Car purchases are one of the biggest cash expenditures we make during our lifetimes behind things like houses and university tuition. Many of us simply can’t afford to put forth the entire value of a car in cash, which is when financing comes into play. The bank, car dealer, or a finance company will help you pay for the car in exchange for interest payments over the loan term. That way, you can afford to pay for the car without having to put down all of the cash at one time. Keep in mind that car financing is good business for the people giving you the loan and that the actual price you end up paying for your car will be more than the purchase price when you sign the contract due to interest.
We want to make sure you get the most out of any car financing deal you partake in which is why we’ve put together a few smart tips to help you out below.
1. Keep the Loan Term as Short as Possible
If you aren’t familiar with financing, you might think that having a longer time period to pay off a loan is better. That’s simply not the case, because the longer the term of your loan, the more interest you will be paying. Try to keep the loan term at 4 years or lower to avoid paying excessive amounts of interest. The car will be depreciating while you are paying it off, so it really doesn’t make sense financially to be locked into a loan for over 4 years.
2. Don’t Let Your Emotions Get the Best of You
Buying a used car is an emotional experience. After you find the car you want, you are normally feeling good and will do anything to drive away in your used car. However, don’t let your emotions cloud your judgment. If the dealer is not giving you the loan or used car price that you want, simply walk away.
3. Negotiate the Price as Low as Possible
One way to save a lot of money is to negotiate the total price of the used car down as low as you possibly can. A good car salesman will try to negotiate the monthly payments instead of focusing on the overall price of the car. Don’t fall for that trick, focus on getting the lowest overall price of the car and then discuss the financing later.
4. Don’t Be Afraid to Walk Away from High-Interest Loans
Your credit rating will ultimately be what determines the interest rate you are offered for used car financing. Even if you have bad credit, you don’t have to accept a loan with a ridiculously high interest rate. You have to keep your financial future in mind whenever you are making a big decision like financing a used car. Remember that you are always in control and that you can always walk away from a deal if you want.