I am interested in buying a certified used car--like at Carmax. Well, I was looking at how high insurance would be because we would have to make payments versus the pennies we pay now because our car is paid for. I am considering taking out a personal loan and paying cash for the car flat out. I think that this will eliminate high insurance and I can pay the loan off as if I did have a note anyways. The bonus is also that the loan has a lower interest rate and I won't have to worry about the car getting repossessed. The car I want costs less than $9,000 and is a certified used car (it's been checked out, etc). What do you think?
2006-11-10 08:28:26 · 9 answers · asked by Flighty 1 3 in Cars & Transportation ➔ Buying & Selling
In Response to Posts: I know that insurance is based on the worth of the car. But even if you bought a crap car, if you are still making payments on it, you pay more insurance. I want to choose how much makes sense for the car.
As far as the personal loan and being asked what it is for...I am not specifying who or where I am getting the loan from. I know that I won't be asked what the money is for. I have taken out one before and paid it back with income tax refund, etc.
2006-11-10 08:39:16 · update #1
I don't have a good running car. I bought a used car for $500 and it is sooo much trouble. The steering column is messed up, the radiator on the blitz and the heating core is out. Thanks
2006-11-10 11:08:15 · update #2
What I mean by paying a lower rate because the car is paid for: I won't have to buy full coverage. Therefore it's cheaper. Maybe not smarter...but cheaper.
2006-11-10 11:15:53 · update #3
It is very rare that a personal loan has a lower interest rate than an auto loan, and also rare that its terms could be stretched for as long as most auto loans, but if what your saying is true, that the personal loan is at a lower interest rate than the auto loan I would say go for it.
The downfall would be that should the car be totaled the first day you have it, you still owe that 9,000 to the bank, your liability only insurance will not pay for it, and because it is a personal loan you cannot refinance it in with a new auto loan for another car, like most people do when they are upside down in an auto loan.
2006-11-10 08:47:51 · answer #1 · answered by xturboexpress 3 · 1⤊ 0⤋
Answer this first. Is the car something you absolutely need??? If you have a good running car now then keep the car you have until the one you have breaks down. If the car you have now is not in good working condition then the certified car might be the way to go. Cars are always bad investments (unless they are classics or antiques). What if you put $3,000 into the car you currently own? That would save you over $6,000. Taking out a personal loan on the car and paying cash is a good idea if the interest rate is lower. However, this doesn't mean that can't reposses the car if you miss the loan payments. The bank instead of the dealer will come and take the car away. Trust me I know people that have had their car repossed that way. When the bank repo's it they put it on the auction block. If they sell the car on the auction block for $4,500 you will still owe the difference on the note. Here is another way to help pay for the car. Take out a new credit card get one with no interest for a certain period of time. Most credit cards offer those no interest for a certain period of time as an insentive for you to take out the card. Say you get an interest free card for 6 months with a limit of $2,500. Take that card and pay for part of the car with it and then get a loan for the rest. So if you have $2,500 on the interest free card pay for the car that way and then get a loan for $6,500 from your bank. That way you are making interest free payment on the card for 6 months. So pay that one off right away before the 6 months is up. Then the make payments on the $6,500 loan at whatever interest rate you can get. You will save a bunch of money that way. I hope this helps. Take care and good luck.
2006-11-10 08:42:34 · answer #2 · answered by MightyRighty 3 · 1⤊ 0⤋
It sounds like a good idea on the face of it, but if you do apply for a personal loan, won't they want to know what you want the money for? If you tell them it is for a car, they will probably give you a car loan instead, with required insurance which will be separate from the car you already own. You'll be back where you started. But I think it's worth looking into.
2006-11-10 08:35:11 · answer #3 · answered by pessimoptimist 5 · 1⤊ 0⤋
I spent 18 years in the retail automotive business and have never heard of an insurance company charging you more for a car that's financed--that would be against the law. However, if your intention is to reduce your insurance rate by not carrying collision and comprehensive coverage, that's like playing Russian Roulette.
2006-11-10 09:25:13 · answer #4 · answered by Hemingway 4 · 1⤊ 0⤋
That is a good way to avoid paying full coverage insurance. However, if you hit someone you will have to pay all the repairs for your car. If its a certified car it should be okay but if there is a warranty you can purchase you will also better cover yourself.
2006-11-10 08:39:20 · answer #5 · answered by me_laub 3 · 1⤊ 0⤋
I would shop for the best financing, but understand that the bank or loan agency may also require you to protect their investment by carrying insurance. I would not buy life insurance or loan insurance under any circumstances. If you die, you want them to get the car back, not a check for the insurance.
2006-11-10 08:35:03 · answer #6 · answered by united9198 7 · 0⤊ 1⤋
Smart move. I would still consider carrying some limited comprehensive coverage though on your insurance policy being that it's a newer vehicle.
2006-11-10 08:30:04 · answer #7 · answered by Anonymous · 1⤊ 0⤋
insurance is based on the value of the car and your driving record not what you owe,the finance company requires a minimum amount to protect thier investment,
2006-11-10 08:31:46 · answer #8 · answered by doug b 6 · 2⤊ 0⤋
Sounds like the way to go.
2006-11-10 08:29:42 · answer #9 · answered by Alibi 4 · 1⤊ 0⤋