There’s no better feeling in the world than owning your own car. Crank up the radio, roll down the window, and enjoy the freedom to go wherever you like!
However, the hard part is buying the car in the first place. Do you know how to buy a car wisely?
Cars are big investments, but most of us can’t afford to purchase a car outright. A much more realistic alternative is to buy a car with a loan, so that you can pay off your vehicle in small monthly installments.
Want to find out more about financing your dream car? If so, keep reading to find our top tips for financing and purchasing the right car for you.
Start Saving
If you’re buying a car in the future, you need to start saving. If you plan on getting a loan for your new car, that doesn’t mean you can purchase it without any cash.
When getting a car loan, most lenders will require a deposit of around 20%. So, for a car worth $50,000, you first need to save $10,000—no small chunk of change.
To help this process, it helps to save a percentage of your paycheck each month and put it into a separate savings account, where you won’t be tempted to touch it. Or, consider picking up a second job, helping you save some extra cash fast.
Some drivers might be in a position to ask their parents or a loved one for help. However, before agreeing to any personal loans, be sure to understand and abide by the repayment terms.
Of course, if you’re willing to purchase a cheaper car, this means you can get by with a smaller deposit.
While it’s sometimes possible to get a loan with less than 20% down, this is likely to be at a higher interest rate, so it isn’t a smart financial decision.
Know Your Credit Score
When applying for a car loan, creditors won’t just consider your down payment–they’ll also check your credit score.
This is an essential step as it demonstrates your credit history. If you have a history of not paying bills on time, for example, it’s going to be harder to get a low-interest car loan.
To make the financing process easier, check your credit score in advance. You can run your credit score for free each year, which is something everyone should be doing anyway.
If your credit score isn’t the best, don’t worry. You can improve it by paying your bills on time each month and limiting how many credit cards you have.
The better your credit score, the easier it will be to get a loan for your dream car. Stable employment helps get you a better loan as well, since banks know you have a steady income and can afford your repayments.
Do Plenty of Research
Once you’re feeling good about your finances, it’s time to do lots of research before making your purchase.
Think about the car make and models you’re interested in, then read plenty of consumer reviews on each. Not all cars are as well-built as others, so you can avoid costly problems in the future by being wise about which car you buy.
Research is also helpful for pricing as well, especially if you want to buy a car second-hand. Used car prices can vary greatly, so browse used alfa romeo in san diego listings to get a better idea of current pricing.
This will help you avoid overpaying as well. Keep in mind that car pricing can vary based on the economy as well—when there’s a huge demand for cars, pricing is likely to go up.
Compare Interest Rates
To save yourself money, compare interest rates on car loans before signing on the dotted line. Different lenders will offer different interest rates, so you want to accept the lowest possible rate.
Small differences might only be a few dollars per month, but over several years, this can add up.
Also, pay attention to the length of the loan—how long will it take you to pay it off? Ideally, you want to go with the shortest possible loan terms you can afford, as otherwise you’ll be paying more money over time in interest.
Once you do get your loan, always make your payments on time. Otherwise, you’re likely to get stung with late fees as a penalty.
Consider a Co-Signer
When it’s time to get a loan, age can sometimes work against you. If you’re young, you might want to consider asking someone older, like a parent, to co-sign your loan.
Banks often see younger people and students as being unreliable, which makes them hesitant to offer them loans. A co-signer is someone who effectively agrees to help out if you can’t make loan payments.
This makes you look more trustworthy to lenders and can make it easier to get the loan. However, you don’t want to put your co-signer in a position where they have to pay for you, so only get a car loan if you’re sure you can afford it.
Get Finance Pre-Approval
Before you head to the car dealership, it helps to have pre-approval for your financing. This is evidence that a lender is willing to give you a loan, up to a set amount of money.
One of the main reasons to do this is to save yourself time. That way, if you find a car you like, you’ll be ready to purchase it right away and won’t need to wait around for approval.
Plus, there’s always the risk that someone else could swoop in and purchase the car before you’re ready to make an offer. Don’t take the risk!
Bring Along a Trusted Friend or Relative to Shop
When you’re ready to visit the car dealerships, it’s a good idea to bring along another person that you trust. This is because it’s always a good idea to get a second opinion before making a large purchase.
When car shopping, it’s also easy to get caught up in the thrill and excitement of it all, so bringing along a friend can also help you stay grounded and avoid making bad decisions.
Car salesmen can be very persuasive, so you don’t want to fall for their tricks.
Negotiate Your Price
Most dealerships have some flexibility in pricing, so it never hurts to try and ask for a better deal. Negotiation can be a great way to save some money on your purchase, but always make fair offers.
You don’t want to lowball, as this can be insulting to the salesman and can thwart your chances of getting a better deal. This is where your advance research comes into play, as it’s important to know the average market value for the car you want to buy.
Many dealers inflate their car pricing, so usually you can come to a compromise and save yourself some money off the sticker price.
Consider Additional Costs
Many buyers imagine their car budget as just including the car purchase price. However, there are quite a few additional expenses related to car ownership.
One of the biggest is insurance. Auto insurance is a legal requirement, but it also provides you protection in case you’re ever in an accident.
Insurance covers major expenses like repairs and medical bills. Always buy the best insurance you can afford.
Other car expenses include gas, parking fees, and regular servicing, like oil changes. As cars get older, they’re more likely to need costly repairs, like a new transmission.
As a word of warning, parts for European cars or sports cars tend to be higher than more common car brands like Honda or Ford.
It helps to make a list of all of your anticipated expenses, then divide it by 12. This will help you budget how much you’ll need to spend each month as part of your car purchase.
Learn How to Buy a Car With This Guide
Now that you know how to buy a car, use this guide to get started! A new car is a huge investment, so one of our biggest pieces of advice is to take your time.
You don’t want to rush into a purchase that you might regret, so take your time, do plenty of research, and don’t cut corners.
That way, you’ll be able to confidently drive off the car lot in your dream vehicle–it’ll be worth the wait!
