Buying a new car is exciting! If you’re like many people, you’re choosing to finance your purchase with an auto loan. There’s a lot to consider when it comes to your financing and what options are available to you! Check out this guide to help you discover the best way to finance your new car to help you save money and stress less.
Getting an Approval
A crucial part of financing your car purchase is to receive an approval on your auto loan.
In order to get the best loan possible with an approval, you’ll want to make sure that you meet a few requirements. You'll need to verify your income with pay stubs and bank statements, ensure that your credit is where you want it, and confirm that you don’t have too much debt already when compared to your income.
Beyond just the approval, getting a pre-approval can give you many advantages when it comes to your loan. It will help you plan ahead to know what you can afford and what options are available within your budget. This can help you avoid falling in love with a car that’s out of your price range or choosing a car that throws your budget into chaos. It will also show that you are a serious buyer, rather than just casually looking. Overall, this can help make your car shopping experience much less stressful.
Choose the Best Loan for You
Getting an auto loan may seem straightforward – you’ll need to get approved for an auto loan, choose your new (or new to you) car, and then make your monthly payments until it’s paid off.
However, there are more options to make a loan fit your specific situation and save money. When you apply for your loan, you can review what options are available under your approval or even make requests if you’re looking for something specific.
You’ll want to compare loan terms, which is the duration of the loan, and find the best available interest rates for each term. If you can afford a shorter loan term, you’ll pay less in interest over the life of the loan. However, if you need a longer term to make the payment better fit your budget, that can be an option as well. Some people have a set payment amount that they’d like to stick to, which is something that your lender can explore to help you find the best loan option that is closest to that payment.
Don’t be afraid to ask questions or investigate different loan amounts or options. We have a guide here to help you as you explore and compare rates and loan terms. Finding the best auto loan for your situation can help make the car buying experience less stressful and you’ll want to make sure you understand the options and details of what you can qualify for.
Related: The Best Times to Buy a Car
Making a Down Payment
Another factor to consider when financing your car is how much of a down payment you’ll want to pay. A down payment is the initial payment towards purchasing your car. Some auto loans may not have any requirements for a down payment, while others may require you to make a minimum down payment based on your purchase and loan specifics.
Most lenders have a limit of how much of the vehicle’s value they are willing to provide a loan for. This is often determined by age of the vehicle, the wear and tear, mileage, and other vehicle details.
If the vehicle is being sold for more than the lender is willing to provide, you’ll need to provide a down payment to cover the difference. This is also the case if you are unable to qualify for the full value of the vehicle. To finance the vehicle, you’ll need to make up the difference with a down payment.
If a down payment isn’t required for your loan, it may be worth keeping the extra funds available if you need them or your budget is tight. However, you may want to consider making a down payment even if it isn’t required. This can help you pay less in interest throughout the loan and may help you qualify for shorter loan term options.
Where to Finance Your Loan
Did you know that not all financing is the same?
When it comes to choosing where to finance your auto loan, you have a variety of institutions to choose from. Dealerships offer financing options, typically offering their own financing, as well as financing options from local financial institutions. This can be a convenient option as you can purchase the car and deal with financing in the same location. You’ll also have options directly from financial institutions, like banks and credit unions.
There are several reasons to consider choosing a credit union to finance your auto loan. Credit unions like Wasatch Peaks are not-for-profit, meaning that profits are invested back into the credit union. This enables credit unions to provide lower interest rates and fewer and lower fees.
Another major benefit of credit unions is the local service provided. Not only are they part of the community, but they’re more willing to work with you to get approvals.
It’s important to compare offers, rates, and promotions available to make sure you choose the best financing for your loan. Check out this article for a more in-depth look at how a credit union can help you with your auto loan.
Hidden or Forgotten Costs
There are additional things to keep in mind as you finance your auto loan.
Fees and additional costs associated with the loan or dealership are often overlooked when making a car purchase. While taxes and registration fees are required, many people forget to factor the cost into their overall purchase. Other fees, like a document or preparation fee, may vary based on the dealer or lender and you may be able to negotiate the price down.
There are some things that are not required but may be worth considering depending on your situation and purchase. This can include an extended warranty, which can cover electrical or mechanical issues that may not be covered by the warranties included on your vehicle. This will impact your monthly and overall cost of the auto loan.
Similarly, Guaranteed Auto Protection insurance, or GAP insurance, is not required but may be worth the added cost. This insurance covers the different between what your insurance will pay and the amount left on your auto loan if your vehicle is totaled or stolen.
Other hidden costs can include dealer markups, add-ons, or upgrades to the vehicle you’re looking to purchase. These are sometimes added to the cost of your car loan, meaning that you may be paying additional interest on the fees and additions. Make sure to read your contracts closely and look at the cost break down of your loan. It’s okay to ask questions and look for opportunities to negotiate fees, if possible, to help you save money.
It can feel like there’s a lot to consider when it comes to financing your new car, but there are a lot of opportunities to find a loan that is a good fit for you – and that can help you save money!