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How to Finance a New Car
So, you're looking for a new car but you're wondering how to get the best deal when you finance your new car. Here are a few tips that will help you pay the least amount in car loans over the long run when you finance a new car.
To make sure you stay within your budget, make sure you don't spend more than you can afford on your auto loan. Find out how much the monthly payment would be and how much the total payment would be. Stay within your budget and only look for new cars within your price range.
Auto financing can be nerve-wrecking, but take it in stride and do your homework to get the best deal on your new vehicle. To make car-buying less stressful, follow the steps below and take your time if you can.
Save Your Money
1. Save Money Before You Buy A New Car
Start saving money for a new car before you need one. If you can, start a car savings account as soon as you pay off your current cars loan.
Put the money that you would have put towards the car payment into the savings account. You won't even miss the money since it was being used as a car payment before.
When going in to buy a new car, you want to put as much money down as possible to lower the total amount of the loan. If you are lucky, you may even have been able to save enough to pay for your new car in cash! If not, any little bit can help.
If you have money to put down towards your new car, you can either shorten the life of the loan or lower the monthly payments or both.
2. Do You Qualify For A New Car Loan?
Do you have bad credit? If you do, some banks may not want to take on the risk. Others may give you a loan at a much higher interest rate than if your credit were excellent.
If you are worried about qualifying for a new loan, try applying at your local bank or online to see if you do qualify. Applying is free, but there is a caveat! If you apply to too many different places, it may bring your credit score down even more, making it harder to qualify or get a good rate on a new car loan.
If you have an excellent credit rating, than you have nothing to worry about. If you have good credit, you will be able to find a loan without a problem. You will need to do research though to find the best interest rate for you.
Looking For A New Car
3. Look For Low Interest Car Loans
Find the lowest interest rate around. Most times, the auto dealership offers a pretty good rate. Call them up to find out what their interest rate and loan length is and if there are any stipulations. Now you can call around to banks and credit unions to see if they offer a better loan package.
Normally, you can find the best rates at credit unions, but you may have to be a member of that credit union to utilize the loan. You can also look into online banks. They offer very competitive rates since they don't have all the extra expenses that brick and mortar banks do.
Finding a low rate on a new car loan is very important. It effects the amount you will pay monthly and over the life of the loan. Even one percent can make a huge difference!
4. Length Of The New Car Loan
Try to get as short of a new car loan as financially possible. A shorter auto loan, will increase the monthly payments, but it may also lower the interest rate that you get on your new loan. This, in turn, will decrease the total amount you pay for the loan over its life.
Financial experts recommend getting a loan for no longer than 3 years or 36 months. Most people only keep their cars for around 5 years before trading it in for a newer car. This will give the average household either two years free of car payments or 2 years to save up for a new car.
5. Haggling With The New Car Salesperson
Haggling can be intimidating, but it can save you a bit of money. Do your research on the new car that you are considering buying. Look at NADA guides, Kelley Blue Book or Edmunds. You can either get a paper copy or you can look them up online. They will give you information like: the price of new cars, specifications, reviews, ratings and pictures.
From these guides, you can get a good idea of how much the car you are interested is worth. If you think it is overpriced, let the salesperson know that you would like a price reduction and why. Knowledge is power!
If you are hesitant on haggling with a salesperson, bring someone along who you trust and you know is a good haggler.
- Auto Finance
Edmunds directory of car finance articles, including topics such as credit history, car loan refinancing, auto insurance and all issues pertaining to special car finance considerations.