Do you need to finance a vehicle soon? We have outlined the secret tips for financing a car in 2020! Get started today!
It’s time to get some new wheels — how exciting.
What’s not so exciting?
When you’re browsing online for a car or going through magazines, it can be a lot of fun. When you start looking at the price tags, this part of things is where it gets complicated.
While the MSRP is one price, the sale price is another and then the price you actually pay is yet another price. Unless you love math, these numbers can make your head spin — and even then it might not be brain-friendly.
Continue reading this article to learn more about getting your dream car financed.
Whether it’s car financing or motorcycle financing that you’re after, the following tips for financing a car apply. Use them to make your next car-buying experience less stressful.
Tips for Financing a Car
1. Know the Difference Between Used and New Car Loans
If you think banks look at new and used car loans the same — think again.
If a car is too old, your lender won’t even think about lending you money on the car because they’re worried it is going to go to the junkyard before you can pay your loan off.
You should also know that lenders charge more interest for loans on used cars. Used cars generally look like a bigger risk to the lender than a new vehicle.
If you want to buy a used car but you aren’t able to secure a loan otherwise, you may have to work with dealer financing to get the vehicle you want.
2. Don’t Pay Cash on a Down Payment Deposit
You talk to the dealer and tell them you want to purchase a vehicle on their lot. You tell them you’ll speak to your bank about getting financing and you’ll be back.
They require you to pay a downpayment deposit if you want them to hold the car until you go through the process. Keep in mind, if you pay cash, your money is almost as good as gone if the loan doesn’t go through unless the dealership is reasonable.
The next one of our tips for financing a car is about paying with a credit card. If you do that, you can submit a dispute on your credit card so they can’t keep your money.
While you want to think the best of everyone, you should always protect your money.
3. Purchasing from a Dealer
If you’re buying a used car from a dealer, it is usually easier for you to get a loan for a used car.
If the vehicle you’re buying from the dealer is new, it is much easier for you to get a loan.
4. Purchasing from a Private Party
Buying from a private party almost always comes with more risk and lenders know this.
Since lenders know that buying from a private party is a riskier situation, they think twice about lending the money to you.
Read also: How to Sell a Used Car Fast
5. What’s Your Car’s History?
Get as much history of your car as possible is important if you decide you want to go the used car route.
Even if you purchase a new vehicle, you should look to see if there are any recalls on the vehicle. You don’t want to drive a lemon and experience problems you could have gotten fixed for free.
6. Having Money for a Down Payment
The more money you have for a down payment, the less money you’ll have to pay in interest.
If you put a good down payment down, it might not only allow you to pay less interest because of the shorter loan term but you may be considered less of a risk.
Have plenty of money for a down payment and then ask how it would change your loan if you put down more or less on the down payment.
Read also: 67 Best Side Hustle Ideas to Earn an Extra $1000/Month
7. Getting the Best Interest Rate
When you’ve found the perfect car for your needs, you want to get the best interest rate possible. There are some simple things you can do so you can prepare to apply for your vehicle loan.
One of the most important things you can do is not to take on any new loans or start any new credit cards. Establishing a good credit record is important but if you already have a couple of credit cards in good standing, you don’t want to open anymore.
When you apply for new lines of credit, this is a sign to lenders that you’re needing money. It’s even worse if you’re carrying balances on these credit cards.
You want to keep your credit card revolving balances at 30% or lower across the board.
Make sure all of your payments are paid on time so you can keep your payment history clean. If your payment history is riddled with late payments, it might not be as bad as delinquent accounts but it will not do you any favors when you want to get the best interest rate possible.
One of the things you can do so you don’t pay your bills late is to put them on auto-pay. Even if you have the money in your account, it isn’t uncommon to forget to pay bills because things get busy. Auto-pay will help you keep from getting behind so you can keep your payment history looking good.
Learn More About Making the Most of Your Money
Now that you know these tips for financing a car, why not keep learning about money? We have many great articles that can help you get your finances in order.
Navigate to your favorite section of our site, drop a bookmark and come back later for more great reads.