The average price of a new car in the United States is a little under $40,000. That's a lot of money! In fact, it's 20% of the average first family house price.
$40,000 is a huge sum of money to spend at one time, which is why the majority of car buyers opt for financing to help them get the new car that they want.
If you have decided to go down that route, take a look at these top tips for financing a new vehicle.
10. Check Your Credit Score
Interest rates change according to the purchase price and down payment, but credit scores are also factored into the equation. It's not just credit card companies that will scrutinize your credit report, auto loan companies will also use it to judge your creditworthiness.
The higher your credit score is, the lower the interest rate will be.
9. Do What You Can to Boost Your Credit Score
Your credit score is not set in stone and there are a few things you can do to improve in.
Paying down large amounts of debt is probably not a viable option right now, nor is it the best one. After all, if you have more money, you should use that to increase your down payment.
However, you can improve your credit score by removing incorrect information from your report and increasing your credit limits. The former will remove harmful and incorrect marks while the latter will improve your debt utilization and both of these can have a massively positive impact on your credit score.
Credit scores are also impacted by new applications and new accounts, so if you're planning a vehicle purchase, keep those applications to a minimum!
8. Get Financing Quotes
Don't settle for the first quotes that you receive. Shop around, speak with different dealerships and financing companies, and look for the cheapest interest rates and the most favorable terms.
7. Consider a Trade-In
If you have a car to sell, consider trading it in to reduce the purchase price and the loan amount. You're going to need to sell that car anyway, so you might as well see what the dealership can offer you.
6. Pay What You Can
The greater the down payment, the lower the monthly payment. It's not just about paying an extra $1,000 now so that you don't have to pay it over many months. That $1,000 will also reduce the interest rate over the loan term and could result in you paying $1,500 to $2,000 less.
Obviously, you shouldn't use credit cards and other loans to cover the down payment. It's never a good idea to pay one debt with another. But if you have some spare cash, put it toward the car payment.
Sell an old used car or junk car; sell unwanted gadgets; dip into your savings. Any extra cash that you can put toward the vehicle purchase will greatly reduce those car loan rates and make life easier for you over the loan term.
5. Get Pre-Qualified Loan
Once you have checked your credit score and are ready to go, you can prequalify for a loan. You will get an idea of the loan terms (including the interest rate) and it shows the dealer that you're ready to go. It also speeds up the process of purchasing a new car on finance.
4. Go with A Trusted Dealer
You should always buy a car from a trusted dealer. Not only will you get a better vehicle and a more reasonable car loan, but it'll also save you lots of stress and hassle if there is an issue with your car further down the line.
3. Trust Your Instinct
If something doesn't seem right, listen to your instinct and look for another dealer.
Anytime something seems too good to be true, it probably is. Whether you're buying a new car or a used car, there are always people who will try to fleece you. They might not scam you outright, but you could find yourself paying much more than the purchase price or being hit with a massive monthly car payment.
Do your research, shop around, and leave as soon as those red flags are waved.
2. Get a Co-signer if Needed
If you're buying your first vehicle and don't have a great credit score, there's a good chance you will either be refused a car loan or charged an extortionate interest rate.
In such cases, you should either opt for a cheaper used car and leave the new car for when you're making a little more and have a better score, or get a cosigner.
If a family member has a much higher credit score and is willing to help you out, ask them to do this favor for you.
Just remember to check the loan terms, meet the monthly payment, and don't make them regret helping you.
You should also focus on building your credit history, making sure you don't take out too many new loans and keeping those credit card balances to a minimum. It means that you'll be ready to sign your own car loan the next time you purchase a vehicle.
1. Get Your Car Loan and Complete the Car Buying Process!
You're now ready to buy! Find a car in your price range, make sure the car loan is set, and complete the purchase!
You'll be ready to slide behind the wheel of your new car before you know it.