Buying a car is almost a given once you reach a certain age. Though there are several means of transportation, the convenience of being able to hop in your own ride and take off whenever you’d like takes the cake. As purchasing a new car can be expensive, most first-time car buyers rely on auto loans to help them drive off the lot. If you’re interested in doing the same, there is a certain level of savvy you’ll want to have to ensure you’re making informed and wise decisions about such a large (although convenient) investment.
Get Your Finances in Order
Your chances of getting a car with the help of a bank or private lender like New Roads are greatly impacted by your own financial circumstances. Before you even start looking at photos of cars you’d like to ride around in, it’s best to review your finances. Here are some areas to check and prepare:
Your budget – how much can you afford to pay for a car? When asking yourself this question you must first know what it costs to own a car. You’ll need a down payment, sales tax, motor vehicle fees, and any additional fees the dealership charges. You’ll also be responsible for regular car payments, interest, car insurance, maintenance, and repairs. Given these expenses, how much per month can you afford to contribute to a car note and how much can you pull from your savings for a down payment?
Your credit – Lenders use your credit history to determine what type of borrower you are. They look at your income to debt ratio, payment history, credit utilization, and status of accounts to determine whether you can be trusted with a large sum of cash, and more importantly if you’re responsible enough to repay it. So, look at these areas of your credit report with all three major credit bureaus to determine what can be improved.
Shop for Lenders
Now that you’ve decided how much you can afford and cleaned up your credit history to show lenders that you’re a responsible borrower you’re ready to start looking for lenders. Though dealerships often have connections with lenders they can offer, it’s always a good idea to do some research on your own. Sometimes you can find offers and programs that a dealership does not offer. Here are some things to look out for as you shop for auto loan providers.
Reputation – Experience and quality service go a long way when looking for the right auto loan provider. You’re going to be working with them over the next few years until your car is paid in full and it would be best to find a company that has years of experience and the best service. Do some research to find out more about the lender including checking online reviews from existing or previous customers.
Interest Rates – Your credit plays a major role in how much you’ll pay in interest rates for a car loan. Be that as it may, you want to select a lender who offers the lowest interest rate. Some have special programs for people with bad credit so they don’t have to pay back double what they borrowed.
Loan Terms – The longer the loan is, the more you’re paying in interest. On the other hand, longer loan terms can equate to smaller monthly payments. So you’ll have to find a common balance. A loan that offers low payments with short terms would be ideal.
Penalties and Fees – When reviewing the loan agreement, be sure to look at the penalties and fees section. You want to find out what additional fees you could be charged for. Some lenders, for example, charge penalties if you try to pay your loan off early. You want to opt for the lender with the fewest “strings” attached.
Buying a car is something that shouldn’t be done haphazardly. Before you start visiting dealerships to browse their selection of vehicles, make sure you’ve done your due diligence. This includes checking your financial circumstances and doing some research on options for lenders you can borrow the money from. Once you’ve done this, you’re ready to move onto the next stages of buying your first car.