My PT Cruiser with 140k miles is becoming a money pit. I need another car, but due to some medical bills my credit score took a massive hit and I have no cash for a down-payment. I’m worried about getting a loan with a high interest rate, but I’m also hesitant to deal with the headaches of another used car.

This is a tough predicament that a lot of folks find themselves in. They have a car that is not worth repairing any more, and limited financial resources, but need a new vehicle ASAP. The first thing I will say is if you already have some serious debt in the way of medical bills, you may not want to add to that debt.

But despite your reservations about another used car, if you shop smart you can get something cheap and reliable that should give you plenty of trouble free miles without breaking the bank. Buying a used car is all about managing risk. The two best ways to minimize that risk is to a) buy a car that has a good track record for reliability and b) get that car inspected by a trusted mechanic. There are a couple of resources that can get you started on your research.

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Consumer Reports - Probably the most popular source, but finding data on cars that are over eight years old can be a challenge. You also need a paid subscription to access the online information.

TrueDelta - A free website that just requires an email account. It has thousands of owner generated reports for specific vehicles. An excellent source to see what real owners are saying about their cars.

Long Term Quality Index - A wealth of statistical data tracking the issues of various makes and models over several years.

But how am I going to pay for it?

This is where all the “financially responsible” types will chime in and say, “You should have had an emergency fund.” Maybe you did, and it got drained when your had to worry about your treatment, or maybe you didn’t. You certainly aren’t alone in this, if it makes you feel any better, which it probably won’t. The fact remains you don’t have the money, and telling you what you should have done isn’t helpful now.

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One option is to save up enough cash to buy a car and be done with it. This can be a tricky proposition because you would have find alternative transportation in the meantime while you put money away. If that is not an option, perhaps you can borrow a few grand from a friend or relative. Asking people you know for money is the worst, but having an understanding party be flexible on getting paid back is still better than risking a repossession. If you have to take a small loan try to get it from a financial institution you have a relationship with. You want to avoid those Buy-Here-Pay-Here lots if at all possible. The idea here is to take a loan with minimal risk.

Of course no matter how logical the cheap used car solution is, there are some people who just do not want to go the pre-owned route. They feel that a new car with a warranty is a safer bet for their situation and while they might not have the cash in hand to purchase something, they have the income to handle a car payment.

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If you absolutely must buy a new car, you want to get the least expensive and most reliable car you can. Also shoot below your budget. If your goal is $300/mo, try to aim for something in the low $200’s. This will give you a savings cushion.

Now getting approved for a loan with a less than ideal credit score is going to be a challenge. Your best bet is to have someone with a strong credit score co-sign for you. Again, asking others for financial help is no fun, but if you can get a lower interest rate with a co-signer it should help tremendously. Know that co-signing a loan is a risk for the other party because if you don’t make your payments, it is their score that impacted as well.

Also, realize that a co-signer with a good credit score will not automatically get the best rates. The banks know that when they see a co-signer usually the loan is for the person with the weaker score. They will typically offer an APR that is somewhere between the high interest rate that you would get on your own and the low rate that the person with the high score would qualify for.

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It may be the case that you have no one that is available to co-sign your loan. If you are on your own, do some loan shopping ahead of time. Talk to your bank, your credit card, credit union, see what you can get approved for before you go to the dealer. They want you to take their loan, so if you have some leverage, the dealership may be more likely to get you a better rate. Also take the shortest term you can, the sooner you can pay that car off and be free of your loan the better.

(Image: Getty)

If you have a question, a tip, or something you would like to to share about car-buying, drop me a line at AutomatchConsulting@gmail.com and be sure to include your Kinja handle.