Whether you’re buying your first car or you’re just looking to upgrade on your current one, purchasing a new vehicle is a big undertaking. After all, unless you’ve got ample funds stashed away in the bank account, you’re probably going to need to finance your car through a loan; and taking on that extra monthly expense will require some careful planning. Here are some tips to help you find and finance your new car.
Ask Yourself Some Important Questions
You will need to ask yourself the following questions to find and finance your new car:
- How much is your budget? Taking into account your existing bills, household costs and monthly income how much do you have to spend on a new car.
- Can I even afford a new car? There’s a lot more than just the sticker value to consider. You need to sit down and approximate the cost of insurance, maintenance, and fuel; as well as the true financing costs of a new car.
- Can I buy outright? If the added cost of interest on your car is too high, then you might need to pay down cash.
- Will you buy new or used ones? Obviously, the biggest advantage of a new car is that it will cost less to maintain and insure during the first few years of your ownership. New cars also usually come with a maintenance and service warranty that covers the first couple of years of ownership.
- On the other hand, a used car of the same model will be invariably cheaper to purchase, you might even get a good deal and find a car with some value still remaining on its warranty. In case the car gets totalled you also stand to make a far lower loss this way.
If you’ve adequately answered these questions and want to go ahead with your purchase, then you can get started in the following ways.
Check Your Credit Score
Most buyers make the mistake of only applying for credit once they’ve completed the negotiations for the car of their dreams like a Mazda MX-30, only to find out that they’re either ineligible for financing, or that they only qualify for a car loan at a higher interest rate. As we’ve seen, that can really throw off the monthly payment figures on your car interest.
So, the first thing you’ll need to figure out is how easily you’ll be able to obtain financing. Get in touch with a major credit reporting agency like Equifax, and ask for a credit report. If you haven’t received a report already this year, then you’re entitled to this information for free, otherwise, you may need to pay a nominal fee.
Make sure to check your report for any misinformation. For example, any accounts it shows in your name that aren’t yours, any outdated billing information, any billing disputes that you’ve since resolved Mistakes are common and they can affect your credit score. If you spot something you think is wrong, ask the agency to present supporting information. If you’re still sure the data is wrong, send information that supports your viewpoint to the owner of the debt, and request them to send the corrected information to the reporting agency.
Your credit score is determined on the basis of your past payment history, standing debt, how long you’ve been in debt, how recently you last sought out credit, and the type of credit you have. An Equifax score compares your credit rating with thousands of other customers to provide a mark ranging from 0-1200. Generally the higher the score is, the better your chances of getting cheap financing but be wary of used car lots as they will likely overcharge you on both sticker price and interest, regardless of your Equifax score.
It usually takes 30-60 days for your credit report to reflect the right information, but the effects on your interest payments can be significant. Just a 50 point swing could mean the difference between an interest rate that’s 0%, and one that’s 7%. See for yourself how much difference that would make on monthly payments for a $20,000 loan, using your car interest calculator, around $4000 over 5 years!
Choose the Right Car
Based on your budget, you can now start searching for a car that meets your needs. Your first stop should always be the manufacturer’s website where you’ll be able to find different models, specifications and customizations for your vehicle, as well as a suggested list price and any lease deals or rebates available.
You can then check out some free independent websites to find the true market value of your car, and figure out how much you should really be paying. Make sure to check the reliability of your chosen model using Consumer Reports websites, as well as the National database on crash test results.
If a car has more accidents than average, or if there’s information about faulty major components then it’s best to steer clear.
Finding and financing a new car can be daunting for many people. However, often the reason for this is that car buyers are not adequately prepared for the purchase. They do not know where to look for a new car and how it gets financed. Luckily, following the steps above can go a long way in helping you find the right car for your needs and getting it financed through a car loan.
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