Consider these tips before you sign on the dotted line — for a new car and loan.
For many people, buying a new or used automobile can be a nerve-wracking experience. There are high-pressure sales tactics, questionable dealer add-on expenses, and extended warranty offers that can leave potential buyers confused and often overwhelmed.
Then there’s the financing — in other words, the auto loan.
Unfortunately, many people don’t realize there should be two distinct parts to the car-buying process (three, if you are trying to get the best possible price for your trade-in).
You should do your research to find the make and model you want, determine if you are going to buy new or used, and figure out the features you can’t live without. (Cloth versus leather seats, the color of your choice, etc.) Once you find the car, you should negotiate the price with a dealer or owner.Only then – after getting the price to a place you can manage – should you talk about how you are going to pay for the vehicle.
It’s wise to check auto loan rates at credit unions and banks before you begin the car-buying side of the process in earnest. Many consumer advocates say it’s best to avoid allowing the dealer to provide or assist in finding financing for your car.
With tight profit margins, some dealers have been known to use financing to bring in extra money.
And with car prices where they’re at, try to save as much as you can on the financing portion of the process. Be aware of interest rates too, as they are another cost to factor into your purchasing considerations.
Besides a home, buying a car is usually the second most expensive purchase most people will make in their lifetimes. And just like with home loans, consumers can get preapproved for an auto loan before they ever step foot inside a dealership. Credit unions, in particular, often have highly competitive rates for both new and used car loans. Check with yours before you head to the dealership.
To make sure you qualify for the best auto loan rates, it’s smart to check in on your credit score and reports to know exactly where you stand. Those with higher credit scores, of course, tend to get better (lower) financing offers from lenders. Those with lower scores, in the range from 350 to 800, typically pay more. If possible, start reviewing your credit score and pull your credit reports a few months before you decide to buy so you can make adjustments if needed. Those who use the SavvyMoney tool already have 24/7 access to their credit score.
The final price you end up paying for monthly loan installments won’t be your only major expense for your new car. Besides things like gas and maintenance, you should also factor in the cost of auto insurance into your transportation budget.
Article by Jean Chatzky
With reporting by Casandra Andrews