When buying a vehicle, one of the biggest mistakes that individuals tend to make is failing to include the cost of financing the vehicle in the total price. You can pay thousands of dollars in interest, but it is possible to negotiate, pay more down, finance for fewer years, etc. so that you can save money. If you are looking to purchase a vehicle, think about the financing prior to stepping foot on the lot of a dealership. Here are a few things to keep in mind to help you save money and not find yourself in debt a year later.
Know Your Credit Score Before You Go
When you go to purchase a vehicle, it is imperative that you are familiar with your credit score. Unlike a mortgage, you can generally obtain an auto loan with bad credit. The thing is, though, you will pay for it. The reason for this is that banks can have the vehicle repossessed relatively easy if you stop making payment. Of course, if you don't have the best credit, you are likely extremely excited to get the loan and won't ask about lower rates, and dealers are aware of this and can make a lot of money off of you. Ultimately, the most important thing to understand is that the lower your credit score is, the more important it is for you to take the time to shop around and compare bank rates.
Obtain Financing Quotes Ahead of Time
With fantastic credit, you can likely get top-notch financing rates from the dealership. However, if you have less-than-stellar credit, you may want to consider checking out online lenders. All you need to do is fill out a credit application online, and if approved, you will be presented with a maximum amount that you can spend and your interest rate. If the dealer ends up giving you a better deal, then you can simply walk away from the offer that you were given previously online. However, you have negotiating power with the dealer if you have that online lender's offer when you walk through the dealer's door.
Keep the Term to a Minimum
While you don't want your monthly payment to be more than you can afford, you also don't want to pay for any longer than necessary. The shorter the term period, the lower the interest rate—but the higher the payment each month. Salespeople will negotiate with you based on the monthly payment as opposed to the overall price of the vehicle, and in doing so, they will continue to show you lower monthly payments and extend the term of your auto loan, which causes you to pay more in interest. While it may be extremely tempting to extend your loan over five to six years so that your monthly payment is more comfortable, you are going to pay a significant amount more interest. You have to determine if it's worth it, and in most cases, it isn't.
Talk to a place that offers auto loans for more guidance.
Share6 August 2019
When it comes to borrowing cash for a new house or a nice car, how much money do you really need? Although you might be tempted to mortgage yourself to the brim or borrow a little more than you should, the fact of the matter is that everyone has financial limits. My blog discusses the impact of borrowing more than you need, so that you can make smarter decisions with your money. In addition to keeping you out of trouble, this valuable information might also improve your quality of life and protect your financial future. You never know, it could make all the difference.
