Buying a new car is always an exciting occasion, and most customers overlook a lot of important procedures just to get their hands on a new car. But, by keeping your head in the game and doing plenty of research, you can get a great deal through financing, and save a lot of money in the process.
In modern times, there are plenty of options to choose from if you’re in the market for a new or used car. The Nissan Rogue has been a buyers choice because of its practicality and comfort but due to its rising fame, the car’s prices have soared up a little. Whichever model you choose, you can get a great deal on your next car purchase by following some tips while financing your car.
With some clever negotiations and finance options, you can save over $1,000 on your next car purchase.
Because new cars depreciate significantly over the years, you have to plan and decide on financing terms before setting foot in a showroom.
Once you set a budget for your next car, the next step is to start comparing quotes from different lenders and banks to find the best offer out there. Of course, don’t go overboard with the purchase and buy a car you can’t afford. Always include overall ownership costs in your calculations which include running costs, maintenance costs, insurance, and more to reach the final budget.
Since cars are not considered as an investment because of depreciation, always keep a clear head when discussing financing options and avoid losing money in the long run.
So, once you have set the right budget for your next car, follow these tips to save a lot of money on finance.
Always Consider Your Credit Score
Before you even start the process of buying your next car, check your credit score to make sure you can afford it. Since car loans are possible even for customers with bad credit, most people go ahead without a second thought and end up paying a lot more than usual, often leading to repossession of the car.
To avoid this scenario, always track your credit score. Most dealers will capitalize on customers with bad credit, offering them high-interest rates since they’re out of options. Usually, dealers offer the lowest interest rates for buyers who have a credit score of 750 or better. As expected, buyers with a lower credit score, especially those under 650, will have to pay more than a 10% interest rate, which can quickly add up over the years.
If your credit score is lower than usual, do some research and find the lowest interest rate you can find before starting the buying process. After finding a good financing deal, you can always use it to negotiate prices with the dealer later on and get a lower interest rate in some cases.
Avoid Taking Long Term Loans
While it may be tempting to go for a higher budget car by opting for long-term loans that extend for more than 5 years, it will cost a lot more in the long run, especially because of the high depreciation rates on cars.
Most dealerships will start negotiating by revealing the monthly payment options for a particular car instead of stating the complete price outright. A usual trick that dealers use to decrease monthly payments is by extending the loan term. If you take this deal, you’ll end up paying a lot more in the long run, and sometimes end up with a highly depreciated car that’s not even worth the interest you’re paying for it, essentially falling into a debt trap.
Buyers can easily be fooled into taking a lower monthly payment of $407 over 8 years, which adds up to $39,085, compared to a $733 monthly payment over 4 years which adds up to just $35,171. A massive difference of nearly $4,000.
If you can’t afford a loan term under 5 years, reduce your budget and shop for a cheaper car instead of going overboard with your expenses.
Put Some Money Down
While it may seem like a no-brainer at this point, always put some money down before you finance a car regardless of your credit score. This way, you can have a head start on your finances and pay lower interest rates overall.
A lot of dealerships don’t recommend a down payment, but, make sure you do put down at least 20% of the total cost to avoid issues later on if you decide to sell your car. Also, remember to borrow the minimum amount possible to buy your next car.
In a recent report, it was revealed that an average new car buyer financed more than $31,000 in the first quarter, setting a new record, revealing that most buyers borrow more money than they make in a year just to get their desired car.
As expected with such a high finance amount, the interest rates will also be higher, losing out on a lot of money in the long run, essentially paying for a car that has lost most of its value through depreciation. To avoid this dilemma, always shop within your budget and try saving some money whenever possible.
Avoid Adding More Expenses With The Finance Deal
Like putting some money down before financing, always avoid involving other expenses like taxes, fees, options, documentation, service packages, warranties, and more with your finance deal.
All these extra expenses will increase monthly payments further, making it harder to pay off. Paying for all these extra expenses when buying the car with cash along with some down payment will decrease the loan term and monthly payments significantly.
Opting For Gap Insurance
But, if you plan your finances correctly, you wouldn’t need to take gap insurance which can cost over $500 in total with a car loan.
Refinancing A Car Loan
If you’re already stuck with a car loan, you can always opt for refinancing. However, always keep in mind the extra fees associated with the whole process and check to see if you can break even with the new car loan.
If you already have some money saved up, opt for a shorter loan term and pay it off as soon as possible to avoid extra expenses.
Overall, if you budget right and pay a lot of cash upfront, you’ll end up with a better deal and save a lot of money in the process. Keep the loan terms short, and always research loan offers yourself before negotiating with the dealers.