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If you’re in the market for a new vehicle, there are many things you need to know before you head to the dealership. Getting some new wheels is exciting, but since this is an investment, you’ll be paying off over the next few years, you want to ensure it’s done right. Car financing isn’t an exciting topic, but it’s one that you must educate yourself on if you want to get the best deal.
Finance Tips You Must Know
If you’re like most people, you start your car shopping online. It’s fun to browse all the automobiles and try to find the one that fits your family. The shocking part is the price tag. Thankfully, these tips can help you get the best bang for your buck.
1. MRSP Isn’t the Same as the Sale’s Price
Many people are confused about the MRSP as they believe it’s the dealer’s price and is required to get out of the vehicle. Don’t let this sticker price fool you. This is merely the suggested retail of the automobile. The dealer can put whatever price they want on the car, as this is just a guideline. Feel free to haggle with them on price as they have some wiggle room.
2. Used Car Loans Always Have Higher Interest Rates
New car loans always have a lower interest rate than used loans. The reason is that the lender is taking a significant risk by financing an older vehicle, as they worry that it might end up in the salvage lot before the loan is paid in full. The bigger the risk, the higher the interest rate, which is why poor credit auto loans always have such a high rate.
3. Know Your Credit Score
Do you know where you stand credit-wise? It’s always advisable to find out your FICO score before you start car shopping. Ask a professional about the automotive line of credit requirements before purchasing your ideal vehicle. Make sure you have a score above 600, money to put down, and a good debt-to-income ratio, and then you can head to the dealership. Your credit usage should never be more than 30 percent to get financed. Lenders don’t like to loan money to people maxed out on their credit, as it’s a considerable risk.
4. Never Pay Cash to Hold a Vehicle
The automotive market is hot right now, do dealers ask people to pay cash deposits to hold a vehicle. However, it would help never to put anything down until you’ve secured financing. If for any reason, you can’t get financing approved, you will lose the deposit. The only way to get your money back is to ensure the dealership will repay. If they won’t work with you, won’t you have the option of paying by credit card and filing a dispute later.
5. Know The Dealer Specialties
There are used and new car dealers but getting financing can come down to their specialty. You’ll find that it’s easier to get a new car loan at a lot that sells new cars, as they have financing lined up for these types of loans. Whether you want new or used financing, make sure you go to the correct kind of dealer.
6. Sizable Down Payments Equals Favorable Terms
While getting zero-down loans is still possible, it’s not the best option. The more money you put down, the better your financing deal. It looks good to the lender that you have saved cash you can pay down on the vehicle, reducing the amount you need to borrow. You can decrease your monthly payment and possibly your interest rate too.
Final Thoughts on Car Financing
Before you head to the dealership, make sure you have a budget in mind. Many people get caught up in impulse buying and live to regret their decision. Since this is a long-term investment, you want to ensure you get a great interest rate, good financing, and a car that will suit your family for many years.