Auto Financing

If you’re considering changing vehicles or currently leasing a vehicle, you should be aware of what steps to take before and during the car buying process. You will have many decisions – the more information you have available, the easier those decisions will be to make.

Before Shopping for a Car

Before you start shopping for a car, you may want to consider getting pre-approved for an auto loan. This step can give you an advantage when negotiating a purchase. The reason is simple, the seller will know there is no concern about you obtaining auto financing for your new car purchase. In many cases, a preapproval will allow you to negotiate a lower purchase price.

There are also other considerations, in addition to auto financing that should be part of the decision-making process.

For example, before you start shopping for a car, you should have a firm idea of how you plan to use the vehicle. If you’re merely going back and forth to work, you may need a different vehicle than if you plan to take regular family vacations that involve long drives.

Another consideration is whether you should buy or lease a vehicle. You may decide that leasing is a better option. Some of the reasons a lease would work better for some include consistent monthly payments and the ability to trade in for a new car on a predetermined schedule.

There are downsides of course. For example, when you lease a car, you may have restrictions on the number of miles you can drive, and you can only own the car if you buy out the lease.

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Identifying the Right Vehicle

The first decision you will have to make is what car best meets your needs. For some, this may mean purchasing the car they currently have on lease.

Other buyers may find their interests are best suited by working with a car dealer for a new or used car, while others may opt for a purchase from a private party.

Regardless of what decision you reach there are certain things you will have to verify including:

Insurance costs

A new car will mean higher insurance premiums. Since the overall cost of your vehicle purchase must factor in extraneous costs this is an important consideration.

Speak with your insurance agent about what you can expect to pay based on the criteria you determine.

Extraneous costs

There are other costs which must be taken into consideration when you’re purchasing a car.

Fuel costs can vary significantly depending on the type of vehicle. However, other costs such as maintenance can have a serious impact on your budget as well.

Consider this carefully, particularly if you’re purchasing a used car or a car from an existing lease. The older the car, the higher the cost to maintain.

Financing costs

The cost of auto financing a vehicle is another factor to take into account.

What it costs you to borrow money is impacted by your income and your credit score. While you may think that borrowing money for a used car makes more sense, the interest rate differential could result in higher monthly payments on a used car than on a new car.

Make sure you fully understand the cost of auto financing before deciding what car is right for you. Also be aware of any applicable dealer fees and lender fees.

Naturally, if you’re purchasing a used vehicle, you should ensure the car is thoroughly inspected before purchasing. You don’t want to wind up owning a vehicle that requires thousands of dollars in repairs, particularly while you’re paying back a loan.

If you’re purchasing a new vehicle, make sure you are familiar with the dealer’s warranty and manufacturer’s warranty in the event something goes wrong. Remember, even a brand new car can have problems, you don’t want to pay for a brand new car that requires constant repairs.

Understanding Auto Financing Options

Having the right car in mind, it is time to consider which loan is right for your needs. You may wish to compare several auto financing options from your lender as well as from other lenders.

Before you make the decision about which loan to use, there are several key features to consider. Here’s how to break down and compare loans based on how they will impact you.

Loan Interest Rate

The most important factor in any loan is the interest rate. This is the cost of the loan – what you will pay to borrow.

Lenders will tell you the cost as an APR or annual percentage rate. This is the percentage charged to you on an annual basis for obtaining the loan.

Your goal as you navigate auto financing options should be to qualify for the lowest interest rate possible.

Rates are dependent on several factors, including:

  • Credit score
  • Credit history
  • Income

Loan Term

The loan term is the length of time you have to pay off the loan. A long-term can be beneficial if you want a lower monthly payment. However, the longer the term, the more time for interest to accrue.

To make the right decision, compare several options. Balance the length of time of the loan to the monthly payment. You’ll want to pay off the loan as quickly as you can to reduce interest costs.

Also important is to find out if there are any prepayment penalties if you pay off the loan early.

Monthly Payment

You need a monthly payment that fits your goals and budget. For this reason, it’s best to shop for auto financing before you shop for a car. This enables you to find a loan that first and foremost fits your financial needs, then you can choose a car that fits within those goals.

To determine how much of a monthly payment is right for you, consider how much you are comfortable paying with ease each month. Since auto financing plays a role in helping you to establish your credit history, you want to be sure the monthly payment is easy for you to make.

Down Payment

Not all lenders require you to make a down payment to buy a car. But, it is always an option, and a great one, in fact.

Down payments reduce the amount of money you are financing through your lender. This means reducing the total cost of the car because interest doesn’t apply to down payments.

Down payments also favor your lender.

For example, if you want to buy a car worth $20,000, and plan to make a $5,000 down payment, the lender views this favorably. Putting a significant amount of money down means you are less likely to default. Any amount of a down payment is beneficial to the big picture.

Auto Financing Mistakes To Avoid

Before you apply for a loan, there are a few rules to remember and mistakes to avoid:

  • Do not assume the dealership is going to help you get a low-interest rate on a loan. Most dealerships represent numerous lenders. They are not motivated to help you find the lowest rate. They just want to get you approved.
  • Never forget to ask for a better interest rate. The best lenders are willing to help you keep costs low.
  • Be sure you like and trust your lender. Sometimes, the very best step you can take is to use a credit union with whom you already have a relationship. This could reduce your costs and help you qualify for a loan.

Choosing The Best Auto Financing

At Partners Financial FCU, we offer a range of new and used car loans. Our car loan programs offer competitive rates, flexible repayment options, and direct payments from paychecks or from your bank account.

Our goal is to get you in the right vehicle, with a loan that meets your needs. In addition, we also offer numerous cost-saving insurance programs to help protect your investment.

Once you’re ready to complete the car buying process, contact your Member Services Representative at Partners Financial Federal Credit Union for help with the application process.

Contact a Member Services Representative at 804-649-2957 or apply for a loan online at any time by using our simple application.

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A $15. Convenience fee will be automatically added to your payment amount. Your maximum total payment amount (including the $15 convenience fee) cannot exceed $800. Payments initiated and approved by 3:00pm will be applied to your loan on the same business day. Payments initiated and approved after 3:00pm, or on a day that the credit union is closed (weekends and holidays), will be applied on the next business day. If you have a PFFCU debit card, please log into home banking to make your loan payment.

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Excludes mortgages and home equity lines of credit. A $25 fee is due at set-up for each loan. Loan must have been open for at least 6 months. Past due accounts do not qualify. One skip-a-pay allowed per calendar year (Jan-Dec).