By George Reed on September 21st, 2016
When you are choosing a new car, there is no need to overpay to your dealer by using dealer-sponsored financing. This means that you won’t have to pay extra fees and charges that can be included in your financing arrangement. Instead, you should look for a better deal from banks or credit unions that offer car loans.
Choosing Appropriate Terms
Before choosing a way of payment for a new car, you need to decide on the price you are going to pay. This should be done before shopping, as car dealers always tend to influence your decision. When calculating a loan amount, consider a monthly payment that you will have and your disposal income. According to money experts, you should not spend more than 20% on your car payments. In the ideal situation, this money should be enough for covering car loan and insurance, as well as fuel costs. If everything is done right, your credit score will not drop. Although, keep in mind that sometimes credit score can get lower even if you are free from debts.
Another point to consider is a payment period. You can choose the lowest interests, but you will overpay eventually spending more money during a longer period. That is why it’s necessary to determine an appropriate amount you are ready to pay on monthly basis. It’s recommended to obtain a five-year car loan, as it has the less negative impact on your finance.
Deciding on a Money Source
When searching for a car loan, you need to pay attention to interest rate or the APR. So, you can compare different loan lenders with the same propositions according to the duration of a loan. In most cases, a credit union can offer the best deal. But this is a nonprofit organization that deals only with members.
There is no need to spend time on zero-percent offers, as all the interests are included in the price of a car. This type of loan attracts people by offering 0% interest rate, but this money must be taken out of something. So, all the expenses are covered by the initial price of a car.
Instead, you should consider obtaining an installment credit. For these who have good credit level, this proposition is a good variant due to low-interest rates that can be offered by lenders. Also, it’s almost the only way for these who have low credit score. Such people are often restricted from taking out money from banks, but loan companies deal even with these risky clients. Calculating a necessary amount of money to finance a new car, don’t forget to consider extra costs, insurance payments, etc.
Ways of Getting a Bargain
There is also a good recommendation at choosing a car. It’s always better to look for a car that is almost replaced or discontinued. At this situation, you can get a good bargain. Also, you can find a better proposition when you shop on Mondays and at the end of a month. It’s just weekends that are prime time for car dealers, so the beginning of the week is always less overloaded. The end of the month is a better time for shopping, as car dealers have a bonus system. So, you can be offered a bargain by a dealer who needs just one sale to get a bonus.
Buying a new car is a happy but still responsible moment. Don’t follow the advice of your car dealer extending your car budget. Be focused on your plan and choose the most appropriate car loan to make these regular payments invisible to your family budget.