Recently, I had to say goodbye to my baby Ella. For those that don’t, Ella was my Ford Edge. We’ve been together since 2012 and have lived on two continents. Ella survived the hot summers of Dubai and the cold winters of Washington, D.C.
Unfortunately, she recently failed a car inspection, and the air conditioning went out. The cost to make repairs was more than the car was worth. Oh, did I mention, Ella was 115K miles strong and over ten years old?!?! That’s ancient in Ford years.
So when my husband said he saw a used Tesla for a reasonable price, I started to get excited about the possibility of buying a Tesla. I have been dreaming about owning a Tesla for months. I told myself, hey, why not? Let me apply for a loan and see what happens.
I applied online, and in 5 minutes, I learned I was approved!
The next day I went straight to the dealership.
This article will breakdown my buying process and how I leveraged my credit to get the best car and interest rate for my budget.
I got approved for a Tesla, but bought a Ford instead
When you are deciding to add an expense to your budget, it’s important to evaluate what you can afford and shop accordingly.
Although a bank told me I could buy a Tesla, here is why I purchased a Ford instead.
- I did the math!
- With Ford, I leveraged my credit.
- I realized that just because I could afford something doesn’t mean I should buy it.
As much as I wanted to lower my carbon footprint, I couldn’t justify the car note for a Tesla. Even without the cost of gas anymore, the monthly car note for a Tesla was more than the Ford, plus gas, plus insurance.
Secondly, I knew this was an excellent opportunity to leverage my credit. Ford financing was offering applicants with top credit scores a 1.99% interest rate. My bank’s pre-approved interest rate was 3.35%. So I told Ford, “If I qualify for your lowest interest rate, I will use your financing.” Shoot I didn’t have anything to lose, and a better interest rate to gain.
I used my credit score, low debt to income ratio, and strong payment history to qualify for the lowest interest rate for a car loan. So low, that it made more sense for me to save my cash vs. put money down.
Here’s why I put NO money down
The interest rate I earn on my high yield savings account is over 2%. So when they asked did I want to put any money down, I said, “No.” It made more sense for me to keep my cash and take their interest rate. I still get to profit and save my money for my family.
The ultimate lesson learned was…
The most important lesson I learned in this experience, is you must live within your means. Just because the bank said, I could afford a Tesla doesn’t mean that it was the best for my budget.
See my husband’s car is almost paid off. So it made the most sense to get a car note that was less or nearly as much as his. This financial decision allows us to maintain our current lifestyle, still save, and invest.
How you can leverage your credit
If you are in the market to buy a car, house, or anything that will require you to get a loan, do your best to improve your financial habits before your purchase. When it comes to access to credit it’s not just about your credit score. What’s more important are your financial habits.
For example, paying your bills on time, keeping your debt low, and resolving disputes with creditors or lenders before they put negative information on your credit report all impact what’s reflected on your credit report. As a result of good financial habits, you can positively impact your credit score.
Related: How to Raise Your Credit Score & Have Debt
You should never focus on improving your credit score just to buy stuff. If you do, you could fall back into the bad financial habits that impacted your credit score and credit report in the first place. Work on your finances first and other residual benefits like positive changes in your credit report may follow.
Then, use your credit wisely. Continue to pay off any new debts or loans, and keep your credit history pristine and ready for the next time you want to take advantage of the perks that come with qualifying for the best interest rate.
What’s an example of how you leveraged your credit recently? Please share with the PoM community by leaving a comment below.