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.
When applying for a loan, whether through a dealership or traditional banking institution, your credit history will have a strong influence on your ability to qualify for a loan as well as the interest rates and monthly payment amounts that will be offered to you.Click to tweet
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.