How to Finance a Car Purchase
Need a car as soon as possible, but don’t have $20,000 lying around? Fortunately, there are many ways you can finance a vehicle purchase. Here is what you need to keep in mind when financing a car purchase for the first time.
1) Know your limits
When you approach a car dealership (like the ones in the Jeff Lupient Automotive Group), they will have makes and models of every type of vehicle on their lot. If you love cars, you might feel like a kid in a candy shop, except that in this case, the lollipops on the shelf cost tens of thousands of dollars.
Although financing might allow you to drive away with most of these vehicles, getting carried away can leave you with a monthly payment that you might not be able to afford. Take a long, hard look at your household budget: What will you need to sacrifice in order to afford the ride that you want?
If a certain type of vehicle isn’t worth giving up your weekly night out at the movies, that it is important to have a backup model in mind that will better fit your spending habits.
2) Get a copy of your credit score
While most people with a paycheck and a pulse can obtain financing, the quality of that deal will depend greatly upon their current credit score. If your score is on the low side, it might be worth putting off your purchase for a few months while you take steps to improve your standing.
If you need to forge ahead with this purchase, know that a low credit score will result in higher interest rates for your loan. This will increase your monthly payment and the overall amount that you will pay for your vehicle once you have finished paying off the principal … beware!
3) Select a mode of financing
There are a variety of ways that you can borrow the money that you need to purchase a vehicle. Most people look to their financial institution for a loan. While their terms can be stringent, banks often offer the best interest rates compared with other financing options.
Dealership financing is another source of funds that is used by consumers to purchase vehicles. Their terms for acceptance are often more forgiving, making them an excellent option for those denied by traditional financial institutions.
4) Make a down payment
When you go to buy a car or truck, it is a good idea to make a healthy down payment even if you are obtaining financing for your purchase. Doing so will make your monthly payments smaller, making it easier to create room for your car loan in your household budget.
Additionally, the interest payments that you will make over the term of your loan will be smaller, so if you have some cash lying around in your checking account, be sure to put as much of it towards a down payment as you can.