Many people agree that the best way to go about buying a car is through cash. However, other financing options are also available if you don’t have the cash. Either way, it is important to save some money towards buying a car. Set some cash aside and see what is available within what you can afford. It is important to buy a car that you can afford based on your income drawn from all your financial sources. When cash isn’t available to get you the car you need, here is the best way to approach your car purchase:
- Know your Credit Score First
Make sure you understand your credit score prior to visiting any dealership. Your credit score should be good enough to get you the facility you need to buy a car. It doesn’t mean you won’t be able to get a car loan if you have bad credit. However, it may attract high-interest rates. Therefore, it is important to understand this aspect first and consider the consequences of each one of them before embarking on the process.
- Obtain Financing Quotes
If your credit rating is not good, go for financing quotes. A broker serving various lenders could the best to help you get the best dealership. You can try out online lenders. All you will need is make an application and be presented with the max amount you need for the car alongside the interest rate. Gathering as much information as possible is important in helping you make the right decision. In most cases, credit unions and local banks can provide borrowers with average credit that have competitive rates on both used and new car loans. Therefore, find time to weigh all the options.
- Make Some Down payment
Don’t buy your car entirely from a loan facility. Be prepared to put down some payment, say about 20% of the total cost of the car. This will help you avoid a scenario where you owe a lot of money compared to the value of the car. Many car dealers may not require you to do that, especially if you have a good credit score. However, it is for your good – consider making a down payment first.
Getting that new car without some down payment is possible but at the same time, it is a risky move. Should you be required to sell your new car at some point, it may not be possible in the event that you owe more on the loan than the value of the car. With a huge down payment, this option becomes a possibility.
- Go for a Short-Term Facility
A short loan term though with high monthly payments will come with lower rates of interest. You definitely need these tricks of managing your car loan so that your car doesn’t end up being more expensive than you can afford. Car salespeople will in most cases try to negotiate with you based on the estimate car payment per month and not on the overall cost. Lower payments come with long terms for the loan with increased interests henceforth and not by cutting down on the cost of the car.
Financial institutions tend to impose high-interest rates for loans that take long to be repaid back. Therefore, the cost of credit can only go higher and higher when you go for a long-term loan and not a short one. You can be tempted to go for a long-term auto loan due to the small monthly payment but look at the upsides before going that path.
- Use Cash to Pay for Taxes and Fees Incurred
Reduce the amount of loan you are getting for your car by all means. One of the ways to do this is by using cash to finance any miscellaneous expenses that come with the purchase of the car. These include documentation fees, registration fees, sales tax and any other additional charges that tag along with the purchase. Dealers can easily roll these charges into the financing which is not good for you because it increases your loan amount. Ideally, it doesn’t add any value to the car which acts as security for the loan.
If you don’t have the cash to buy your new choice car, there is another way out – well-researched financing option. You need to be very practical while sourcing for funds through other means. Understand your credit score and compare different offers in the market before settling on one that serves your needs. Make it a short-term loan facility.