Buying a new car is a pretty monumental thing for most of us mere mortals, especially when money is so tight nowadays, and whatever vehicle we buy absolutely must be the right purchase and suitable for our needs. Moreover, because even the used car is far more top-heavy than most folks would like to see, you really need to be able to cough up a decent amount of money if you want to drive away in a quality vehicle. Fortunately, when it comes to financing a new (or used) car, you have plenty of options available. This post will cover some of the more common options in order to give you a bit more of an oversight as to where you stand and which option might work best for your circumstances.
Understand Your Budget Before Financing
Just because you’ve got a fantastic credit rating (more on that later) doesn’t mean that you should immediately head out and get the largest loan available to buy that enormous pickup truck you’ve been hankering for. While it can be a painful and somewhat humbling experience, you really ought to spend some time with your significant other to determine how much you are willing to pay to achieve a monthly payment that you’re comfortable with. It doesn’t matter if you need family-friendly Ford vehicles to transport the wife and two kids around or live alone and prefer to buy a sweet little coupe; how much you are willing to pay back each month should be the target you aim for. This will then give you a total figure that you can use to narrow down your choices and come up with a shortlist of cars that meet your demands.
Check Your Credit Score Beforehand
Checking your credit rating before you even consider stepping foot inside a car dealership will help you better understand your financial situation and how likely you are to end up with a loan with rates that make the interest payments paid by the US government tiny or a payment plan that won’t bankrupt you. You can usually check your score with most credit agencies once you sign up, and in most cases, it should be free. You might have heard that the very act of checking your score will bump it down a few points, but this is untrue. Checking is what is known as a soft inquiry, which doesn’t affect the score, as opposed to a hard inquiry, which can do. Arming yourself with this information affords you a few more options than having to take whatever the dealership offers, and in some cases where you have an excellent rating, you could opt to apply yourself. By getting out a personal loan, you can perform your own research and seek the best offers.
Consider Dealer Financing Versus Banks If You Are After A Quick Purchase
Although we said in a previous point that you might fare better by choosing to go it alone rather than taking a dealer loan, in some instances, it may be preferable to go the other way around. It’s fair to say that doing your own research will often yield far better results as you won’t be paying any additional commission to cover the dealership loan; however, what you save in money, you lose in time. If your main objective is to find a car and get into it as rapidly as possible, it might be more conducive to negotiating with the dealer you buy from to get the payment via them. This can massively expedite the process because the dealer will do most of the legwork themselves and essentially pay themselves directly, skipping out what can sometimes be a lengthy process. However, you will need to weigh up the pros and cons of this position and see which way works best for you.
Be Aware Of Hidden Fees
Even if you live in a country that enforces fair practices when offering loans, you may still fall prey to hidden fees that can appear out of nowhere and bump up your monthly payments massively. By taking a bit of time, you can avoid the worst of it, which can include:
- Dealership fees
- Extended warranties
- Gap insurance
- Credit life insurance
- Prepayment penalties
It can also help you pay your monthly payments with a credit card that includes some excellent rewards. This way, you’re doing what you would do anyway, but with the added benefit of receiving some lovely gifts in the process.
Read The Fine Print Before Signing
This point follows nicely from the preceding one in that you really must take time to read your contract thoroughly from top to bottom. Doing so will help you sidestep the usual pitfalls like prepayment penalties that actually charge you extra if you want to pay off your loan early. All it takes is a few hours to check it all over, and once you’re satisfied, you can sign on the dotted line and take ownership of your brand-new set of wheels.
Financing a new car can be a bit of a minefield if you’re a relative novice. However, by heeding these points made in this post, you should walk away with your bank balance intact and bypass the dreaded buyer’s remorse that can come from overpaying.
