Are you in the market for a vehicle? Are you ready to purchase, but unsure about how to setup financing? Are you concerned that you could make a poor decision that costs you money over the long run?
Buying a car is supposed to be fun, but it can soon turn into a challenging situation if you don’t have your finances in order. And that starts with a clear idea of what type of car loan you need (if you’re financing your purchase).
While no two people are in the exact same situation, there are a variety of questions that any car shopper can answer. Here are four of the most important:
1. Are you buying a new or used vehicle?
This is important for many reasons, including the impact on your financing.
Generally speaking, new car rates are slightly lower than used car rates. Keep this in mind when shopping, as you the rate difference may be enough to push you toward a new vehicle (even if you previously believed that preowned was the best option).
2. What interest rate are you being offered?
This goes along with point #1 above. If all else is equal, the lender with the lowest rate is the one that should win your business.
In addition to allowing the dealer to shop around on your behalf, reach out to lenders – both local and national – for more information. This is the best way to learn more about available rates, eventually leading you to the best deal.
3. What is the term?
Car loan terms typically range from 12 to 72 months. Furthermore, a growing number of lenders are offering 84 month loans.
The lower the term, the lower your interest rate. Also, this allows you to save money on interest charges over the life of your loan.
However, when you opt for a higher term, it allows you to pay less money on a monthly basis.
4. What are the fees associated with the account?
This is one of those details that’s easy to overlook. You assume that everything will go as planned, so you don’t look into this. That’s a mistake.
There are many fees associated with car loans, such as late payment fees and early repayment fees.
Ask your lender about all of these before signing on the dotted line. This is particularly important if you have reason to believe that one of these fees will come into play (such as if you plan on paying off your loan sooner than expected).
When you answer these questions, among others, you’ll find it easier to compare car loans and secure the one that’s best for you and your finances.
Tip: don’t assume that all car loans are the same. Even if the rate is identical, there are other details that will impact your decision. Take every detail into consideration, no matter how big or small.