Your Vehicle May Be Breaking Your Bank

April 30, 2008 By Tisha Kulak

Forgetting the ever-increasing price of gas, your car may be one of the main reasons you are struggling to make ends meet. Car payments may be wiping out your funds and that does not include the insurance costs, registration costs, maintenance costs, and the other things associated with owning and operating a vehicle. It is estimated that one out of every four vehicle owners have spent too much money when purchasing their car.

There are several reasons why consumers get themselves in debt over a car.

Wanting a Car versus Needing a Car - Many consumers do need a car to survive. They need to get to work, to the store, and transport their families. However, there are many people who have access to reliable public transportation, car pools, and other resources and prices should be compared to the costs of owning one or more cars.

You are What You Drive - People often make the mistake of buying something that is more than they can reasonably afford in order to be perceived in a certain light. Today’s car commercials portray cars as a status symbol and many consumers are fooled into that line of thinking.

Only Considering the Monthly Payment - Many consumers do not take a look at the whole picture when financing a vehicle. They tend to look at the monthly payment and dismiss the other costs involved in vehicle ownership.

Suckered at the Dealership - Salesman have a knack for getting consumers to buy cars and sometimes they can get them to buy cars for too much money. Without being able to negotiate a good deal, you run the risk of being taken for a ride in more ways than one.

Lender Approval Means Affordability - Just because someone is willing to finance a certain amount for a new vehicle does not necessarily mean you can afford that much on a monthly basis. Some lenders even count on that scenario so they can tack on the extra fees associated with missing a payment, paying late, and even defaulting on the loan.

So what do you do if you realize you can no longer afford to keep your car or that you have simply paid too much?

Sell It - If you have equity in your car and it is still in great condition, you could possibly sell it or trade it in for a less expensive, more affordable vehicle.

Refinance - If the car you financed was new and you have been keeping up with payments, your lender may be willing to refinance your loan and extend the terms for a longer period.

Reconfigure your Budget - Probably one of the best and easiest solutions is to cut back on some of your expenses so you can better afford your payment. Cut off unused or unnecessary utilities and use the extra money towards your car note until it is paid off.

Repossession - Usually the last resort, repossession of your car will annihilate your credit and you will still be responsible for paying any monies remaining from the loan balance and the amount of money the car sells for if auctioned. There may also be fees associated with the repossession and costs from selling it at auction.

Whatever the reason you find yourself in debt because of your car, don’t let the situation go ignored or you will wind up in a worse situation. Next time you go car shopping, be prepared and stick to your guns. Know what you can afford to pay and don’t let anyone tell you otherwise.

Posted in automobiles, borrowing, budgeting, cars, debt, financial problems, insurance, lending, lifestyle, loans, personal finance basics, saving money