Purchasing a new vehicle can be a very stressful situation. Make sure you do all of the research that you need in order to feel comfortable making your decision, and you won’t leave with a sense of buyer’s remorse.
Here are 6 important tips that will help you save money on your next car.
1. Find your financing before you shop.
It is widely known that paying cash will save you the most money on your new vehicle purchase (as you will not be paying any interest). However, if you are unable to dish out the cash, explore your financial options outside of the dealerships or car lots. Obtain pre-approval from your bank or credit union for the lowest interest rate possible, potentially saving you thousands. Independent financing will give you more buying power than relying on the finance department at the dealership.
2. Check your credit profile.
The interest rate you receive depends significantly on your credit score. Your credit score is used by lenders to determine how risky it is to lend you money, and will adjust the interest rates according to their evaluation. In order to make sure the lender’s assessment of you is as accurate as possible, check your credit reports for inaccuracies. Do this a few months before shopping so there is time to fix these inaccuracies and improve the interest rate you receive.
3. Compare available APRs.
Typically, the loan rates you are offered are shown as an annual percentage rate or APR. APR includes interest and fees, allowing you to compare loans in an apples-to-apples fashion. A lower APR will save you money over the length of your loan and lower your monthly payment. In order to determine which type of loan will work best for you, use an online loan calculator to experiment with loan amounts, interest rates and loan terms.
4. Avoid long-term loans.
Longer-term auto loans have become increasingly popular as monthly budgeting concerns are often taken into consideration more than the total price paid over the life of the loan. Terms as long as 84 months are being reported more frequently than ever before. Though these loans are gaining in popularity, this does not mean they are a good idea. A longer loan will provide lower monthly payments but you will end up paying much higher interest. Keep your term as short as you can while still being able to fit it in your budget.
5. Compare rates and terms.
Shop around for the best interest rates and loan terms available. A dealership may be able to offer you the best rates for your situation, with some new car purchases being financed at 0% for 60-72 months to buyers with great credit. If the dealership is not offering incentives on brand new vehicles, credit unions will likely offer you the best rates, educate yourself on your options.
6. Focus on total cost.
Don’t get burned, concentrate on the total cost of the loan you are applying for rather than the monthly payment. The best options for lowering the total amount of your loan are to bring in a trade-in or a significant down payment.
The bottom line:
Do your research, exercise your options, and make sure your credit is going to help you obtain approval. If your credit leaves some room for improvement, CreditServices.com can help you.