As with any major financial decision, financing a car should be something that you put a lot of consideration into. Besides rent or mortgage payments, our cars are usually the biggest charge we have to deal with in your life. That’s why you should be doing everything you can to make sure you have the best deal. There are a lot of factors going into the decision of buying a car. We’re going to take a look at just a few.
Have plenty of savings set aside
The first thing you need to understand is that you should have plenty of money going into the sale, even if you’re going to for a financing plan. For one, there’s the deposit you have to consider. Secondly, when you’re in negotiations, it’s easy for extras to get added on. Just another twenty here and there might not seem like much in the middle of the conversation. But add that on to your financial plan and it’s looking like it will take longer and longer to get it fully paid off. That’s why, if you think there are likely to be extras you really want, you should have the cash to pay for them then and there.
Trade in your old one
As we’ve stated, one of the ways you can easily give your financing plan a boost is by having cash ready to pay a lump sum off. One of the ways you can easily do that is by trading in your own vehicle. Of course, the value of the vehicle you’re trading in depends on a lot of things. There’s not much you’ll be able to do about the mile count or how old it is, but you can slow the rate at which it depreciates. Mostly by taking good care of it. Most cars should come with a maintenance schedule. Make sure yours is fully updated and that you’ve put some effort into sprucing it up.
Watch your credit
Financing a car is essentially taking a loan. As with all other loans you’ll be getting in your life, it can be majorly affected by credit. Credit essentially measures how reliable you are for paying off debts and credit you’ve taken. Missed bills and late bank payments are just a couple of things that can negatively affect it. Of course, there are options like Arizona Auto Exchange for those with poor credit, so it won’t discount you from getting a car entirely. Still, it’s recommended that you put the effort into maintaining your credit. At least that way, you will have plenty of options in the different finance packages you can take. How you deal with the finance will also be reflected in your credit.
You shouldn’t be afraid to shop around and get quotes on different financing options. There are a couple things worth considering when you do so, however. For one, people will worry that getting credit checks and quotes from multiple sources will hurt their credit ratings. More than that, they worry than when financiers look at their credit score, they will see that other creditors have been doing the same thing. However, if you keep your shopping around within the same fourteen-day period, that isn’t true. All credit checks in that period will appear on your report as the same credit check. That way, you can use those fourteen days to shop around freely without your credit report needlessly suffering for it.
Plan in advance
Know what financing options you can realistically play with. What this means is having realistic expectations of what you’re able to pay. There are a lot of apps and sites on the net that can help you calculate how much car you can afford. This can help you get an estimate of how much you’re able to pay each month alongside all your other bills and expenses. When you’re using big loans, you need to have the ability to budget big. As we’ve stated before, how you deal with your car finance will affect all finance options you have in future. Keeping a budget can help you keep a close eye on things. Not only will it show you what you can afford, but steer you from missing any payments.
Keep terms as short as you can afford
If you find that you’re able to pay off a car in the shorter term, you should do it. Of course, this will mostly apply to those who can afford quite a bit of car in the first place. At some point, most people who can afford it will want to finish their loan plans early. However, paying lump sums up front and reducing the amount owed so that the loan closes early is not the best idea. The loan you agree on is set for a fixed period, so paying it off actually counts as breaking that agreement in the eyes of your credit score. Consider keeping terms short and payments higher instead.
Buy vs. lease
Of course, not all finance plans are the same. Most will know that you don’t have to get a loan to pay for the entirely of the car. Instead, you may want to consider leasing it instead of buying it. Price aside, the two options work for different people for different reasons. Leasing a car will result in lower payments as well as a lower deposit. It’s also how a lot of people end up with a car much better than they can afford. But there is the factor of returning it. Also that you’re considered responsible for upkeep and set on a limited amount of miles. So consider the pros and cons of leaving and buying.
Depreciation is a major factor to consider when buying a car. As soon as you put down a deposit and drive out the dealership, you might have lost as much as 20% of that car’s value. Gap insurance is something to consider when financing a car. Gap insurance pays off the ‘gap’ between what your insurance will pay out on a car and how much you have left to pay your loan. Even if your car gets totalled, after all, you still have a loan to pay. Sometimes, insurance won’t cover that based on how much the car is worth at the time of the claim. Gap insurance can help you make up the rest, so owning the car doesn’t become a total loss leaving you in debt.
Research the cars
What’s the best way to know you’re getting the best deal on your car loan? By knowing how much a car should actually cost and whether you can get it or not. Over the vast majority of consumers, car dealerships still hold the advantage when it comes to pricing cars. However, for the savvier customers, the internet is changing all that. There’s a broad swathe of information available to just about anyone nowadays. Before you go out to any dealers, do your research on the cars you plan on looking at. Know not just their prices, but where they might need extras and how much you should be able to pay for them as well. Knowledge is key, so arm yourself well in it.
Know its history
When you’re looking at a specific car, it can be better to know more than just about the specific model. You can also check up on the history of any pre-owned car, too. This can save you from making risky buys such as cars registered as stolen or scrapped. But it can also help you spot things that you might later be able to use to lower the price. With just the license plate, you should be able to find out plenty about the car you’re looking at. Otherwise, you might never know whether you’re getting a good deal or if you’re the sucker in that particular situation. As our next point states, you need to be ready for any tricks that dealers might pull on you.
Not all dealers are untrustworthy, of course. But that doesn’t mean you should be lax when it comes to negotiating. As mentioned in the points above, being forearmed with the right knowledge can help you bust those prices down. But so can playing a little deceit of your own. For example, acting like you’re going to buy with cash might drive the price of the car down. This is because the seller will be looking to make their money with the extras added after, as opposed to through a great finance deal. Get an agreed price before you finally reveal that you’re going to pay with it through financing after all.
Financing a car relies on a lot of different decisions. You should do as much research as possible to find out which kind of financing best fits you and where you might be able to get better. In the end, a bit of negotiating skill can go a long way, too.