Car loans make it easier to invest in a vehicle. Like a house, you only need to afford a down payment and gradually pay off the rest of the loan over time. But even with a car loan, buying a vehicle doesn’t come cheap.
The interest rate on your car loan will increase over time. In fact, the average loan for a new car was just over $32,000 in December 2018. The average interest paid on a car loan is $5,555.
You could be driving your vehicle for a long time before you finally make your way out of debt. Here are three tips that will help you invest in a new vehicle without sinking slowly (or quickly) into debt.
- Choose a used car. Used cars are less expensive than new ones and the loans are typically smaller. According to Edmunds, the average monthly auto loan for a new car was $558 compared to $413 for a used vehicle in December 2018. Just be sure to do your research on the vehicle before you buy it. There are 5.5 million car accidents on U.S. roads every year, and if your vehicle was in a car accident it could impact how the car performs.
- Be prepared when you go to the dealership. Before you go to a car dealership, it’s important to know your credit report and that you’re pre-approved for an auto loan. When you’re prepared, you’re in a better bargaining position and it forces the car dealership down on the rate.
- Be on the lookout for good deals. If you keep a sharp eye out during the car-hunting process, you might be able to find car-buying incentives that could save you money. These incentives include cash-back deals or car loans with 0% interest rates. You can learn about these offers directly with the car manufacturer or on websites like Kelley Blue Book or Edmunds. It’s also important to keep in mind that, while excellent credit is what helps to secure the 0% interest rate offers, it doesn’t hurt to apply for them. You might just get the offer.
Cars are the easiest modes of transportation, especially when it comes to traveling long distances. But investing in a vehicle can be costly in more ways than one.
Not only do you need to worry about how you’re going to afford a down payment, but you also need to consider how you’re going to pay off the interest rate on your car loan. The good news is, by following the tips above, you can keep yourself from sinking into debt when you invest in a new (or used) vehicle.