Buying a Car After Bankruptcy (and Foreclosure) – Part 2

Part 1 covered t he beginning process and pain points of trying to re-establish new credit after my bankruptcy in 2011 and foreclosure (March 2012). The whole reason behind even venturing into this territory before I’m even a year removed from my bankruptcy discharge is because of my car, which I lovingly refer to as Sophie. I owned a 2006 Volkswagen Jetta, which was purchased from a VW dealer as a used car – it was previously a leased vehicle with 1 owner. Almost immediately after purchasing the car, I began to experience tons of problems. Luckily, I was covered under the original warranty for a bit and then covered under my extended warranty for about 20,000 miles over the expired original warranty.

Sophie has had her share of issues – malfunctioning air bag (x3), malfunctioning trunk lock, malfunctioning car door locks, bald tires (when it was sold to me, the tires were bald!), rumbling in the engine (I call them my “squirrels”), an emissions issue (even though it passed it’s emissions test), and a handful of other issues. Needless to say, that not only was my patience worn thin with monthly visits to the dealership to have my vehicle serviced, but it also started to get expensive with quotes from $800-$1,200 to fix it after the warranties expired. I did not want to keep shelling out money for this car, so I started to investigate and research what I needed to do to get my hands on a brand new, more reliable vehicle.

Sure, the thought of taking on a larger car payment, more debt (I was down to a balance of $6,500 on my VW) and the worry of having a beautiful new car freaked me out a bit since I went through the bankruptcy and foreclosure in the past year. You don’t realize how much you’re hit emotionally when you go through something like that – and I’m pretty good at hiding how it really made me feel. Right now, it’s just a whole lot of avoidance.

So, after researching vehicles, JP and I started test driving in June/July this past year. We went to Honda first because I had my eye on a CRV, and we test drove that vehicle and an Accord. Immediately after that test drive, we realized that we wanted a small SUV and not a car, so we scratched cars off of our wishlist. We then went to Hyundai to test drive a Tucson, which had a ton of neat features in it’s basic model and a great warranty (10 years/100,000 miles), but thought the vehicle was small compared to the CRV and wasn’t a brand that was as reliable as Honda. After our Hyundai test drive, we hopped on over to Kia where we had a terrible experience. We walked in to the showroom, which was really busy, and two salespeople just looked at us. I had to ask if they worked there because no one was apparently making the move to help us.

We got paired up with a brand new salesman who was ending the first week on the job. He knew NOTHING about the vehicle and sat in the back seat of our test drive, super quiet, the entire time. It was so weird and awkward that as soon as we realized the vehicle wasn’t for us – we ran out of the showroom and hit the road in the Jetta.

We decided to cool our jets for a few months, especially since my dog (a 14 lb min pin) digested some fudge in August and was rushed to the animal ER, which that visit cost me over $900. Yikes! The biggest (and most obvious) problem of trying to make any purchase after a foreclosure or bankruptcy is that your credit score and history take such a big hit that it takes a long time to work on building that back up. And even if you manage to get your score back up to a normal amount, banks and other financial institutions will likely flee from you in horror because of the big financial mistake you have on your history for the next 10 years. You’re a risk and they know it.

The way I was able to secure a big car loan isn’t conventional, so I really can’t even give you great advice on that. I worked with a credit union that I had done business with in the past (and that I had declared bankruptcy against) to pay back the amount I had discharged. Even then though, you’re not guaranteed to get a credit union to work with you but I do think you have better luck with them than a large bank. I was able to not only get a loan but get a loan with a reasonable APR (no 20% + for me!), which is amazing because I really needed to get a new car. We ended up getting a 2013 Honda CRV EXL model, which is great because we weren’t expecting to get a 2013! We also have a Costco discount, and that took some haggling pressure off of us (especially since we’ve heard that Honda doesn’t work with customers). We had a great experience and are in love with our new car!

This is Vivian … ain’t she purty?

If you can wait, some credit unions (and possibly banks) will work with you about 2 years out from your bankruptcy discharge. Just remember to keep building your credit, and stay wary of credit card offers that are too good to be true. I’ve struggled with “when is the right time to get a credit card,” which many credit unions and banks will tell you is needed to rebuild your credit history before they will work with you. Just be careful with that, especially if that’s what got you into trouble in the first place!

Advertisements

2 thoughts on “Buying a Car After Bankruptcy (and Foreclosure) – Part 2

  1. Ashley – sorry, I left a comment on the part one of this post and hadn’t seen the second part. Coincidentally, I too have a VW Jetta – this one is a 2003 with 122,000 miles on it and it’s been costing me $$$ to keep her alive. I am awaiting discharge (should get it in a couple weeks) and I’m hoping that shortly after that I can get a car loan. What have you heard about people getting car loans shortly after discharge? My car needs tires, brakes and a few other things – I need to send her to the morgue and replace her.

    • Hi Tony, thanks for stopping by! I’m a stern believer that VWs are the worst car company out there. The cars are poorly built and are not sustainable without pouring tons of money into them!

      I’m sorry to hear about your discharge/bankruptcy. It’s not an easy thing to go through but once you get through it and begin to live your life debt-free, it’s an awesome feeling. I haven’t heard much about people being able to secure loans shortly after a discharge. I met with a credit union (not the one I received a loan from) before getting my new car and they told me to establish new credit first and come back in two years. Well, you’ll find out it’s hard to establish new credit – especially if credit card debt was your issue (partly my issue).

      I did get a new credit card a few months after discharge and paid it off monthly. That helped build my credit. Most credit unions/banks will tell you that you’ll need to wait at least 2 years to secure a loan, though, and even then your interest rate may be steep. That’s why I chose to go with a credit union – I have a 6% APR on my new car loan (my VW APR was 7.99%!). I’ll hit two years out of discharge next month, though – so depending on the relationship you have with a bank or credit union there are possibilities to get a loan sooner. Good luck to you and GET RID OF THAT VW! 🙂

Tell me somethin' good ...

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s