No doubt, a new car is a significant purchase. Whether you’re buying your first or fifth car, you want to ensure you’re getting the best deal possible. That’s why it’s important to understand all your financing options before you sign on the dotted line. Here are five helpful tips to finance your new car that you may not have considered. Take a look.
Get a Loan
If you have a good credit score, a bank or credit union for car loans may give you a loan for your new car at a lower interest rate than usual. It’s worth shopping around to compare rates, but don’t forget to ask your banker for their best offer.
Furthermore, keep these tips in mind when looking for car loan offers with low-interest rates:
- Loan Term: The longer the term, the lower the interest rate will be. However, you will also have to make payments for a longer period. As such, it’s important to consider both the interest rate and the term of the loan when shopping around.
- Other Factors: Other fees, such as origination fees and prepayment penalties, can also add to the cost of a loan.
Use Dealer Offers
Some dealerships offer 0% interest loans on new cars to entice buyers. This means that you’ll pay no interest on the loan if you pay it back within a certain period, typically 12-36 months. Just be sure to read the fine print. Here are a few factors to keep in mind when reading the fine print:
- Hidden terms: Some dealers will add a clause stating that the 0% interest only applies if you also buy certain add-ons, like an extended warranty.
- Prepayment penalties: Some loans may have a prepayment penalty, which means you’ll be charged a fee if you pay off the loan early.
- Deferred payments: Some bank loans may require that you make no payments for a certain period, usually 12-18 months. This may sound great, but keep in mind that you’ll be accruing interest during this time.
Lease Instead of Buy
Leasing a car can be a good option if you don’t have the cash for a down payment or you don’t want to tie up your money in an asset that will depreciate over time. When you lease a car, you make monthly payments for the use of the vehicle and then return it to the dealership at the end of the lease term. Remember that with a lease, you’ll never own the car and may have mileage restrictions.
Pay Upfront if Possible
If you have cash, paying for your new car outright is always the best option. You’ll avoid paying interest and won’t have to worry about making monthly payments. However, this option isn’t realistic if you don’t have enough cash saved up. In that case, consider using some of these other financing options to get behind the wheel of your new ride sooner rather than later.
Consider Dealer Financing Options
If none of these other options work for you, most dealerships will happily arrange financing for your purchase through their lending arm or an outside lender such as a bank. Just be prepared to pay a higher interest rate than you would if you financed through another source. This is because dealerships typically mark up rates to increase their profits.
There are many different ways to finance your new car depending on what priorities are most important to you. If you have good credit, you may be able to get a loan with a low-interest rate. We hope the tips mentioned in this guide will help you save money and get behind the wheel of your new car sooner rather than later.