January 15, 2006

Hello Tony

I'm writing you to ask for sincere advise because I've hit rock bottom and don't know what to do, here's my story:

I'm a 21 year old college student with absolutely no credit. I've only had one car which I purchased through an auction, and later found out that it had been totaled and the transmission was bad. It was a '95 Pontiac Grand Am. I paid $1,100 for it.

I was devastated, and made attempts to find another car. Eventually I grew tired of looking and settled on driving the car even with the transmission being bad. It lasted me about 14 months.

I commuted to school and work with this car. On the outside it looked good, but boy, the transmission would give that away as soon as I drove it a few yards. I've learned my lesson in that looks can be deceiving when buying a car.

Now I'm car-less. I drove my boyfriend's old Mitsubishi Mirage until it gave out. He had already drove it into the ground before I drove it. Basically it needs more repair that the car is worth.

I'm so fed up with car dealers, I can't stand car shopping because, for me, it's exhausting and depressing. I have no credit and no cosigner.

Let me tell you . . . I've been to over 30 car dealers. Some big name and some are "Buy Here, Pay Here" places. The big names won't touch me without a co-signer. The others want a hefty down payment and $300 or more a month for 24 months.

I also don't like the sub-prime car dealers, because those are usually the ones that rip you off the worst. They want way too much for their cars, and some are obvious junkers. I'm familiar with the values of cars and I do lots of research online.

I really and truly don't want a car payment. I know they can make your life miserable if you can barely make ends meet. See, I only work part-time, earning about $700 a month. So I know it's not the best thing to get a car note but what can I do when I need a car to go to school and work?

I have about $2,200 saved up to spend. My boyfriend is willing to loan me about $2,500. So I can probably scrape up about $5,000 to spend in cash for a car. But I have trouble finding a good car for this amount. Most are very high mileage domestics. I really wanted a import with less that 100K miles, but that's practically non-existent for my price range.

My only goal and prayer is to find a reliable and dependable car that won't give my a lot of trouble, and one that gets good gas mileage. I dread going to car lots because they want to drag me across nails because I don't have any credit. I'm afraid of buying a lemon or paying too much.

Please, give my any advice on what you think I should do? I appreciate your web site. I've gained lots of knowledge from it.

Sincerely,

Nicole

Answer:

Hi Nicole,

Listen Nicole, the first thing you need to understand is that lenders consider many factors when deciding to approve a loan, and income is a big one. They want to be sure you make enough money to repay the loan. Earning $700 a month is a non-starter with any lender.

You have to know in your own heart that there is no way you can afford a car payment at this time, so why put yourself through the stress of trying to pay one every month? If you fall behind on the payments they'll come and get your car and then you have no car and even bigger trouble.

I realize you had a bad experience with the Grand Am, but in your case buying a used car for cash is the only smart option. If you have $2,200 cash available that's more than enough to find a decent, serviceable car.

I might point out that the Grand Am lasted you 14 months without you doing anything to repair the transmission. For an $1,100 car that's not bad. Had you put a few dollars into repairing or replacing the transmission you would probably still be driving the car and this conversation would be moot!

Forget about borrowing from the boyfriend. I can't think of a better way to screw up a relationship than to borrow money from one another. Anyway, you're going to have a hard time paying him back, and sooner or later he'll want his money. What happens if you break up next month? How awkward will that be - still owing him money?

I've purchased many decent cars for under $2,000. There are plenty of them out there. Yes, you may have to fix something or put on a set of tires, but if you are careful about what you buy you can usually find a good, reliable car in that price range that will last you 2 or 3 years with minimum repairs and maintenance.

If a car was taken care of properly having 100,000 miles on it is nothing anymore.

Don't even waste your time looking at cars in new car dealers. Most of them don't like to spend any time with you if all you want to spend is $1,500 to $2,000. All they'll do is give you a run around and try to sell you something much more expensive.

Instead, search on small, used car lots; not "buy here - pay here" lots, but just regular, small, used car lots.

Also, read the classified's regularly for cars being sold by private individuals. There are plenty of good cars to be had this way. You never know when you will run into a car where it's owner is desperate to sell and willing to give you a good price.

Remember, the asking price can always be negotiated!

You'll have to be patient, and check out the car to the best of your ability. Visit this page on my website: How to Buy a Used Car and Get Low Used Car Prices! It will give you some tips on what to pay attention to when checking out a used car.

Believe me Nicole, you do not want a car payment right now. Finish school, get a decent paying job then worry about building credit. There will be plenty of opportunities once you have the income. Keep your chin up! You have your whole life to look forward to!

All my very best...

Tony Iorio