you tomorrow in the form

of higher costs.



If controlling costs is important to you, as it should be, leasing is an attractive alternative to

purchasing. The monthly payments tend to be lower than what you’d have with a loan and

keeping up with your payments will help establish your credit history. For many drivers, the

greatest part about leasing is the fact that vehicle maintenance is covered by the dealership.

Limiting your car related expenses is key because, unlike houses, cars tend not to be great

investments. There are a select few cars that will increase in value over time but the vast

majority of cars will lose about 10% of their value the second they’re driven off the lot. The

numbers don’t look any better with time. Depreciation is important to consider when weighing

your options. If you’re planning on re-selling your car to finance the purchase of vehicle a few

years down the road, you won’t be getting nearly as much as you paid to drive away. By the end

of that first year of ownership, you’ll see another 10% of value disappear and the value will

continue to fall year over year.

So remember, while it may be tempting to spend a tax refund or a nice bonus on a car, leasing

will provide you with a way to keep monthly expenses low while building the credit history that

will support your financial future.