There is a very simple way to finance your vehicle and still own it free and clear, of course you do need the liquid assets to do it. Here is how I purchased my S2000:

I went to the dealer and negotiated the out the door price to my satisfaction. Signed the deal and asked for 1 hour to get them the cash.

I went to my credit union, took the exact out the door amount out of my checking account and opened a 48 month certificate account earning 4.3% interest. I then borrowed the full amount against that certificate account at 5% interest (lower interest rate because it's a secured loan) on a 48 month term. I took the cash from the loan, put it back in my checking account, went back to the dealer and wrote them a check for the full amount. I own my car free and clear, the title is in my hands. The financing for the car is 48 months at 0.7% interest.

If I ever default on that loan, I never loose my car, they just take the certificate account and pay it off.

As I pay on the loan every month with interest I'm earning from every other investment I've made, the available balance of the securing certificate account for the car loan gets higher and higher. So, if there is ever a month that I cannot make a payment, I can finance that one payment against the available balance of the original certificate and then make a double payment the next month, one payment on the car loan, the other to pay off the payment loan, then the available balance is even higher and it keeps going and going like that. Of course, I have never had to take out a loan to make a payment, but the option is still there. And, on top of that, my credit union will finance me based on 80% of my vehicles clear value, since I own it free and clear, that can be a nice chunk if I ever need it (but I probably never will).

I also purchased most of my real estate with this method of borrowing against my own money. The big advantage to the real estate side is that you can obtain much higher levels of financing if they are used as collateral.

So basically, I borrow my own money to buy something, then I can borrow against what I just bought with a minimal interest rate in the end (usually 0.3%-1% interest rate).

It may seem a little silly to do it this way, but the credit union loves me and I no longer have to even borrow against myself, I went there three months ago and asked for a $100,000 unsecured loan. In five minutes I had the cash in my checking account, no applications, no credit check, no waiting for approval. Granted, this had a higher interest rate, but just to have that borrowing power is a nice security in life if something tragic ever happened. I can probably go higher now on the next one since I just paid it off in full yesterday...

Of course, you are 18 but you have to start somewhere. You could start by not getting the credit card (CCs are evil and there is only one entity that it helps, the financial company backing the CC) and saving the cash for the parts, open a certificate, borrow against it, pay it off in a few months and I will guarantee that your interest rate will be far less than that CC could ever be.

Just some advice from a 28 year old that used to be "trailer trash".

 

If you have the money in a checking account in the beginning why not use this to purchase the car that way rather than putting it into a certificate account as an asset?

 

Because it builds a reputation with the financial institution (RE: my unsecured borrowing power) and establishes a good base for better credit with other companies.

 

My point was that he seems to be more savvy with finances than you are. I am not bashing you, please take this in the spirit intended, you are only 18. I was not savvy with these things at the age of 18 either.

You are a likely to be able to enhance the business if you attend some business, economy and accounting classes.

 

thanks for the advice
but it is true with great credit 99% of the time in my personal experience with others that with this kind of purchase it is better with credit card than to get a personal loan from the bank... personal loans require too much red tape...........

 

if you can afford the payment whether through credit cards or the bank, go for it. The bottom line is, do whatever that makes you feel happy. Life is too short, live it to the fullest