The auto loan process can be frustrating, but if you do your homework and understand how auto loans work, you can save more money for this big purchase. It’s important to take your time when purchasing a new or used vehicle. Taking your time will help you avoid making any costly mistakes during the buying process. Here are ways you can come out on top and qualify for the car of your dreams when buying a new vehicle.
Review Your Credit
The most important factor when qualifying for an auto loan is your credit score. Lenders will evaluate your ability to pay back the loan based on your credit history. Don’t let yourself be surprised by your creditworthiness. Your first step in the car buying process is to check out your credit and make sure there aren’t any derogatory details on it, such as missed payments or car repossessions. Then, take steps to fix any mistakes if needed.
Choose Your Car
Once you have a better idea of your credit situation, next, it’s time to start searching for the right car. Be realistic about what you can afford. If you have money saved for a down payment, that can help lower your monthly payment. Consider other costs that go along with vehicle ownership, such as gas, maintenance, and parking. Do some research about your preferred car’s reliability and the average cost of ownership before committing to one type of make and model.
Pay Off Debt
For the first few months of the car buying process, if you have that much time, consider taking steps to pay off any unresolved debts. Your credit can get a quick boost if you eliminate some of your credit use and clear up any balances owed. It may make more sense to pay off debt instead of using a large lump sum to put as a down payment for your car.
Check Out Loan Products
It’s also recommended to do research about different types of car loans. The best way to get an auto loan is to scour the internet for different loan packages. There are hundreds of different lenders willing to do business with potential car buyers, so this puts you in the driver seat and in control. Let the loan companies compete for your business and take the time to determine which loan terms work best for your situation and budget.
Negotiate a Vehicle Price
Next, if you’ve chosen the vehicle you want, it’s wise to go visit local dealers and to start talking about pricing. Today, you can also search for your vehicle online and find the dealer in your region who has what you want. In most cases, vehicle prices are negotiable, so you can work with a car salesman to get to a price that is more reasonable for your budget.
Have a Lender Approval Letter
Dealers also look to make money off of car loans with their customers, so be prepared to talk interest rates and loan terms when you visit the dealer in person. Be ready with a pre-approval loan letter offer in your hand to make the process more beneficial to you. The finance team at your dealership will then have to compete with your other offers to give you the best terms.
Avoid Adding Any Extras
Once you’ve agreed to the car’s price, avoid adding extras to the purchase price. Any add-ons, no matter how inexpensive, will only add to the amount of money you have to finance. Dealers may offer car washing services, oil changes packages, or maintenance deals to your purchase price. It’s much cheaper to cover those costs on your own as they come up.
Before buying your next car, make sure you have followed the right steps to give yourself a better deal. Save your cash for other important things and avoid giving extra money to your dealer or lender.