A mistake that many new car buyers make is forgetting to include the cost of the loan into the total price of the car. So, if you are looking to purchase a new car, don’t wait until you’ve found your dream ride and you’re sitting in the dealer’s office to think about loan financing.
Keep in mind that your car is not an investment, regardless of how much you pay for it. In fact, cars depreciate a lot with time. Due to this, it’s really not wise to pay a lot of interest for a car loan. When you get a high-interest loan, in many cases, the car’s value depreciates faster than the borrower can repay the loan. This essentially means the borrower will owe more than what the car is worth.
Of course, that doesn’t mean you shouldn’t buy a car. The truth is that many of us have jobs to get to kids to drop off at school, so a car becomes necessary. And, since we don’t all have a pile of cash lying around, we also need to get a car loan. But, you can save money even if you opt for financing. Here are our best tips.
Check Your Credit Score
When you apply for any loan, be it a car loan, home loan, or personal loan, you need to check your credit score. Your score will tell you how much interest you can expect to pay on your loan. If your credit score is towards the lower end, consider waiting until it improves to apply for a new loan.
Know Your Financing Options
You don’t have to get a loan from the dealership. In fact, it’s best if you do your own research and compare the rates offered by different types of lenders including credit unions and online lenders. Once you have a few good loan offers, use it as a bargaining chip to get a lower rate from the dealer.
Keep the Loan Term Short
A long-term loan will have more affordable monthly payments, but you’ll have to pay higher interest charges over the term of the loan. So, keep the loan term as short as you can.
Pay for the Extras with Cash
Don’t finance all the additional expenses like the registration fee, sales tax, etc. Dealers will be happy to roll these charges into your loan, but you’ll be paying more for the loan if you do this.
