Before taking a test drive or even visiting a dealership, you need to know what to expect with the car buying process. Being informed will help ensure things go smoothly and that you get the best deal for your money.
When buying a car, several things can go wrong. While this is true, taking some time to do your research will help ensure you avoid as many issues as possible.
Keep reading to learn everything you need to know when buying a car.
Consider Financing Options
Before going to a dealership, it is important to figure out what type of deposit you can make and the monthly payment you can realistically afford. You can also get to know what types of auto loans are available.
For example, you can choose a secured car loan or something else. Getting to know the options is essential to finding the loan that will work best for you.
There are services available online that will let you compare options based on your information and needs.
Look at Your Credit Report
Buying a car is a huge investment. That’s why financing is the first thing to know.
If you don’t know your credit score now, it is good to look into it. The higher your credit score is, the better chance you have of getting a lower interest rate.
If your credit score isn’t perfect, review your credit report to see what negative marks are there. Figure out if there are any steps you can take right away to increase your credit rating.
For example, if you have accounts in collection, negotiate with your original creditor to pay it off and ask them to remove the derogatory item from your credit report.
If recent late payments have caused an issue, ask the creditor to remove it as a courtesy.
Know the Factors That Affect Your Loan Payment
Regardless of where you decide to obtain financing, you need to understand loan terms and how they impact your monthly payment. You also need to know the total cost of the loan.
For example, the APR will have a small impact on overall monthly payments. Two things will impact the payment more. These include:
Loan and Down Payment
Taking a smaller loan and making a bigger down payment will reduce your monthly payments. The opposite is true, as well.
Loan Term
If you choose a longer repayment term, it will help reduce your monthly costs. However, this may also mean you wind up paying more for the loan’s life.
Shop Around
Get to know the type of vehicle you want before going to the dealership. Going in unprepared may not work out well for you.
To figure out what vehicle you want, take some time to look online. You can search specific types of cars, such as the “best cars for large families” or the “best cars for students.”
There are plenty of resources to use to help you figure out what you want.
Know the Trade-In Value of Your Current Vehicle
Do you have a vehicle you are planning to trade-in? If so, you should not wait for the salesperson to tell you it’s worth it.
Take time to do research yourself to figure out its approximate value.
Several factors impact the potential trade-in value of your vehicle. This includes the year, model, make, condition, and mileage.
If your vehicle needs minor cosmetic repairs, think about making these yourself. This can help increase your vehicle’s total net value.
After you figure out the potential trade-in value for your car, you can go to the dealership with the information needed. This information can help you negotiate the price you pay and ensure you get the most money for your vehicle.
It’s also worth noting that if you put in the time and effort, you will get more money for your current vehicle selling it rather than trading it in.
Cash Rebate vs. 0% APR
Many dealerships offer promotions. Some provide no-interest financing, while others offer cash rebates. Some offer both with a new vehicle purchase.
While the offers may seem attractive, you should weigh the pros and cons first.
In some situations, a cash rebate combined with a lower-rate auto loan is the better option compared to 0% APR. Cash rebates can also help reduce the vehicle’s overall cost and lower the loan amount that offers savings for the loan’s life.
If you can qualify for the 0% APR auto loan, make sure you figure out the repayment terms first. After doing that, you can use auto loan calculators to compare the 0% APR loan at a higher amount than a lower rate auto loan with rebates to lower the total amount of the loan.
Test Drive Vehicles You Are Interested In
It may be a good idea to pass on the test drive if you are familiar with a specific vehicle’s make and model. However, taking a test drive will never hurt.
This allows you to inspect the vehicle and make sure everything is working properly. You can also listen for any shimmies, rattles, or squeaks that may cause issues after the purchase.
Determine a Realistic Payment Amount for Your Financial Situation
You need to understand the factors that will affect your auto loan terms and fees. This is going to help you figure out the monthly payment you can realistically afford.
The main pieces of information you must use to calculate your monthly payment include the loan amount, the APR (annual percentage rate), and the term of the loan.
You can use an online calculator to experiment with various numbers and find out what will work best for you.
It may also be a good idea to consider the down payment of your new vehicle. This will give you a smaller total loan amount.
After you have calculated your monthly payment, figure out if it will work with your budget. If you aren’t fully comfortable with the number you come up with, adjust the loan factors until you reach a payment that works for your financial situation.
For example, consider lowering your purchase price or increasing the length of the loan. You may also want to make a bigger down payment.
New or Used Vehicle
You have to consider if you want a new or used vehicle. You may base this decision on cost alone; however, you should consider more than just the sticker price.
For example, if you choose a used vehicle, you will have minimal depreciation and repair and maintenance costs.
With a new vehicle, you may have a lower interest rate with your auto loan and lower repair and maintenance costs.
Check Into Car Histories
Before you choose what dealership to visit, look for consumer reviews. This is going to help you avoid having a poor experience.
Just because a car is reputable and well-reviewed, it doesn’t mean it is issue-free.
Take time to dig deeper, especially if you plan to purchase a used vehicle. You can find online histories on sites like CARFAX that will tell you about the vehicle’s life.
You should also check out the title. This is possible by visiting the area’s DMV website.
Buy or Lease
When you get to the dealership, the salesperson will ask you if you want to buy or lease a vehicle. Buying is owning the vehicle (eventually) while leasing is renting.
Both options have set pros and cons, but it is a good idea to figure out which option will work best for you and your situation.
It is important to note that there may be a penalty if you end it early with a lease.
Now You Know What to Consider When Buying a Car
There are many factors to consider when buying a car. Be sure to keep the information here in mind, which will ensure you make the right decision regarding the vehicle that you ultimately purchase.
Don’t underestimate the benefits of taking time to find the right car and the right loan term. In the long run, this will pay off and help you get the vehicle that you want and need and that works with your financial situation. Being informed is going to help you get the right vehicle for the right price.
Are you looking for additional information about making important decisions? If so, be sure to check out some of our other blogs. We cover topics on everything from education and health to arts, entertainment, sports, and more.