For the ones who don’t live close to work, or in a city where public transportation is reliable, having a car available is a necessity.
Your car gets you to and from your office, meetings with friends, and groceries shopping, and unless you want to walk to stay fit, a functional vehicle is needed. Knowing how imperious owning a car is, it should be said vehicles also tend to be expensive, so financing one can prove challenging. If this is the first car you buy, finding financial resources may seem a little overwhelming, but once you understand the basics, you’ll be in a better position.
When you search funds for a car, don’t forget to add the auto financing cost in the overall price. Most of the times you can negotiate the price for a used car, but before, let’s figure out how you can get some money.
Check your credit score before heading to the dealership
Always keep an eye on your credit score, especially if you plan to get a loan. The excellent news with car loans is that most times you can get one even if you have bad credit, but you’ll pay more. Why? Because the lender finds it more comfortable to repossess the asset when you cannot repay the loan.
But when you have a bad credit score, and you find a lender willing to provide you with funds, you’ll be too happy with the news, and may forget to check the rates the dealer is asking. Dealers usually take advantage of buyers with bad credit score because they take it as a sign, they’re not good with finances. So, they may charge you a higher price than the market.
Also, dealers advertise high-interest rates for some cars, but they don’t mention they offer these rates only to buyers with a good credit score. Buyers with lower rates can get a good interest, but they won’t qualify for most promotions.
In conclusion, know what your credit score is before heading to the dealership to get a deal on the vehicle.
Determine your budget
It’s easy to fall in love with cars, but before doing it, determine your budget. After all, there’s no use to fall in love with a vehicle you don’t afford. You may die to drive a sports car, but you afford only a standard model.
If you already own a vehicle, search for one that maintains the payments roughly the same. But if this is the first car you own, check your monthly budget and figure out how much you can afford to spend. When you get a loan to finance your vehicle, you must decide how much from your present budget, you can divert towards this investment. A loan adds extra monthly payments to your current expenses.
And don’t forget that with loans you also pay interest and other potential fees.
Learn the vehicle buying jargon
When looking for car financing solutions, you must understand the lingo. Most of the lenders ask interest, or a finance charge, which is the fee you pay for borrowing money. The interest adds to the monthly payments you make to cover the loan.
You also need to check the conditions of the loan, the number of months that the lender expects to make payments, the fees you must pay for the lender to approve your request, and the repercussions if you cannot pay the money.
Some car providers ask buyers to put down a payment for purchasing the car. The down payment is the initial lump of money you pay for buying the vehicle. According to the amount you afford to pay, the remaining monthly payments are calculated on the price of the car minus the down payment and adding the interest.
Decide if you prefer a loan or a lease
When it comes to financing solutions, loans and leases are the two main options. Leasing a car is similar to renting a house because you return the vehicle at the dealership at the end of the lease term. If you consider leasing, you must first determine how much you’ll drive it, because most dealerships charge extra if you use the vehicle above the miles the contract includes. Contact the dealership and ask what their conditions are because some ask down payments and other similar fees. If you want to drive an expensive car, the dealership will probably ask you a security deposit.
Sometimes you can opt for a lease from a third-party lender like a finance company or bank. Your local dealership can also provide this service, but their packages differ according to the model of the car you prefer. First, decide the vehicle you prefer, and then get in touch with the dealership to find what their conditions are.
Nowadays, it is easy to get a car loan because most financing companies allow their clients to apply online. Before picking a car loans provider, check their reviews on an online directory to find out their former clients’ opinion. Some directories offer lists of the most trustworthy financing providers, reviewed by professionals in the industry. Compare their rates and services to pick one that brings the best benefits. Most of the online lenders offer to finance even if you have less than perfect credit.
Keep the term short for a loan
If possible, opt for a short loan term to pay less interest. When you contact a financing provider and say you want money to purchase a cart, a savvy lender will negotiate the conditions based on the monthly payment you make, and not on the price of the vehicle. They will offer the option to choose between lower and higher monthly payments by extending or reducing the term of the loan. The cost of the car is the same, but the overall amount you pay differs. With all financing options, expect to pay more than the initial price of the car because all providers charge a fee for offering their financial support. The longer you take to repay their money, the higher the interest is, and the more expensive your car will be.