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What To Know About Payment Plans for Auto Repairs
Your vehicle is damaged. Or maybe it's not running like it should. Either way, when it's time for car repairs, there's one thing that's as sure as death and taxes: It's likely to make a good-sized dent in your wallet.
If you don't have the cash available right now to cover repair costs, a payment plan may be one option to consider. Here's how it could work.
What Is a Payment Plan?
Payment plans are a convenient financing tool that lets you make multiple smaller payments over time (such as weekly, biweekly or monthly) rather than a lump sum up front. These can come from a variety of sources, including your repair shop, your dealership or third-party financing companies.
Types of payment plans for auto repairs
If you are seeking to finance your vehicle's repair, payment plans come in multiple forms as well, such as:
- Deferred payment programs ("buy now, pay later")
- Zero-interest offers (make multiple payments with no interest payable)
- Payment plans with interest (such as bank loans or credit cards)
Choosing the right plan for you involves knowing all the options available and understanding the pros and cons of each.
READ MORE: Different Types of Credit and How They Work
Understanding Terms and Conditions
Before signing on any dotted line (be it real or virtual), it's important to understand the terms of the agreement. Some payment plan factors to consider include:
- Interest rates: Pay close attention to any interest or fees applied. If an interest rate is low or even 0%, note how long that rate is valid. For example, a zero-interest offer might apply only for a certain time, after which a higher interest rate might kick in.
- Repayment period: Understand how long you'll be making payments and what the total cost of the repair will be at the end of the payment period. A longer payment period might seem tempting, but there's a good chance it will translate into more interest paid overall.
- Payment schedules: Will you have to make payments weekly, biweekly or monthly, and how much will each payment be? How does that amount fit into your budget?
- Penalties: What will the consequences be for missed or late payments?
Impact on Credit
Any time you want to borrow money, it's a good idea to think about whether it could affect your credit score. When looking into a potential payment plan, find out if it requires a credit check and whether any late payments will be reported to credit bureaus. If that's the case, remember that financing your car repairs might impact your credit score in potentially good or bad ways. That makes it even more important to choose a payment plan you can stick to.
READ MORE: What Is a Credit Score & Why Is It Important?
Affordability and Budgeting
A payment plan is a convenient way to spread out a large cost over time to make it easier to fit into your budget, but you still need wiggle room in that budget for the whole thing to work.
Once you have a clear idea of the total cost of your car repair and what payments might look like, calculate whether you can comfortably afford them. Consider any current debts and financial commitments, and make sure the payment plan won't strain your finances. If the numbers are close, consider whether there are other expenses you could cut back on for a while to balance things out.
READ MORE: 6 Steps To Create a Basic Budget That Works for You
Hidden Fees and Extra Charges
Weekly or monthly payments are one thing, but in some cases, there might be extra costs associated with a payment plan. That's the kind of surprise no one wants. Watch out for processing fees, administrative costs or early repayment penalties that might affect your costs. And be sure to ask about any additional fees up front, before you commit.
Comparing to Other Funding Sources
A payment plan can be a convenient way to cover the cost of car repairs, but it's not your only choice. Weigh the plan's pros and cons against other options: digging into savings, asking your bank for a personal loan or using a credit card to pay. Also, inquire whether there are lower-cost borrowing or assistance options for those in need.
READ MORE: 10 Benefits of the Synchrony Car Care credit card
Repair Warranty and Service Guarantee
No offense to your repair shop, but you'd probably rather not have to go back anytime soon. That said, you'd probably also rather the repair have a warranty that means you can go back if you need to. When signing up for a payment plan, confirm that using it won't affect your warranty, and ensure you understand the shop's policies while under payment arrangements.
The Right Payment Plan for the Right Job
When expensive car repairs are on the table, it's comforting to know there are options to help you cover the costs. The trick is to find one that works for your needs and budget. Assess what's available to you, understand the details, ask the right questions and you'll be well on your way to the convenience of regular payments—and a car that's running as it should.
Want a different option to pay for your repairs and keep you on the road and where you need to be? Consider the Synchrony Car Care credit card. Learn more and apply now.
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