3 Things to Keep in Mind When Auto Financing
Purchasing a new vehicle can be fun and overwhelming all wrapped into one. You’re excited about getting behind the wheel of that new car you’ve been eyeing up at the dealership. However, ensuring you get the best deal on your car loan is an important consideration you need to take into account when signing on the dotted line. There are a few key factors that you need to keep in mind when you’re talking with a dealership or bank about auto financing.
1- Always Shop Around For Pre-Financing
While it may seem like a good idea to stop by the dealership to look at a few new vehicle options and get a ballpark price, it really isn’t. Too many consumers start out ‘just looking’ at the dealership and end up leaving with a new car and a new loan they really can’t afford to pay. You should start your car buying experience by going to your local banks and checking online for the best financing options that are available.
When you go to these alternative lenders, they will take your income into consideration before giving you a pre-approved loan amount. This will get you started on the right foot as you’ll know what amount you can comfortably afford to borrow without straining your budget or ending up paying way too much interest in the long run. Once you have a pre-approved financing amount, then you should head to the dealership. This will help you to pick a vehicle that falls within your budget and gives you a bargaining chip against the car loans that the dealership offers you.
2- Look At The Big Picture
Car dealerships know that daunting a 0 percent financing offer or lower monthly payments can be a great tactic for getting consumers to purchase a car. In the short term, it sounds like a great way to save yourself some money and pressures you to make a buying decision because of limited offers. Unfortunately, in most cases, if you do the math behind the terms that you establish the loan for, you end up paying the same or even more money back as compared to buying the car without the offer.
You must go into the car buying process with a long-term view. Don’t let these sly short-term benefits let you ignore the long-term consequences. You should take the time to do the math on the loan to see what the actual amount will be that you end up paying for the entire loan. You should be especially looking at the interest and principal amounts. If you aren’t overly proficient in mathematical equations, there are numerous online auto financing calculators that can help you discover these numbers. Many require you to input the terms of the loan and will spit out the interest you would pay over the life of the loan. This is the number you should be comparing when evaluating various financing offers.
3- Don’t Let Extras Sway Your Logic
People like to know that their money is going the farthest possible. This is why late night infomercials proclaim crazy deals of throwing in two or three free products along with the main product. People who order from those infomercials feel like they’re getting a great deal because they get so much stuff for their money as compared to just one item.
Car dealerships are no different in this respect. They will offer extras such as insurance, extended warranties, and free inspections. While your brain may be screaming to you that it’s a fantastic deal because you’re getting so much more for your money than just the car itself, your logical side needs to take over. Actually look up how much an extended warranty program would be from an independent contractor, as it’s very likely to be cheaper. The same goes for insurance. Never let the amount of products you get overshadow the amount of money they are actually worth as compared to what you’re going to be charged.
Auto financing can be an overwhelming experience even for the best mathematicians out there. Weighing in all the extras and loan details is an important aspect of finding the right financing offer for your next car. Remember that taking the time to get the financing right could save you bundles of money later down the road.