If your vehicle is a few years old and you’re thinking of upgrading to a newer model, it’s important to understand the options that you have when it comes to financing. Many people find that they can afford a better car than they might have thought. Your ability to finance a used car purchase is influenced by numerous factors including your household income, credit history, and amount of cash available for a down payment—as well as the type of car being financed. Here are a few things to consider when beginning to shop for your next vehicle.
1. Consider a newer car.
Many times, car buyers believe that they cannot afford a newer car. However, banks generally offer more favorable financing terms for newer vehicles than they do for older ones. For older models of cars with higher mileage, a bank will typically require a higher down payment as well as a shorter payback period. This means that, for example, you might have to pay back your loan in three years instead of five or six years, resulting in a significantly higher monthly payment. Also, dealers are often able to offer cash
back and other incentives on new car purchases, which can make a new car more affordable than you might have expected.
2. Run your credit report.
If you haven’t run your credit report recently, make sure to do so before shopping for your vehicle. Running your credit report is important because it will ensure that you know the reality picture of your credit before applying for a loan. If you have a false derogatory entry on your credit report, there are steps you can take to get it removed. In any case, it’s to your advantage to be informed about your credit beforehand to eliminate the possibility of discovering a nasty surprise at the car dealership. You are entitled to receive one free credit report per year from each of the three major credit bureaus (Equifax, TransUnion, and Experian) and you can request your credit reports directly from their web
3. Work out your budget.
There are two numbers you need to know when you walk into a car dealership: your total amount available for a down payment and your maximum monthly payment including interest. See what you can do to come up with as much as possible for a down payment. If you can borrow some additional money from family or friends and pay it back in a few months, this will help you to reduce the amount you have to pay to the bank in interest later on down the road. If you know realistically what you can afford, this will help a dealer figure out what options you have, and this can save you some time.
Financing a new or used vehicle is a relatively simple process—and you’re likely to find yourself pleasantly surprised by just how nice a vehicle you can drive off the lot without breaking the bank.
This article was written by Andrew Dean of National Transport, LLC, a leader in the US car shipping industry. You can view additional articles at their blog, or you can become a fan of their Facebook page to keep up with the latest transportation/travel news from around the country.