There are several important things to keep in mind when you are in the market for your next car. Paying attention to considerations like getting pre-approved, shopping around, financing for the shortest time possible, avoiding upgrades, and buying a used car to avoid the depreciation hit can make a huge difference in your car buying experience.
Keep reading to learn the best car buying tips and secrets from our financial experts.
Time your purchase just right to obtain the lowest possible interest rates. This is important because the amount you will pay in interest over time is directly affected by the quality of your credit score.
The time to apply for a new car loan is not when you are just getting started building your credit or when you have recently applied for other large financial products like a home mortgage or new credit card. Give your credit score time to recover after a major purchase, and consider embarking on a credit repair program, if necessary, to get the best possible rates on your vehicle loan.
Similarly, you want to keep an eye on the federal prime rate, as the rates offered by your lender will likely be influenced by how federal rates are trending.
You must keep an eye on loan terms. In addition to the interest rate, the loan repayment period is a very important piece of the financing puzzle that will determine not only how much you pay per month, but how much you will pay in interest over the life of your loan.
You want to finance for the shortest amount of time to reduce the number of monthly payments and interest payments you will make on your vehicle. As tempting as the long-term loans may be, you will wind up paying far more out of pocket in the long run, so try to avoid those astronomically long repayment periods.
Another common source of car buying frustration is the temptation to over-upgrade your vehicle to get the latest and greatest features and technologies. But the best advice is to not finance these extras unless necessary. Each upgrade and add-on drives up the price of your vehicle and the amount you pay in interest over time.
Instead, seek out dealership and manufacturer promotions or consider only buying vehicles that already come with standard upgraded features. As a last resort, some dealerships may let you pay for your upgrades upfront to avoid paying interest.
Take your time when selecting which features you need for your next car, and try to leave your emotions out of it.
Buying a certified pre-owned vehicle instead of a brand new vehicle is often the smartest financial decision you can make.
As tempting as it is to drive that shiny new car off the lot, the second you leave the car dealership, that brand new vehicle will begin to depreciate, possibly even leaving you upside down in your loan. Choosing just a model year or two behind can save you a significant amount of money over the lifetime of your loan while still giving you access to plenty of the latest new features.
One of the best things you can do when you are in the market for a new or used vehicle is to get pre-approved before you begin shopping. Pre-approval suggests how much car you can afford, but it also gives you a leg up on negotiations with the dealer.
Dealerships are notorious for offering less than satisfactory and even predatory loan terms, as well as being a hassle to negotiate with. Obtaining a pre-approval from your credit union can eliminate much of the difficulty often associated with car shopping.
Unless you are sure that you have found the best possible loan product on the market, you shouldn’t go with the first financing deal you see without shopping around first.
As mentioned previously, the loan terms and interest rate you receive can make a significant difference in your monthly payment and total repayment amount, thus influencing your overall financial health.
When you’re in the market for a new or preowned vehicle, it pays to shop around.
Lastly, consider looking beyond the typical well-known banks and apply for membership with a credit union in your community.
Credit unions are member-owned organizations that are run as non-profits, and they can pass their profits directly to their members as cost-savings. Member-owners benefit from low interest rates, friendly service, and a variety of loan products and services with flexible terms.
At Partners Financial FCU, we are proud to offer vehicle financing with more flexible terms, better rates, and lower thresholds than most other banks and credit unions. We can even do auto loans for amounts less than $5,000!
Click below to learn more about the credit union difference when it comes to financing your vehicle purchase.