5 Things To Keep In Mind When Financing A New Car

Driving is a fact of life. In 2014, 88 percent of American households had cars. With numbers that high, it seems inevitable you will buy a vehicle at some point. Most people can’t just pay with cash and go, which means you will need financing. Here are some things you should know before you buy.

Stay in your budget.

Cars are expensive. Your ideal pick may not be affordable right now. Take a look at your income and expenses. How much can you put toward a down payment? The recommended amount is 20 percent of the car’s value. What about loan payments? The more you pay per month, the better. Don’t forget about fuel and maintenance. Estimate these costs to find options that fit your taste and finances.

Prepare to bargain.

Bargaining is a must when buying a car. You need to negotiate the car price, loan term and interest rate. Research the values of vehicles you like to get an idea of what a fair price looks like. Don’t feel pressured to do all your financing through the dealership. They will likely offer a loan, but you may find better deals at a bank. Knowledge is power – use other offers as leverage.0

Cars depreciate quickly.

Unlike other high-priced items – like houses – cars do not have the potential to grow in value. In fact, they do quite the opposite. This matters because you do not want to wind up with a big loan that costs you way more than the value of the car. Try to stick with a short loan term. Your monthly payments may be higher, but your interest will be lower. High interest rates drive up your debt.

Think beyond monthly payments.

Being able to pay your loan is crucial, but there are other expenses you need to consider. There is the aforementioned down payment; the more you put toward that up front, the less you have to pay (with interest) later on. Be prepared for taxes and fees, too. While you can roll some of these costs into your financing, it’s not ideal. You end up increasing your loan amount, while the value of the car stays the same or goes down.

Your credit score matters.

Almost anyone can obtain an auto loan regardless of credit score because it is easy for banks to repossess cars. That said, prices are much better for people with good or excellent credit. Get your free credit report to determine what range of rates you can secure. Compare quotes from different lenders rather than going with the first offer. Local banks like Citizens National Bank may be your best option, as they tend to be the most flexible.