Buying a new vehicle is an important decision and involves many moving parts, like loans, leases, credit history, new versus used, and more. To decide on one of your most important possessions – your transportation – you should understand the vital elements of buying a car.
Doing some homework, exploring financing options, and knowing your credit score are all helpful when you begin the process of buying a car. Here are some tips to help you find the very best deal for your financial portfolio and driving habits.
Do Your Homework
Before you even set foot inside a car dealership, you need to know how much you have to spend, what you’re looking for, and what an ideal monthly payment might be.
Some of the areas you’ll be researching are whether you want to buy a new car or a used one, if it’s a good idea to get a car loan from a credit union or a bank instead of a dealership, and your financial history.
Your monthly payments will depend on how much you can initially put down and how good your credit is. If you have excellent credit and can put a substantial down payment against the amount you’d like to borrow, then you will have a lower interest rate on your auto loan.
Explore Your Financial Options
You have a few different choices if you’re looking for financing for your next vehicle. You can get a loan through the dealership, through a bank, or a credit union. Even though getting a loan through the car dealership is incredibly convenient, it isn’t fiscally in your best interest to directly go through the dealer. Often, the dealership has high-interest rates.
Banks are great options as they usually have standard interest rates, unless you have poor credit, and can give you a wide range of financing options. If you’re a longtime customer of the bank you’re borrowing from, you may be eligible for more attractive deals because of your bank relationship.
Credit unions are often the best place to look for financing as they offer low-interest rates. However, the only catch is that you must become a member of the credit union before you borrow money from them.
New Versus Used
When you’re thinking about a car purchase, it’s useful to know what you’re getting into. Many people believe that buying a new car at purchase price straight out of the showroom is not a good idea, but for some, purchasing a brand new car is the dream of a lifetime.
Perhaps the car dealers are pricing quotes that you can’t turn down, and your financing options are attractive enough to let you buy new. No matter the deal you’re getting, you should still make decisions that lead to a manageable monthly payment.
Many are happy with buying a used car as it is new to them. You may be able to get a good deal or even a great deal if you have stellar credit history and a chunk of cash to put down for a down payment.
No matter if you’re buying new or used, it’s crucial to test drive the vehicle. And if you’re not the person in your household that will be commandeering the car most of the time, you should bring along the person who will be.
Leases and Loan Are Not the Same
Most adults know that these two financial contracts are not equal. They’re similar, but their distinctions make a world of difference.
Think of a lease as renting the vehicle and a loan as buying it outright. You may be able to find fantastic car deals for leases, but you should remember that you will have to bring the car back in excellent condition to avoid the wear-and-tear penalties at the end of your lease.
These penalties are like a security deposit on a rental home; if the property isn’t in adequate condition, you will pay.
In contrast, at the end of your loan period, you own the vehicle outright and can use it for as long as you like or as a trade-in for your next purchase.
If you drive a lot, you should avoid leasing a car as there are limits to how many miles you can put on a leased vehicle. If you don’t keep your car in reasonably good condition, you may want to go with a loan option instead.
Consider Using the Internet
Buying a car online will save time and shoe leather as you will be able to explore all your options from the comfort of your living room couch. Using the internet to buy your next vehicle helps you avoid haggling on the showroom floor.
Car salespeople usually work on commission, so they will try to get you to pay the highest price possible for the car, so they get paid more. Internet car salespeople are usually paid a fixed rate and get bonuses for each sale they make, but those bonuses are not related to the final price you pay for the car.
Online shopping is also a lot more convenient, especially if you like to kick a lot of tires. If you’re a buyer who wants to look at multiple sellers’ options, buying your vehicle on the internet can make this a quicker process. However, you will not get a chance to test drive the car, which is a deal-breaker for some.
Buy the Car You Can Afford
You may be tempted to go for the brand-new sports car that the dealership features in the showroom this month, but unmanageable monthly payments will soon make your dream car into a nightmare.
If you’re still paying off a previous vehicle, or you’re tempted to buy a car that’s out of your price range, you may want to pause and take stock of the situation. It may seem like the purchase of a lifetime, but if you’re stuck paying exorbitant payments every single month, you will soon regret your impulse buy.
Before you sign a contract or click “Buy,” always have a clear perspective on your financial profile, how much you want to be paying each month, and how much your current car will be worth, if you’re trading it in.
Learn to Negotiate
Haggling isn’t everyone’s cup of tea, but you’ll find it useful to negotiate when you’re trying to get a great deal on your next vehicle.
There is not as much haggling in a virtual showroom, which some buyers find a relief, so if you consider negotiating terms an integral part of the buying process, you may want to go to a physical dealership.
If you are in the process of hammering out the details, remember that it isn’t always a drop in the asking price that you’re looking for; a great deal on an extended warranty can be equally as attractive.
The Final Word
Buying a car is a big step, and it’s worth the time and effort to prepare well before you take a step into a dealership.
If you fully understand your finances, credit score, the different financing options, and what kind of financial contract you’d like to sign, you have a chance at making a great deal on your next vehicle.
Financing your vehicle through a credit union like T&I Credit Union can help you land on low-interest rates for a dependable car.