Excited to get your hands on your dream car? 😀 Let's help you with some great tips for getting a good deal on car finance for your shiny new purchase! 👍 Cars are an essential part of our lives. The availability of auto loans has made the dream of owning one achievable for most individuals. Car finance allows you to buy a model that you would like, without using your savings.
Buying a car is very exciting. However, it would be best if you planned well to get a vehicle that suits your needs and financial situation. Before signing up for any car finance, you need to understand all the terms and conditions involved, in order to make the right decision.
As you shop for a new or your next car, here are some helpful car finance tips to consider.
8 tips to consider when getting car finance
Set a fixed budget
A car is an expensive and depreciating asset. Therefore, before buying one, you should first decide how much money you are willing to spend overall on the car.
These costs include a deposit, monthly payments, and interest rates. Based on your income, calculate whether you can sustain the loan repayments and running costs.
So think beyond the car finance itself. Can you afford maintenance, repairs, insurance, tax and fuel after you drive the car home? Make sure the car is affordable in the long run and will not put a strain on your overall household finances.
Find the best rates
As a first-time buyer, don't make the mistake of jumping on the first car financing deal you get. Dealership lenders try to offer loans with low interest rates when you shop for a new vehicle. As a rule of thumb, it's best to look around for rates from other lenders or banks.
Carry out market research on the loan rates offered before deciding on the one that suits your needs. Before going to a dealership, check for other financing options, for example from a bank or other lender.
You can quickly get this information online or by visiting the branch. This car buying finance tip might save you a lot of money.
Negotiate the car price
The price of a vehicle in most dealerships is negotiable. The number one tip in bringing your loan down is to negotiate the cost of the car. When it comes to new cars, most dealers have offers and discounts for buyers; therefore, it's vital to ask if there are any offers available.
You can also compare these deals between different dealers to get the best prices. Once the price goes down, your car finance amount also drops.
Know your credit score
The credit score is a very critical component in car financing. Your history gives an illustration to the lender of how good you are at paying back your loans. Improving your credit rating is a vital car finance tip, especially if you apply for a bank loan.
Before approaching any financial lender, review your credit reports so you know your chances of getting better rates. If you have any discrepancies, you can contact the rating agency to make any changes.
An excellent record guarantees you lower interest rates on your auto loan. It also gives you more finance options because you can approach your dealer or a bank with confidence.
Choose a shorter loan tenure
Personal loans offered at credit unions and banks have a loan term of up to 7 years. These loans are attractive to many buyers because they have lower monthly payments.
A downside to this is that they are expensive in the long run because you end up paying more interest. The car also depreciates, and with a longer loan term, you can only re-sell it at a lower price.
Try and opt for loans that have a repayment period of 3-5 years. The monthly payments might be higher, but interest will be lower, and you can finish paying it back sooner. This is an essential tip for financing a car to avoid long-term debt.
Avoid extra add-ons at the dealership
Once you've agreed on the car's price with the dealer, the dealers often try to sell you extra accessories. These could be audio systems, warranties, gap insurance, tire protection plans, model upgrades, or central locking systems.
Car dealerships make so much money out of selling these accessories and they are expensive. If you are taking a car loan that is just enough to buy the car, you can always plan to buy any of these items later. This car financing tip will save you extra expenses.
Lock-in your financing
Before approaching a dealer, it’s best to get a pre-approved loan from the bank or other lender. Dealerships will want to sell you the car plus offer you an auto loan. They make money on these deals because they receive commissions from lenders or manufacturers.
But with a pre-approved offer, you have bargaining power and can sometimes negotiate more on the price. Having this done before also allows you to compare the lenders' interest rates and get the best deal.
Understand the fine print
Auto finance can be complex and confusing for most people. A critical tip when financing your car is to get all the necessary information, especially concerning cash expenses. Get a detailed quote from the dealership with details on tax, registration and transfer fee, and any charges you need to meet.
Furthermore, once you get your loan agreement, read through it thoroughly. Ensure you note all the critical details on repayment charges, interest rates, prepayment charges, and all the terms and conditions. Different financial plans have distinct regulations; therefore, check all the agreement's details to avoid incurring penalties. If it's sounding like a lot of jargon, click here to read more about car finance jargon and what it means!
You're on your way!
So now you know, having the correct information before getting a loan can get you great deals! As you approach dealerships, make sure you arm yourself with plenty of details - both on the different interest rates out there, and your credit score, to have better-negotiating power.