If you’ve bought cars in the past, more than likely you’ve faced issues with the financing process. Financing can be difficult when the terms aren’t completely clear and if you’ve haven’t explored all of your options. On the other hand, if worked through correctly, financing can be a great option for those that are struggling and can’t have all of the money upfront. Before you rush out to by your next car, it’s important to study what your options and what mistakes to avoid so you can get the best offer possible. Below are some tips to make the financing process easier so you can take with you on your way to the next dealership.
1. Not Knowing Your Credit Score Beforehand
We cannot stress enough how important it is to know your credit score before even attempting to ask about cars. Your credit score reflects your credit history, which means that any negative events could enormously affect your interest. This also makes it very hard to buy a car on your own without a co-signer – with a great credit score of course – or a pretty big down payment. By finding out the information beforehand, you’ll be better equipped to buy a car within your price range and your honesty will only help your dealer figure out how to help you with different options.
2. Not Being Honest with What You Can Afford
While getting a new car is exciting, you’ll have to be honest about what is within your price limit. If you get something on the pricier side, you’ll have to accept higher payments and interest rates that wouldn’t have happened if you had picked something lower in cost. What you will need to do is check out your monthly finances, and really examine how your job is going currently. If there is any instability, something inexpensive would be your best bet. It’s better to be safe than completely sink your credit score because that can take years to fix.
3. Not Studying Your Finance Options in Advance
Because of Covid-19, the used car market has gone practically digital so there is no excuse as to why you can’t research your options before walking into the dealership. There are many online lenders that you can apply with immediately for fast responses, and to get an idea of how much funding you can actually get without going through your dealer. By doing this, you can get your payment rates ahead of time and be more prepared to properly haggle with your seller.
4. Not Paying Attention to Finance Terms
Everyone has heard of the horror cases of a customer becoming too excited to get their new car home that they immediately signed the finance contracts without reading the terms of what they were going to be locked into for the next five years. If your dealer makes an offer for lower monthly payments, the trick to this is that you will have to stay committed to the loan for a longer period of time, meaning you will be paying a lot more in interest. Take your time to read each point by yourself and with your dealer before just so everyone is on the same page.
5. Not Selecting the Shortest Term Possible
Having 72 months or more to pay off a car sounds ideal, especially when money is tight but in reality, it can cause a lot of damage. Ideally, you should aim for a term of 60 months or less because even if you have to pay more per month, you will save more over time by not paying the high interest rates. This will also save you from spending money you don’t have, and causing more problems with your lender, credit score, and bank.
6. Not Wanting Options Other Than Dealer Financing
We get it: dealer financing is convenient. The problem with this is that because it’s usually a much easier process to go through, this doesn’t mean you’re getting the better deal. You’re not going to want to pick this choice unless you’ve explored every resource you have. If you have no choice but to go with the dealer’s option, you’ll want to have a long conversation with your dealer about how to get the terms closest to what is most affordable for you.
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