Are you planning to buy a used car and do not have the money? You are not alone.
According to Debt.org, 53% used car buyers, use a loan to finance their purchase. While you might be saving a lot of money by buying a used car, when it comes to how to finance a used car, you need first to realize that it is not as easy as financing a new vehicle.
You need to prepare, persist, and know some of the tips and steps you should take to ensure that you get the financing that you need. With this and a little more knowledge, you might end up getting an excellent loan for your vehicle.
Here are some tips that will help you finance your used car.
Shop around and get financing quotes from different lenders or companies that are willing and ready to give you a loan. Do not settle on the first seemingly good deal you are given, there might be something better out there. Take your time and shop for a lender just like you would shop for any other big purchase.
Compare the amount the lenders are offering you, the loan terms, and interest rates. Remember to read the fine print before settling on one company.
Know Your Credit Score
A car loan is very different from a home loan. It is possible to get financing for your car even with bad credit. There are excellent car dealerships and other lenders who are ready to listen to you and give you a loan no matter how bad your credit is.
The only challenge here is that you may have a higher interest rate if your credit is less than stellar. However, as you shop for a lender, let them know your credit score so that they can give you an offer that matches it.
Do not assume that a low-interest rate is for everyone. People with lower credit scores might end up getting charged more.
Budget for Some a Down Payment
When getting a car loan, whether new or used, the lender requires borrowers to put down some money as a down payment. Several lenders require at least 20% of the buying price as a down payment. Try not to limit yourself to their minimum requirement, but instead, you can consider putting down more than the required percentage.
When you put down more money, it is taken off from the loan. This will help decrease the monthly payments and may also affect the interest rate.
Once you know the value of the car you want, try getting more than 20% of that price as your down payment. You will end up saving more in the long run.
Use Cash to Pay for Other Fees
There are other fees that you can incur during the process. Such charges include documentation fees, dealership fees, sales tax, and more. It is wise not to let these fees roll into your loan. If possible, pay for all of the fees in cash.
Lenders and dealerships will be happy to include these fees in your loan. They will even offer to include the sales tax. However, this will only increase the amount you owe on the car, compounded by the fact that you’ll be paying interest on these items too.
Go for a Short Term
When it comes to loans, the longer the term, the more interest you pay. If you want to save more, consider making your loan term as short as possible. While you’ll have to pay more monthly, clearing the car loan faster will help you save a lot of money in interest.
It can be tempting to stretch the payments for five to seven years so that you do not have to pay more each month, but in reality, you might end up buying the car for almost double its price if you go for a longer-term loan.
Timing is Everything
It is common for interest rates on car loans to fluctuate. This is mostly due to economic conditions.
Before walking into a loan company or a dealership, do some research. Depending on your lender of choice, quotes vary at different times of the year.
If you are getting financing from a dealership, you should try and find out at what time of the month sales are slowest. They may be willing to give you a good deal if they are not selling as many cars as they’d like to.
Get a Co-Signer If You Are Young
If you are just starting out or you have no credit, you may be in a dilemma when it comes to financing a car. Even if you have a secure and well-paying job, you might still end up getting very high-interest rates. To avoid this, look for a co-signer.
The co-signer should have a solid credit history so that they can positively affect the interest rate, and this will lower your monthly and long term costs.
Avoid Late Payments
Always remember to make your payment on time every month. There are times that you might be late due to a lack of money. It happens, but do not let it be a habit, or you might end up paying some hefty penalties and fees. Making payments on time also improves your credit.
These tips will not only help you get financing but will also make the process easier. Remember, always borrow money from a reputable company or dealership.
Are you looking for a used car and need financing? Check out our current inventory here https://www.whymonstercars.com/cars-for-sale.