The idea of driving a new car is fun and exciting, but the process of getting to that point can be a little daunting. Whether you’ve never been to car dealerships before to buy a car or you’re looking to improve your next experience, here are some tips for navigating the car dealership financing process.
Before Heading to the Dealership: Preapproval Is Your Friend
One of the best things you can do before heading to the dealership is get preapproved for your auto loan. You can do this through your bank, an online lender, or a credit union. This will let you know if there are any issues with your credit, and it will help you determine how much car you can afford. If you do find any bumps in your credit report, you can work to smooth them out and bring up your score before buying a car, so you can get a better rate.
Loan or Lease? Which Is Better for You?
The big question when buying a new car is whether to get an auto loan or lease the vehicle. This question will inevitably come up during the financing process. If you do your research before you make your rounds at your local car dealerships, you’ll have a better idea of which one is better for you.
Buying a car is usually a good option for someone who plans on driving it for many years, even after the loan is paid off. However, you may have to pony up more cash for a down payment, especially if you’re trying to lower your monthly payments. While you will own the vehicle after you pay off the loan, you’ll be on the hook for any repair costs once the manufacturer’s warranty ends.
Leasing is a good option for drivers who like to upgrade their vehicle every few years and for someone who doesn’t drive a lot of miles. Lease terms are often in line with factory warranty periods, so repairs should be covered while you’re leasing the vehicle. But you’ll have to keep your car pretty tidy: if you return it with more than reasonable wear and tear, you could be on the hook for extra charges when you return it.
It Doesn’t Hurt to Shop Around for Financing
Did you know that it won’t affect your credit score if you shop around for financing? Before you go to your local car dealerships and find out what type of loan they can offer you, shop around to see what you can get for a rate from an outside lender. When you shop around, it’s likely that several lenders will pull your credit, but these inquiries won’t hurt as long as you do them within a short time period. They will all be grouped together and count as a single inquiry when it comes to your credit report.
Keep Your Loan Terms Short
It might sound strange, but you’ll save money in the long run if you opt for the higher monthly payment and short loan period. Keep in mind that you are in control of setting your loan term. Extending the loan period may sound good because it lowers your monthly payment, but you’ll end up paying more in interest over the life of the loan. If you have good credit and can handle the higher monthly payments, keep the loan term as short as possible.
Now You’re Ready to Visit Your Local Car Dealership
So, now that you’re armed with some of the important information, it’s time to head to car dealerships to find your new vehicle. Keep an open mind about financing through the dealer; they might have some specials available that can save you money, but remember you have options.
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