3

I'm in a really tough situation with continually using Uber as transportation for work. I am basically working to pay for uber. Someone had mentioned to me the other day about a car dealership that does a Dollar Down payment. I would really like for some more information. I've been searching the web and Its not much help. If any one has any informative insite that'd be great!

  • 3
    What you're looking for is "No money down". Note, though, that the interest rate will be high, and you'll have to pay your own car insurance and maintenance/repair. It sure is more convenient, though... – RonJohn Jun 30 at 15:47
  • 3
    @RonJohn - I saw the question while on the treadmill, where I really can't compose answers. Your comment is most of what I'd answer. Any interest in writing up an answer yourself? (As a mod, I am still pushing to reduce answers in comments. Uphill battle.) – JoeTaxpayer Jun 30 at 16:18
  • I suggest that you compare the monthly cost of a car payment, insurance and fuel with your monthly cost to Uber. I suspect you'll find that Uber is cheap. – chili555 Jun 30 at 16:31
  • @JoeTaxpayer what about the stricture against one-line answers? – RonJohn Jun 30 at 16:45
  • 2
    Is there poor public transport where you live? Can you move to a place with good public transport? Or viable bikeways? Because you're in the right season to be doing those things and you can save up enough money to get a car properly, if you're serious about it... – Harper Jul 1 at 2:29
6

First, you should be aware of your own situation. Is your credit score low, and you have little to no downpayment? Do you know your score? Your desire is improve your situation is great, but first, get all the information you can.

if this is a particular car dealership, you should be able to visit, and without letting them run a credit check, just ask for the details of this "no money down" deal. What are the full terms of the sale? And is the starting price fair? Paying $8000 for a car that would sell for $6000 cash, and then financing it at 12% can result in nothing good. It leads me to suggest that there's always a way to raise money, no matter your circumstances. Finding that $1000 to put down, on a $5000 car, can lower your cost of ownership by a huge amount.

When I read the title of this question, I was reminded of the "rent to own" scams that's prevalent in poor communities. People paying $25/mo for 5 years to "rent to buy" a TV worth $500. You don't want to get into that situation.

Echoing a comment on your question - once you have the numbers for the car, price out what insurance will cost you. And gas for the annual miles you'll drive, as well as maintenance. In the end, you might decide the car is worth it, still. But, arm yourself with all the knowledge you can before moving forward on this purchase.

2

There are dealerships (I think they mostly deal in used cars) that have programs where somebody with bad credit can make a small down payment and get a car loan.

These are targeted at people who have no extra money for a down payment, but they also have a poor credit history which means they will have a higher interest rate.

The higher rate is to protect the lender because of the poor credit history, and to protect against being upside down. The low down payment means that for much of the loan there is a risk that the balance owed will be more than the car is worth. If the borrower defaults when the loan is upside down the lender might not be able to make enough on the resale to get all their money back.

To see what you can afford start with your bank or credit union, don't wait till you get to the dealership to try and determine what you can afford or you will be taking a risk that you will walk out with a bad deal.

2

Many dealerships that advertise as "No Down Payment" or "Buy Here, Pay Here" are specializing in offering cars to people that may not qualify for a traditional auto loan from a credit union, bank or other financial institution.

A common misconception is that a car dealer is willing to lose money or take a risk on the financing to someone who may not normally qualify because doing so allows them to sell a car. This is not the case; they take a risk with the financing and will charge fees, an increased purchase price or a higher interest rate on the loan to make it worth their while.

These can be very dangerous places to purchase a vehicle. Because the car is priced above its market value or because of fees rolled into the purchase price, the buyer/borrower is immediately "underwater" on the purchase. This is a very risky place to be, especially for a buyer who didn't have enough money available to come up with more than one dollar down in the first place. Consider how difficult it would be for that person in one or more of the following circumstances:

  • If the car needs to be repaired (very likely, since the cars for sale at these dealerships are often older or have high miles on the odometer)
  • The buyer defaults on the loan (in which case the car is repossessed and all payments are essentially forfeit, and now the buyer has no money, no car, and will be sued by the dealer for the remainder of the contract)
  • The car is in an accident (the insurance company pays only the retail value of the car minus the deductible, while the buyer is still obliged to meet the higher loan amount)

Banks and credit unions are in business to make loans. If they choose not to extend credit to a potential customer, there is a very good reason they would turn down the business.

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.