Buying a car is an exciting and expensive time in someone’s life. For many people, buying a new or used car is one of the most important purchases they will make with their hard-earned money. As with any major purchase made on credit, there are several things to consider before committing to such a large expenditure. If you are considering buying a car or coming out of an auto loan soon, it is important to understand the current market and how to get the best deal on your next new or used car.
Make sure you understand your credit score
When buying a car, one of the most important factors in determining your interest rate is your credit score. If you have a good credit score you will pay less interest on your loan. Conversely, if your credit history isn’t so great and you find yourself with a very low yearly income that doesn’t justify the car’s sticker price, don’t be discouraged.
If you have a low credit score, consider applying for an auto loan with your bank or credit union. Many credit unions have more lenient lending policies so it would be prudent to inquire about financing at your local branches. Additionally, many banks will refinance your loan if you find yourself in a situation like this and want to lower the interest rate.
Put down a deposit
Putting a low deposit amount down on your car purchase is one of the best ways to guarantee you’ll get a great interest rate and secure your loan. The general rule of thumb is usually 10% or $1500 whichever is greater, but putting more money down will lower the risk for lenders and result in lower monthly payments or better interest rates so always aim high with your down payments.
Be wary of dealer finance
Using a dealer as a short-term lender will probably result in the highest interest rate possible and it is important to be aware of this when negotiating a new or used car’s price. This practice is particularly prevalent with customers using bad credit and their interest rates can be even higher than those offered by bank loans. Make sure to use your discretion when you are financing car at a dealer.
There are many lenders out there looking for people with good credit to take advantage of their interest rates. As more and more people begin to repair their credit scores, the banking industry is starting to make it easier for them by offering more attractive deals. It is important to shop around for this type of loan because you could end up saving thousands on your car purchase. Always take the time to review your choices before committing to any lender and you could find yourself saving a lot of money on interest payments. There might even be deals specific to your city, for example, if you live in Perth, make sure you check out Driva Perth car loans