If you’re thinking about buying a new car, then the most important step is to figure out your budget. And that has to be followed by figuring out how you’ll be paying for it. Physically checking out cars comes later. So, check out these steps before you step into a dealership.
Always start by checking out your credit score. If you have poor credit, the lender will charge you more or can repossess your car in case you can’t pay for it. So always check your credit report and get it corrected in case there are any mistakes in it. If you’re not in a hurry, spend a few months improving your score before applying for a loan.
If you have excellent credit, then you can get the best rates at the dealership. But if you don’t have great credit, then check out online lenders. Once you complete your application, they’ll offer you your interest rate and the maximum amount you can spend on the car. If the dealer gives you a better deal, then you won’t even have to use it. Often, local banks and credit unions are also helpful to people with poor credit and offer them reasonable rates for a car loan. If you get preapproved, you can use that deal as a bargaining chip to get an even better offer elsewhere.
Keep the loan term as short as possible. The interest rates will be higher, and your monthly payments will be higher, but you’ll pay less interest over time and be debt-free sooner.
20% Down Payment
If you have good credit, the dealership may encourage you not even to make a down payment. But don’t listen to them. Save up and put down at least 20% of the car’s value as a down payment. You’ll borrow less, pay less interest, and save a lot of money.
Cash for Extras
The dealer may try to roll the taxes, fees, and extras into the loan. Don’t let them. Pay for all taxes, fees, and extra purchases like extended warranties with cash. That way, you’ll avoid going upside down on your loan and save money over time.