A Guide on How to Finance Your Car
With several financing options like leasing, cash or bank financing, and car loans, it can get a little confusing to choose the right way to finance your new/used car. Add to that a sales pitch by the dealer, and it leaves you with mixed feelings. This guide will assist you in financing your next vehicle.
Check Your Credit Score
Check your credit reports before shopping for a vehicle. You can usually do it for free, but remember that some “free” services actually provide estimates and may not show the score that the lender will see when you apply for a loan. If you want to know your official FICO score, you need to order it from at least one or maybe all three credit bureaus.
If possible, try increasing your credit score before applying for auto financing. You could save a lot of interest by boosting your rating.
Plan a Down Payment
Before you start looking for a car, save up some money. You’ll be able to put a down payment on the car that you want. A larger down payment results in a smaller loan, and a smaller loan results in a lower monthly payment.
If you put no money down, you’ll pay more interest in the long run. You should make a down payment of at least ten to twenty percent. However, if you have poor credit, prepare to make a larger down payment in order to secure financing.
Make a List of Essential Features
Once you have a credit score and down payment, you can begin shopping for your vehicle. Keep your must-haves to a minimum, and you’ll have more options from which to choose. Your must-have list will be based on your needs.
For instance, you might care more about how much seating space or extra hauling capacity a car offers than whether it’s new or used. This list of features you need will show you what you’ll need to spend money on.
Learn About Fees and Taxes
Before you begin shopping for financing, it’s a good idea to think about all the additional fees and taxes that will be involved in the process. For example, dealer and licensing fees may apply and could increase the cost of your loan. You’ll want to plan for these costs if you want to use cash for your down payment. Knowing these figures will help you make decisions about how much cash to set aside.