Car loan tips

Want to get a car but don’t have necessary funds on your bank account? If so, why not consider taking out one of the many car loans available on the loans market? However, financing a new car purchase requires some research. Before visiting the car dealership uninformed first of all, do you know that about 70% of all new car purchases are financed? Whether you are going to pay cash for your new vehicle or apply for loans, you should consider financing the car.

Do this in four steps.

1. Analyze your financial situation

This is the first and most important step in the car buying process. Before to determine what car you want, you should know how much money you are ready to spend. You don’t want to get stuck making a bloated car payment that will leave you eating bread and water for three years.

First of all define your monthly budget. It’s quite easy to calculate. Add up all of your fixed monthly expenses, such as your rent/mortgage, phone bill, etc. Subtract that from your net income. Then subtract your estimated extraneous expenses, such as food, gas, entertainment, etc. The result should be an amount of money you have to play with.

Also you should bear in mind that getting a vehicle involves more than a down payment and monthly payments. Add to this licensing, registration and other hidden costs, as well as monthly insurance costs, fuel and maintenance. Oh, yes, it is not cheap to possess a car!

When you have done all necessary calculation you must get an approximate figure of the budgeted amount you can use for car payments. But remember, it’s good if the sum of your monthly car payment won’t be more than 20% of your budget. Once you determine that figure, stay with it.

2. What car do you want?

When at last you managed to settle on a monthly allotment, you can determine what car fits into the price range.

Of course, this is a purely personal choice, but not to be mistaken consider what you really need. Do you have a family? You can find plenty of affordable, safe and reliable minivans and station wagons on the market. If you are single or drive a lot in the city, there is a wide range of models to choose. Do you use your vehicle for work-related tasks, such as hauling, delivery, etc? Consider one of light and heavy-duty pickup trucks and vans. Midlife crisis? There are several convertibles and sports cars that will make you feel young again.

Also consider your wants. If you want to save money on the increasing gas prices compact cars get really good gas mileage so they’ll suit you. Going to take road trips? Consider something that gets good mileage and has cargo space and lots of cup holders. Fond of off-road driving? The SUV is your best bet. Some are even equipped with a first-aid kit!

When at last you’ve narrowed your choices down to a couple, it’s time to do some car research.

3. Do your homework

This is a step where you will need to spend some time sifting through some details, but it will be worth the effort in the end. Remember: the more you know about what you’re buying, about whom you’re buying from, and about the buying process itself, the more money you will manage to save in the end.

There are a lot of places to look for a vehicle you want to buy. Check out the Internet and newspapers, contact car dealerships, credit unions and local banks to see what kind of deal you can get. Large scope of useful information will help you in the negotiating process. Many car buyers are eager to get the lowest possible down payment, but be very careful as the dealerships offering you low downpayment will later find ways to compensate for their own generosity. Being focused only on the down payment “savings,” you’ll spend much more money in the long run.

Also be aware of factory-to-dealer incentives. The secret is that the manufacturer refunds a certain percentage of the car’s price to the dealer. So even if the car dealer sells you a car at the invoice price, he or she will still make money from the deal. You are able to find out about a manufacturer’s incentive percentage, as this is available public information.

Also look out for rebates. When the seller offers you incentives, this often means the manufacturer wants to either get rid of slow-selling cars or reduce the inventory. Therefore, they may also offer the buyer a cash rebate and a low financing rate, or an option of one of the two.

4. Go to the car dealerships

Now when you have an understanding of what kind of rate you will be offered, you should go out to the car dealerships. Do this only when you have an idea of what kind of car you want, how much you can spend and what kind of financing you can get. Again, don’t forget: the more you know the more successful for you the negotiating process will be. Gather required information. Lenders will require you to provide your name and address, social security number, employer information (company you work for and salary). They will also require your financial information such as whether you own or rent a home, how much your payment is, how much money you own on credit cards, etc..

Remember also that car dealers are professional negotiators and they sell cars every day. They will consider you to be a beginner. The dealers will not be easy on you and of course they are not going to point out all the ways you can save money. So it’s purely your task to find all of them.

While most car salespeople are good honest people, some live by this principle: It is morally wrong to allow suckers to keep their money. So don’t forget that you are controlled all the time. But also you have the right and ability to stand up and walk out of the office at any point and the dealer will lose the sale and the money consequently. Don’t let a car dealer intimidate you. Knowing all necessary information will help you to be relaxed and comfortable as this is you who are holding all the cards.

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