Getting your car financed is easy. But getting the loan paid off takes you back to reality. Being smart about your car purchase means looking at the process from all angles to ensure you’re getting the best deal possible. You need to take into consideration things like interest costs, the risk of negative equity you may have, and how long will it take to pay it all off. As the buyer, remember that you have control over your purchase. Use this to your advantage when walking into a car dealership. Coming in prepared and knowledgeable keeps you from being easily swayed by flashy offers from car dealers. the moment you walk in. With that in mind, here are 5 tips to help you save on your car financing.
Learn About Your Credit Score and How it Affects Your Eligibility for Offers
You may often see 0-3% interest rates advertised by car dealerships on new cars. These rates are insanely attractive. The catch however, is that these great interest rates are offered only to buyers with the best credit meaning those with FICO scores of 750 or higher.
This is where understanding your credit helps you determine if you qualify for the best rates for a car loan. If your credit score is in the low 700s, you may still get a good interest rate but not the best offer. However, if your credit standing is below average, car dealerships can still offer to finance your car, except this will come with a much higher interest rate.
This is why it’s always important to know your credit score before going in. This helps you understand where you’re at and what you may qualify for. If your credit score is lower, it’s best to shop around for the best rate that banks can offer. . Being knowledgeable of what you are eligible for will stops you from being easily persuaded to immediately jump at the first rate offered to you by the car dealer. This brings us to our next point.
Equip Yourself with Online Car Financing Quotes
Stepping into a car dealership is like playing a game that tests your willpower and ability to negotiate. Rate shopping and getting quotes for auto loans for which you have applied at a local bank, online, or at your credit union is always wise .
You won’t be able to negotiate without finding out the car’s average full price. You also can’t negotiate without information about the auto loan. . Learn about the car’s sticker price and markup, bring your A-game, have quotes in hand, and get ready to negotiate for the best rate you can get. With all of this information handy, you’ll have a ballpark figure of what you can get and a price for the car dealership to beat. Pre-arranged financing is always a great bargaining chip when negotiating. Dealers can often match the price or offer a lower rate just to secure your business. When everything is finalized, make sure to read every detail of the contract before signing the paperwork before you agree to a certain rate.
The Power of 20 Percent
Down payment isn’t always required but is necessary if you don’t want to end up in a hole with your car loan. New cars are not an investment. Their value degrades as time passes. Consider sticking to a 3-year term and putting in a down payment of at least 10-20%. This reduces the principal amount being financed and ensures that your car’s worth won’t be less than what you owe in three years’ time.
If you’re getting the car at a low or zero interest rate at best, a down payment may not be required and won’t save you as much on interest rates. For higher interest rates however, a down payment may save you a lot of money in the long run.
Get the Shortest Term You Can Afford
In addition to a down payment, choosing the shortest term with a monthly payment you can afford is always best.You may choose the longer term as long as the interest rates are within the range of the shortest one available to you . If a loan offers the same interest rate for 48 and 60 months, take the 60 month loan. This reduces the monthly payment you’ll be required to pay each month toward financing and gives you an allowance for emergency expenses. If you are determined to pay off the loan sooner, keeping a personal timetable is also helpful. You can make advance payments in larger amounts. This can help you pay off the loan sooner than what you have indicated on your loan term.
Do Not Finance the Miscellaneous Expenses
Although dealers would be happy to roll all miscellaneous expenses into your car financing, it’s smart to just pay miscellaneous expenses such as sales taxes, registration and documentation fees up front with cash. Any amount added to your principal loan will incur interest, which will subsequently increase the amount of your loan.
Ready to get out there and get your car? Carfect is a trusted used car dealership that offers one of the widest selections in the Greater Chicago area. If you need help finding the vehicle that’s right for you, visit us today at Carfect.