How does a person with good credit get bad credit? Usually by getting a loan in the first place. Some people who have the money, get a loan to "build credit." Would you borrow a dollar from a friend today, even though you have a dollar, just so you can have bragging rights that you can repay $1.50 tomorrow? So you get the loan, then life kicks in and makes you late for a payment; maybe bounced some checks; paid medical bills on a credit card (which is really just another type of short-term loan); or a fender-bender jacked your insurance rates up. Either way, you messed up your budget, and you're paying the consequences.
Why is getting a loan a bad deal for a car? For one thing, we've all forgotten what a car is. It's a means to get us from A to B that is faster than walking. But we want the extras, so we get multi-CD changers, satellite radio, OnStar, GPS mapping, etc. And second, a vehicle is in motion. This makes it easier to hit stationary objects, like a guardrail, or another moving object, like a bus. And really it's just a matter of time before we hit or get hit. 'Car loan payment' plus 'higher insurance premium' equals 'no money.'
What to do? Save for a nice used car. Pay in full. Keep it maintained and drive it forever or until you save for another used car in 10-12 years. A brand new car depreciates the instant you drive it of the lot. A used car therefore doesn't carry the "new-car-surcharge." Honestly, it's cheaper for me to maintain and replace parts on an older vehicle than make loan payments on top of maintenance costs for a new car.
What do I drive today? A '93 Saturn coupe, purchased new on a loan (before we knew better). Outside of gas and insurance, the most recent big expense was a set of tires for about $350. Still gets me from A to B.
