Buy a Car With No Savings: 6 Pointers From ChatGPT
Written by
Cynthia Measom
Edited by
Cory Dudak
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When purchasing a car, a down payment can result in easier loan approval, lower interest rates and less risk of being upside-down in your new loan due to depreciation.
Ideally, you’d want to put down 10% for a used car or 20% for a new car, according to LendingTree, but that’s not always practical. In fact, you might not have any funds at all for a down payment.
According to ChatGPT, buying a car with no savings can be difficult, but not impossible. To make it happen, it recommended being creative with financing, and willing to accept some trade-offs. Here are six suggestions it gave for approaching a car purchase without having any money saved up beforehand.
Explore Financing Options
ChatGPT suggested exploring financing options like the following:
- Low- or no-down-payment loans: Look for lenders and dealerships offering programs that don’t require cash up front. However, ChatGPT said you should expect higher interest rates if you go this route.
- First-time buyer or special financing programs: The bot explained manufacturers sometimes have promotions for certain borrowers with steady income and decent credit that may require little to no down payment.
- Credit union loans: Credit union loans are known for more flexible requirements and lower rates than what traditional banking institutions offer, according to Experian.
Use a Trade-In
Another suggestion from ChatGPT was to trade in a vehicle you already own — no matter how old — because the dealership will apply its value as a down payment.
It’s important to note that you don’t want to trade in a car that has negative equity, which means you owe more than it’s worth. Doing so could result in the difference between what the car is worth and what you owe to be rolled into the financing on your new car, according to Kelley Blue Book (KBB).
Also, keep in mind that if you sell your vehicle to someone else rather than trading it in, you could end up with more money for your down payment than trading it in — especially if you have an older or high-mileage vehicle, per Consumer Reports.
Consider a Co-Signer
ChatGPT said asking a trusted family member or friend to co-sign on your vehicle loan can help you qualify for better terms and lower rates. However, the co-signer should have good to exceptional credit, because their history will influence the loan’s approval and interest rate.
Choose a Used Car
Instead of trying to purchase a more expensive new car, ChatGPT recommended choosing a reliable used car with a lower purchase price. Doing so, it said, will result in a smaller loan balance. It suggested looking for models known for durability and lower repair costs.
Keep in mind that while used car interest rates are typically higher than those for new cars, they will likely have lower taxes, registration fees and insurance coverage, Experian noted.
Boost Approval Chances
ChatGPT said it’s a wise idea to improve your credit score before applying. It recommended paying down balances or correcting errors to help you qualify for better terms and rates.
To check for errors, get a copy of your credit report from each of the three credit bureaus: Experian, Equifax and TransUnion.
Consider ‘Buy Here, Pay Here’ Dealerships
These types of dealerships often don’t require a down payment, said ChatGPT, but financing rates are likely higher, and the risk of repossession greater. It recommended doing this only if you have no other options.
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