The decision to purchase a new vehicle is exciting. Whether it’s your first car purchase or not, the freedom of mobility and independence is invaluable. You can go anywhere, whenever you like.
But cars are expensive. Buying a vehicle that suits your needs and your budget can be a challenge. Often, the vehicle that you would like to drive may not be the one that you can afford. Become an educated buyer.
Buying a car is a two step process
1) Shop around for your new car.
You may want to attend a local auto show, purchase car magazines, speak to car owners, or research online. Once you’ve determined the type of vehicle you’d like to buy, visit dealership websites. Find the year, make, model, and color you’d like. Ask about the cost and availability.
2) Shop for your financing.
Once you know the cost of the vehicle, decide how you plan to pay for it. Figure out the best way for you to finance your vehicle. You may have saved some money, have a vehicle to trade, or see that a dealer is offering rebates. Review your budget and determine the amount that you can afford on a new car. At last, check your credit reports for errors. If you need to dispute inaccurate listings on your report, do so in advance of applying for new credit. The errors could make the difference between you being approved or denied for the loan.
Research your Lending Options
Many times the dealer will assist in securing financing for your auto loan. However, you may be able to get better terms through another bank, credit union, or financial institution. Different lenders offer different terms. You may be able to secure a loan on your own with a lower interest rate, monthly payment amount, and shorter loan period.
Only enter into a loan that you can afford. Do not sign a loan agreement until you’ve made sure the financing terms are right for you.
Down payment, trade-in, or both?
Often when someone plans to purchase a new car money has been saved to make a down payment. Any funds paid towards the cost of the new car will lower the amount financed.
Also, new car buyers may have a car to trade. The dealer will evaluate the condition of the car and offer an amount that the buyer could apply towards the cost of the new car.
After deducting the down payment and/or trade, the balance of the car cost is the amount that a buyer would finance.
Is Money Still Owed on my Trade?
Before going to a car dealership, contact your lender to find out the balance owed on your car loan. Request a payoff figure so that you know the total amount to satisfy the loan.
The dealer may offer to add any balance owed on your trade to the new car loan. Whether you apply money toward the new purchase with a down payment, or have the value of your traded vehicle applied towards the purchase, the cost of the new car will be reduced and this will decrease the amount you need to finance.
Owning a car is a responsibility
Auto loans may make the purchase of a vehicle more affordable, allowing the borrower to make monthly payments over a specified period of time. The loan agreement, or Retail Installment Sales Contract, signed at the time of purchase states the monthly payment amount and the date the payment is due. Payments must be made in full and on time. If the buyer defaults on the terms of the auto loan, the lender has the right to repossess the vehicle.
Check your credit report
If you’re in good financial standing and have a good credit score, you should be approved for an auto loan. Good credit shows financial responsibility and that you have a history of making payments on time. Check your credit report and score before you discuss options with a potential lender so you know where you stand. You can get a free copy of your credit report every 12 months from each of the three credit reporting bureaus.
Consider a co-signer
If you can’t secure a loan on your own, consider asking a family member or friend with good credit to co-sign for you. A co-signer guarantees that the loan will be paid if the primary borrower falls behind on payments or defaults. It is a significant financial responsibility, so make sure that the person you ask to co-sign is aware of the financial obligation.
Wait and save
If purchasing a new vehicle doesn’t fit your budget right now, consider waiting a bit longer. It may be worth it in the long run. If you’re in a stronger financial position, you may be able to make a larger down payment, get a loan with a lower interest rate and shorter payoff period.
Seek Legal Help
Flitter Milz is a consumer protection law firm that represents people that have had a vehicle repossessed – whether payments were missed or not. Contact Us to discuss issues related to your vehicle.