If you are living on a budget, you are not alone. Many people must be cautious about how much they spend, especially on higher-priced items such as cars. If you are not mindful, you could get in over your head and put yourself in a difficult financial situation where you cannot afford your monthly payments. This can be stressful to manage and can affect other purchasing habits and abilities.
The good news is that you can spend less upfront and in the long run on your next vehicle if you know a few tips and tricks. Shopping for a new car can be less stressful and even enjoyable when you know effective ways of lowering your costs.
Put More Down
When you buy a car from a dealership, you may be asked to make a down payment. This is often a certain percentage of the vehicle’s total cost. If you want to lower your monthly payments and how much you will pay on the life of your auto loan, increase how much you put down. You may worry about how much you pay each month, but if you have saved up a few thousand dollars, putting it all toward the car may be worth it.
If you buy a $25,000 car and put $7,000 down, you will only pay interest on $18,000. This can save you $100 or more each month for the life of your loan.
Adjust the Loan Term
If you finance your new car, you will have a length of time to pay it off. Terms can vary, usually between 38 and 84 months. There are advantages and drawbacks to both shorter and longer terms. A shorter-term has higher monthly payments but a lower interest rate. If you are more concerned about how much you will pay in the long term, this might be the right option for you. A longer-term will give you lower monthly payments, but the interest rate will be higher.
In considering which rate is right for your loan, think about your budget and how much you can afford to pay every month. You may also want to do the math and determine how much you will pay in interest with both options. Then you can compare the savings you can experience.
Trade in Your Current Vehicle
If you get to the dealership and find that the car you want is above what you can afford, there are other ways of lowering your costs. Consider putting the vehicle you have been driving toward your new purchase. If you have paid off this current vehicle, the dealer will take the value of the car and subtract that from the purchase price of the new one. If you still owe money on the current car, trading it in will only work if you have equity in it — if it is worth more than you still have left on the loan.
Ideally, you will be able to shave a few thousand dollars off your new purchase price by trading in your old vehicle. Its value will depend on its age, the number of miles it has on it, and the condition it is in.
Car shopping can be stressful and frustrating. It can also take time to explore different options available. Be careful not to choose the first model you find at the first dealership you visit. Making important purchases warrants careful consideration, so explore your options when you buy a car. Get multiple price quotes from dealers in the area. You can also shop online and compare the different prices available.
You should also shop for different lenders. Banks, credit unions, and event online lenders can help you obtain the financing you need for your purchase. Find the best interest rates and loan terms possible.
Lowering Your Costs Means Working on Your Credit
When you buy a car, the lender will look at a number of factors to determine the loan amount you qualify for. First, your income will play a key role in how much you can afford to pay each month for a vehicle. The lender will consider how much debt you have and what other monthly obligations you must take care of. Your credit score will also matter significantly.
The higher the credit score you have, the lower your interest rate will be. This equals a less expensive car over time. If your score is not where it should be, pay off some debt, get on track with payments, and review your report to see if there are any erroneous negative marks on it.
Lowering your costs when shopping for a vehicle can be easier than you may think. Keep these tips in mind as you are looking for a car. You could save hundreds or even thousands of dollars on your purchase.