Buying a car is a big purchase for most people, and as a result, the process can feel stressful and overwhelming. If you are in the market for a new vehicle, being armed with the relevant information can reduce the pressure and put you in a better position to negotiate and make smart decisions.
Here are some steps to help you save money during the purchasing process.
Check Your Credit Report
Before you even begin to look at car options, it’s wise to consider the financial side of things. Your credit score can impact not only the size of the loan but also the interest rate. If your credit is good, you might be able to negotiate a lower rate on a car loan.
If you check your credit early in the process, you will have more time to remedy any issues that might appear. For example, you can make sure any errors are identified and quickly resolved.
Calculate Your Budget
The amount of credit you qualify for is only part of the equation you should use when determining how much money you want to spend. Everyone has other factors to consider as well. Try using an online budget calculator to assist you, and make sure you take into account the extra costs associated with owning a car, such as auto insurance, financing charges, fuel needs, vehicle maintenance, and unexpected repairs.
Determine Your Car’s Trade-in Value
If you are counting on trading in your car to help offset some of the cost, you should investigate its worth as soon as you can. There are online valuation sites that can provide you with an estimate based on your car’s make, model, and year, and this information can help you with your budget. Additionally, being armed with this information can boost your credibility during the negotiation process and, therefore, help you get the best price.
Investigate Finance Options
You have three general options when financing your car. You can pay in full with cash, take out a loan, or choose to lease the car instead of buying.
While paying in full might save you the most money in the long run, it’s simply not an option for most people. For this reason, most people will choose to finance with either a loan or a lease.
Simply put, car loans are when you receive a lump sum of money from a bank or other institution, which you then pay back with interest over time. The three variables involved with this type of financing are the amount of money you are borrowing, the length of time you have to pay back the loan, and the annual percentage interest rate you will be charged. It always pays to shop around for the best rates because there can be some variability.
Leasing is another popular choice for financing a new vehicle. When you lease a car, you are paying to use the car rather than to own it. Some leases require a down payment and some don’t, but sales tax is only applied to your monthly installments. When you lease, you also pay a financial fee similar to interest on a loan.
The monthly lease payments are usually less than when you buy. However, keep in mind that you gain no equity in the vehicle, and at the end of the lease, the car must be returned to the dealership. You may be able to buy the car at the end of the term, but when you do this, you almost always end up paying more for the car than you would have if you had purchased it in the first place.
Also, there are often additional fees you can incur with a lease. If there is a mileage limit included in the lease terms, you are charged for mileage that exceeds this amount. Also, you need to take good care of the car because you are responsible for any damage as well as wear and tear when you return the car.
Get Pre-Approved for the Loan
If you decide that getting a car loan is your best option, obtaining pre-approved from a loaning institution can be useful. Having pre-approval means that you can shop with the same comfort and confidence as someone who is paying cash. You are more likely to be taken seriously and are in a better position to negotiate. It’s also great peace of mind to focus on choosing a vehicle without worrying about whether your financing will be approved.
Research Vehicles That Match Your Needs
Once you know what you can afford, you can shift your focus to selecting a vehicle that fits your budget and your needs. Make a list that ranks your priorities, including size, safety, gas mileage, seating capacity, storage space, rate of depreciation, and eco-friendliness. After you have your list narrowed down, it’s wise to read car reviews on each vehicle under consideration before making your final choice.
Look at Local Dealership Reviews
While most dealerships are trustworthy, there are, unfortunately, shady operations as well. Dealerships that take advantage of people and prey on those who need a car quickly will often wrack up bad reviews, so use the internet to do your research.
When buying a new car, you need to be prepared if you want to get the best possible deal. Put in the time and effort to check your credit, examine your budget, determine your car’s trade-in value, and consider all the advantages and disadvantages of various forms of financing. When you can enter the process armed with knowledge and pre-approval, you will be in the ideal position to negotiate and get the best possible deal.
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