Purchasing a new or pre-owned car is not like buying a small household appliance from the local store. A lot of money is involved and most often than not, liquid cash payment is totally out of the question.
So the question lies here…
What is the most important thing to consider when financing a car?
Irrespective of whether you plan to buy a new or pre-owned car, financing will be a lot easier if you have a good credit score.
If plans to buy your vehicle are a few months away, work on boosting your credit score by ensuring you have a savings and checking account to your name. Having a direct deposit option into your account, from your place of work, is an additional booster.
(Plan ahead and open a bank account for your children with they’re young to help give them the gift of a decent credit score when they’re old enough to use the same.)
There are different ways you can finance the vehicle you plan to purchase:
1. Via Lending Markets
Having ensured you have the best credit possible, research reliable banks and credit unions. Remember not to make an impulsive/quick loan agreement with any company. Calculate the actual dollar figures, don’t go by percentages as you will be surprised to see the 0% APR is not always as advantageous as the 1.5% APR when the cash rebate is applied.
Ensure you are always in a loan that does not penalize you for early pay-off as you can effectively bring down the interest percentage paid through the life of the loan if you end up shortening the loan life.
The only disadvantage in using a lending market is it takes some time to be approved but is well worth the effort.
Overall the lending rates are competitive, customer service is always provided, they can often tell you if you’re paying too much for a car and most times provide free life insurance or disability insurance with loans. Also, it’s important to know that the loans are usually simple interest loans (i.e. interest is spread evenly throughout the term of the loan).
2. Via Car Dealerships
While this is easy, convenient and often less stressful. If you can do your math and tell/show the dealership you have a prequalified loan from a bank or credit union and would like to see what the dealership has to offer you can end up getting a good deal, but ensure the actual dollar figures are calculated to get the best financing deal.