An auto loan provides you with an easy way to pay for a new car. You can take your vehicle home today and pay off the sales price with monthly installment payments. With numerous car loan programs available through banks, credit unions and financial institutions, you may be able to locate a few programs that you qualify for. However, the loan terms, fees and other factors for these financing options may vary considerably. The last thing that you want is to take on a loan that is unnecessarily expensive. These tips will help you to avoid finding yourself in that situation.
Review Your Budget
Before you apply for a loan, you need to
know what you can afford. First, determine how much money you can reasonably afford to use as a down payment. Then, estimate the total monthly auto expenses that you can take on without stressing your budget. You should still be able to maintain your lifestyle and save for the future after taking home your new car. You do not want to regret your purchase by finding out that you cannot actually afford to make the car payments comfortably.
Pay Attention to All Ownership Costs
Vehicle ownership expenses include auto insurance, maintenance, repairs, fuel and the loan payment. When you buy a new car, all of these expenses may change. Request a new auto insurance quote for the new vehicle, and do your best to estimate expenses for repairs, maintenance and fuel. If you do not take them all into account when updating your budget, you may find yourself financially strapped after your purchase.
Use an Online Calculator
Through these steps, you know the down payment amount that you are comfortable with and the monthly loan payment that you can reasonably manage. Before applying for a car loan, use an online auto loan calculator to estimate a sales price range that is realistic for you. Remember that you can adjust the loan term to moderate the payments. While a longer loan term will establish more affordable payments, it may also be associated with a higher interest rate. In addition, establishing and maintaining significant vehicle equity with a longer term can be challenging.
Get Prequalified
Getting prequalified for an auto loan is a relatively quick process. Simply search for competitive loan terms online, and complete the online application process. Lenders generally need to review your credit report and other financial data before issuing loan terms. Because of this, you may need to apply with several lenders in order to find the best deal.
Keep the Sales Price Out of It
When you meet with your dealer to finalize your purchase plans, the dealer may attempt to
negotiate the sales price in conjunction with the financing. For example, the lender may tell you that you can get a better sales price if you use the financing they offer. Your sales price should be negotiated independently of the financing in order to get the best overall deal on your purchase and financing.
Ask the Dealer to Beat Your Financing
After you have agreed on a sales price with the dealer, pull out the preapproval letter that you secured. This letter sets a minimum bar for your dealer to beat. If your dealer can beat that offer, then use the dealer’s financing. Remember to compare the interest rate, term, fees and payment rather than only looking at one or two factors. In some cases, the dealer may immediately tell you that the terms you found cannot be beat, and you can move forward with finalizing the purchase without hassle.
While you are eager to drive home in the beautiful car that you have your eye on, auto financing is a serious matter that requires your full attention. In many cases, auto shoppers can complete most of these steps within a few hours. There is no better time to begin at the first step than right now.
