You may have found the car of your dreams, but do you know how to pay for it? While it is fortunate if you can pay with cash, many buyers will require an auto loan. Unfortunately, now is not necessarily a great time as far as car loans. Interest rates are at their highest levels since 2010. As of 2018, the average rate for a new car stood at 5.2 percent. Before you sign any paperwork, it is critical to do your homework to see if you can get more favorable rates.
1. Shop Around
Similarly to how you would go to different dealerships to see if you can get the vehicle you want at a better price, you need to see if you can get better loan rates somewhere else. A large percentage of people simply get financing directly from the dealership. Attaining financing from a dealership is convenient, but most people could get better rates elsewhere.
There are plenty of other institutions that offer great rates. Talk to at least a few places before you purchase a car. It could make the difference between paying thousands of dollars over the years.
2. Examine Your Credit Reports
Before buying a car, you should first take a look at your credit score. The primary institutions you can see your current credit rating at are TransUnion, Equifax and Experian. Your score should roughly be the same at all three. However, some people will find one score to be substantially lower than the others. You need to correct this immediately or else it will drastically impact the kind of loan you qualify for.
If you find a mistake, then bring it to the attention of the organization promptly. You want to correct it before you have an auto dealer take a look. You are allowed to check your scores once per year for free. Even if you do have to pay, it is worth it to know precisely what you are getting into.
3. Look at More Than Just the Monthly Payments
One huge mistake people make when they try to get the best car loan rate possible involves only looking at the monthly payment. Even if you can budget for the monthly amounts, that is only part of the picture. You also need to consider the overall price of the vehicle as well as the trade-in value for your old car.
Some places will offer an enticing monthly payment only to increase the value of the car and offer you less than you deserve for the trade-in vehicle. Whatever you do, make sure you do not tell the salesman how much you can afford each month. If you go into the dealership with a loan already in hand, then you can negotiate more effectively to get the lowest price possible for the new car.
4. Avoid Yo-Yo Financing
Some dealerships will allow you to drive the car off the lot only to call you a week later to say the financing went through. The salesman says you have to go back to the lot to renegotiate the price and to pay a rental fee for the time you drove the vehicle. Chances are these terms were hidden amongst all the paperwork, and it occurs quite frequently.
The best way to protect yourself against this scam is to not take the car until the dealership definitely has the money. A simple way to accomplish this is to acquire financing somewhere other than the dealership. The financing needs to be deemed final before you can take the vehicle. Although this practice is not as prevalent as it used to, you still need to watch out. You should only purchase vehicles from reputable dealerships, so read plenty of reviews about a lot before making the trip over.
Many people are so excited to purchase a new car that they simply sign the paperwork without really considering what they are getting into. This is a huge mistake. A new car is one of the most significant purchases you will ever make, so you need to go in as an informed consumer. Luckily, there are plenty of institutions that can provide you with reasonable loan terms, so you get the car you want without spending a fortune.