Most car s want to pay the lowest price for a car that compliments their needs. They also want the most inexpensive to own in the long run. But is this possible in the automobile world? Yes, it is. You only have to ensure you get it right when it comes to financing the car. However, it is imperative to note that financing a vehicle is not as easy as most people think. The process is plagued with pitfalls that can trap even the most experienced shopper. I can confirm that because I’m a car enthusiast and spend my days reviewing and writing about the automobile world all dressed up in my automobile lover T-shirt.
Let’s look at some time-tested guidelines to help you finance your dream car. But before we do that, ensure you click here to understand more about dream cars and know which dream car you can afford with a minimum wage. Here are some guidelines that you should always remember when buying a car.
Should you pay in cash?
It hurts to pull cash from a savings account to buy a vehicle that you know will depreciate value. However, if you have saved enough money and can pay for the car in full without crushing your financial plans, please do it. Paying in cash helps you avoid paying interest. It enables you to prioritize other financial objectives and gets you attractive discounts.
How much should you put down?
If you are financing a new car and want to get the best deal, ensure you cover about 20% of the car’s purchase price, including any trade or rebate. This makes it easier for you to pay the loan in time. If you have an excellent credit rating that guarantees a low-interest rate for your loan, you don’t need such a large down payment.
Who should you borrow money from?
Unlike in the past, car buyers can now obtain car loans through several car financing options available on the car loan market. With many options to choose from, car buyers particularly first-time car buyers find it hard to choose the best financing option based on their needs. To ensure you get the right lender, you should never accept the first offer you receive. Compare at least three lenders. Here is a list of common types of car loans that you are likely to find in the automobile market.
- A dealer loan- This loan is offered by dealers through their affiliated banks. Who is eligible for this loan? Most dealers are accommodating most borrowers presently. If you are a buyer with limited credit or with a bad credit score, a dealership sponsored loan is best for you. However, dealerships loans have higher interest rates when compared to those acquired from other institutions.
- Bank loans- Most shoppers will go for the dealership sponsored loan and avoid banks because it’s easier. They can show up at the dealer’s showroom, finance the car, and drive the car home all in the same day. But easier does not always mean better. Banks loans have lower interest rates than dealership sponsored loans. If you have a good rating, you should go for a bank loan. You will enjoy lower interest rates and might even get a discount from the dealer.
- Credit union loans- These loans have the best interest rates in the automobile market. Credit union loans come with three, four, or five-year terms for loan repayment. If you go for this option, make sure you choose a term that matches your budget. If you are financially capable, choose the three-year term. With this term, you will pay higher payments, but your total cost will be lower.
No matter which financing option you decided to go for, you should always ensure you research and compare your options first. Don’t make snap decisions. Take your time to make sure you are doing the right thing. Also, before you sign any paper, ensure you read through everything to know what you are getting into.