FINANCING A NEW CAR
Almost all Americans will dream of owning a new car. But as we all know, new cars are not cheap nowadays and not only that, one should also consider car insurance plans. Before sinking a fortune into a new car you should read this page. You are urged to read this information before visiting a car dealer's showroom.
Before starting your car shopping event assess your household budget to find out exactly how much you can afford to spend. Keep in mind that a vehicles sticker price doesn't always reflect the full cost of owning a financed vehicle. Ask yourself if you indeed do absolutely need a new car. If your current vehicle is still reliable and fuel efficient, it may be a better option for you to keep using it. Make a list of the vehicle features that you absolutely need. Don`t order any expensive extras you don`t need!.
Financing a New Car
If you in the majority of new car shoppers you simply cannot afford to pay cash, so that means you will need to become an informed consumer on the subject of financing if you're considering buying a new car. For most new-car buyers, one of the biggest costs of purchasing a new car is interest on the loan that makes the purchase possible. But there are many different ways to finance a car, and knowing your options can help save you money.
Preapproval is a Plus
Just as you want to secure the lowest price for a car, you also need to look for the best prices from banks on the car loan. The best time to do this "homework" is before you start to shop for your dream vehicle.
Getting a preapproved auto loan before you start shopping for a new automobile is like shopping with cash. If you find what you like and you are preapproved you can drive the car right off the lot without waiting for the dealer to check your financial situation out before giving you the keys. In most cases an auto loan can be approved by your financial lender in a few days.
Shop Around for Auto Financing
All financial loan lenders are not created equal. You can save several hundreds of dollars by searching different options in order to find the best lenders available. Ask the lenders what interest loan rates they can offer then ask your car dealer if they can give you a better rate.
Borrowing From the Auto Dealer
This is the easiest route, and all in one stop if you will. With many car companies having their own lending affiliates. The lending process is faster this way as opposed to applying for a bank loan, and dealers are more likely than banks to qualify buyers with less-than-perfect credit ratings. They also usually help customers with special needs, like first-time buyers and recent college graduates. Best of all, car companies sometimes offer low-rate promotional financing on certain models. It is hard to get special discounts on the most popular models.
Make sure you secure the price of the vehicle with the salesperson before you talk loan terms. Some dealers might try to hike the car's price to give you a lower-rate loan. Even if you get low dealer financing rates of 2% to 5%, there's a catch and that is that the loans need to be paid back in 2 or 3 years, not 5 or 6.
Borrow From a Bank, Credit Union, or Finance Company
Banks and credit unions usually offer set, nonnegotiable rates, often less expensive than dealer financing. Membership credit unions that offer auto loans typically offer lower rates than banks and finance companies. But finance companies usually take the higher risk borrowers.
In 1991, the IRS eliminated the income tax deduction for interest on most personal loans. The major exception is interest on a home equity loan, which is tax deductible on principal up to $100,000 no matter how you spend the money.
Borrow Against Investments
Another option is to borrow at an attractive interest rate, with a flexible repayment plan, against a securities portfolio, passbook savings account, or a cash value life insurance policy.
Payback Quick and Save Money
If you take out a loan for a car, get the shortest payback time you can comfortably handle. While monthly payments can be reduced if you have a longer term you will also pay a higher interest rate. Try to pay more per month with lower interest rate loans and shorter loan terms.
A $15,000 loan at 8% for five years, for example, will cost $3,240 in interest. You would save $672 if you paid an extra $62 a month for the same size loan over four years. The total interest cost would drop to $2,568.
Quick Car Loan Summary
When you have a preapproved loan it's like shopping with cash. Talk with several lenders such as banks, credit unions, or finance companies. When taking out a loan, get the shortest payback time you can comfortably afford.
