It’s finally time to buy a new family vehicle, but the idea of committing yourself to an auto loan for 4 to 7 years is intimidating. If you’re overwhelmed by the idea of walking into a finance office and signing a purchase agreement, it’s time to learn about the steps you must take before you choose a loan and take that final plunge.
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If you’re getting a loan from the dealer or getting a loan from the credit union you’ve done business with for years, you need to take the same basic steps.
Here are five simple steps to take to make a very scary situation much less scary:
Step #1: Determine how much you can afford.
You might want a luxury SUV, but if you can’t afford the luxury vehicle, you are going to have trouble making your monthly payments. A loan officer will review your income and your debt to determine what you can afford, but you might be more comfortable calculating how much you can afford monthly on your own. By using an auto loan calculator and entering your income and credit score, you can determine an affordable amount based on your own situation.
The monthly payment isn’t all to consider. You’ll need to consider the monthly car note, the insurance costs, registration fees, gas expenses, and even regular maintenance costs. To factor these costs in, price insurance with an agent, call the DMV, look into mpg’s on vehicles, and price the cost of oil changes and parts by visiting sites like simpletire.com. Considering the overall expense of owning the car will make you feel comfortable.
Step #2: Know the loan requirements.
You might think you can afford more than the lenders do. This is why it’s important to take time to learn about the lender’s rules before you test drive a car and fall in love. The lender might look at take-home pay and only lend up to 20% of this amount. Review your take-home pay and investment income, and ask the lender what their limits might be so that you understand in advance.
Step #3: Narrow the list and shop for vehicles.
Do you know what vehicle make you want or what class you’re interested in? Now that you have a price range, you can look for cars in this range that have excellent ratings and features. Consider safety ratings, gas efficiency, price, reliability, repair costs, room, and features. After you’ve narrowed down the options, you can select a vehicle that you can reasonably finance.
Step #4: Do an in-depth research on the vehicle.
After you test drive a car, don’t just make an offer immediately. Take time to go home and read consumer ratings so that you can make a good decision. Find out about mechanical issues, safety features, performance, and everything else. This can also help you get incentives, rebates, and price discounts with the information that you gather.
Step #5: Down payments, trade-ins and rebates
A dealer might receive special incentives to sell some models, and the rebate can be passed on to you as the consumer. Ask about rebates, finance incentives, and special interest offers. You should also ask about trade-in values if you have a spare vehicle. By putting money down or getting money from your trade, you can lower your monthly payment and keep finance charges low.
If you follow these steps, you can get the best deal and purchase the best family vehicle. Don’t jump at a vehicle. Play hard to get, exercise your power as a consumer, and you’ll feel good about financing a car for 36, 48, or even 60 months.
About the Author:
Meghan is a freelance writer, blogger and researcher from Oklahoma. She enjoys being in the outdoors and exploring new opportunities whenever they arise, as well as researching new topics to expand her horizons. You may connect with her on Twitter and Facebook.
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