If you have never purchased a car from a dealership, or have previously purchased but never been sure how the finance process actually work, here are some helpful tips. Financing has become the most common method of purchasing a new (or used) vehicle. The steep rise in auto prices makes it difficult for most consumers to simply lay cash on the barrelhead. Therefore, it makes sense to know on what criteria your loan will be based.
o Your Credit Score – Few things are as integral to your auto loan as your credit score. This will dictate what interest rate you are offered, the length of auto loan available to you and much more. In fact, your credit score is the largest contributing factor to the entire loan process. If you do not know what your credit score is, the best choice is to get a free copy of your credit report from one of the credit bureaus (one from all three is a better option), though you’ll have to pay for the actual score.
o Your Down Payment – The amount of money that you use as a down payment is a vital part of what determines your loan payments. The larger your down payment is, the lower the amount of money that you will have to finance. This helps you reduce your monthly payments and, when combined with a strong credit score, can help you receive the deal that you want.
o The Market – While your credit score plays a role in the interest rate that you receive, the current market conditions also play a large part. Many consumers are unaware of what the current market conditions are and, thus, have no way of knowing if they are receiving the best interest rate or not. Interest rates fluctuate based on the economy; knowing what those rates are will help you attain the best deal possible.
o The Source of Your Auto Loan – Many consumers mistakenly believe that it is easier to obtain financing through the dealership. While it may be more convenient, it is certainly not the only, or even best, method. Local banks and credit unions can offer you a viable option, as can online lenders. By having your financing already in place, you can avoid the expensive hassle of dealer financing and get a better deal on your new vehicle.
o Your Trade In – The value of your trade-in vehicle is an important part of the process. The more your vehicle is worth (to the dealer, not market price), the more money you will receive for your vehicle. Never think that you will receive fair market value for a trade-in. Dealers will pay only what they feel the vehicle is worth. This value includes how easily they can sell the car (demand) and how many similar cars they currently have (stock).
By ensuring that you know these areas of information, you will be able to ensure that you remain in control during the purchase process, as well as ensure that you pay the lowest price for that new car.