Financing your car is one of the biggest financial commitments you can make, after purchasing real estate. But many of us still rush into the choice and take the default financing offered at point of sale- which can cost us big. A little research into your options up front and you could save hundreds of dollars on the purchase. Here are some things to think about before handing over that hard-earned money:
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Financing is a cost in itself
If you’re buying a car, of course you need to negotiate to get the best price from the dealership. But a common mistake is to negotiate solely on the car’s ‘sticker price’ without including the cost of a loan itself. Rates of financing are subject to change and can usually be adjusted by the sales manager. So make the interest percentage and any upfront payment part of your discussion on prices and you could save big.
Check yourself first
Understanding your credit score is the key to being able to find the best finance deals for your new wheels. Even if you have a poor credit score, you will usually be able to get a car loan, because it’s a physical asset that is easily repossessed if you default on payments – but you may not have room to negotiate on rates. Know the situation before you enter the sales room and you’ll know how much you can push it with negotiations before picking the model you want. A FICO score of 750 or above will get you the best rates (these are usually the ones advertised) but anything below 700 and charges will rise sharply. The dealership financing isn’t your only option – check out bank loan rates if you have good credit.
Use a vehicle as a financing source
You can make a vehicle purchase pay for you in the future by looking into a car title loan. If an emergency occurs and you’re thinking ‘I Need Cash Now’ then make one of your biggest assets pay. These loans use your vehicle as equity for a set amount- it can be up to $50,000. Application is typically a quick, four step process where they look at the value of your car and your ability to repay so you can get your hands on money quickly in times of need.
Pay for charges in cash
Another way to save at the point of purchase is to find additional expenses involved in the sale outside of your loan amount. So fees, sales tax and add-ons like extended warranties. These costs start you off off on the wrong foot, as they increase the value of the loan while the asset value remains the same. So if you can afford to cover the extras with cash, you’ll be in a much better position.
With a little careful research, preparation and knowledge, you can go into the sales pitch prepared and ready to negotiate for the best possible outcome. A few smart moves before you go in, and you’ll know exactly what to expect and where you can save.