The majority of used car buyers put most of their car buying efforts into locating the perfect vehicle. True, it is very important to find the right car but it is also equally important to figure out how to pay for it. Most car buyers do not have enough cash to purchase a vehicle outright and therefore securing a car loan is also a critical part of the car buying process.
In this post we will help you understand not just how to finance a used car, but how much money you should actually be spending on the vehicle.
To help you narrow your choices when searching for a vehicle it is important to first establish your budget so that you know what the maximum amount that you can spend on a vehicle will be.
When you finance a vehicle you will also need to consider the interest costs as a part of the total cost of your used vehicle. Unfortunately, many car buyers do not consider the interest rates and how much they will add to the final cost of the vehicle.
Of course, you’ll need to think of things other than the financing and the actual cost of the vehicle. Things such as the fuel economy, insurance costs, mileage, functionality, comfort, and resale value must be considered as well.
Most car buyers do not even think about the financing details until they are actually at the dealership. Sad to say, this type of situation can lead to future potential financial calamity. A smart car buyer knows exactly how much they can afford to spend and what type of financing is in their budget range. They do all of this before heading to a car dealership.
Preparing for the dealer
You may end up financing with the dealership but if the dealer does not have something to either meet or beat then he will have no incentive to provide you with the best financing deal. There are other details that you need to research before heading out to buy a used car. These other details include your credit score, different types of financing deals, the language of lending, making a car loan application, financing choices from a dealership, finalizing the car deal, and what to expect after signing the loan documents.
For example, some of the language terms that will be used when financing a car include finance charge, car loan term, principal, down payment, and monthly payment. It is vital that you determine the cost of the car plus all of the interest charges when comparing various car loans. You will not have a complete picture of the car’s total cost if you focus in on only the number of months that you will be paying, monthly payments, or the interest rate.
One of the more important facets of getting a low interest rate is your credit score. Obviously, if you have a good credit score then you will be able to get a lower interest rate. On the other hand, if your credit score is low then you will have difficulty securing a loan or perhaps you may need to pay an additional interest rate for the car loan. Normally speaking, if you have a credit score of 720 + and have steady employment then you should have no problem securing a car loan.
Lenders look primarily at your credit score and your employment stability but they also look at other things such as your age, marital status, address, income, and ability to repay the loan. Yes, there is a tremendous amount of excitement before purchasing a quality used vehicle. However, there can also be a tremendous amount of disappointment if the buyer does not spend some quality time doing good research and preparation.
Having read through our article, you should now feel a little more confident in purchasing a used car. It really shouldn’t be a fearful process, just make sure you do your research and you should be fine.
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