Buying car cannot be considered as an investment. Its value can depreciate very fast and hence it is not very smart idea to pay interest for your car loan. In most cases, the car value drops faster as compared to the amount that you repay your loan.
So, whenever you try to finance any car, you should not only think about monthly payment but also about the total cost. So, this is what I recommend.
- Understand about your credit first
It is important to know about your credit score much before you consider about your loan. With better credit score, it is possible to get loan at much lower interest. Even if you have poor score, you can get loan but you have to pay higher interest. Dealers often try to exploit such situation. There are offers available for different credit score hence it is important to know about your credit score first.
2.Get quotes if your credit score is poor
Quite often credit unions or any local bank may offer any average credit candidate very competitive interest rates for buying both new or used car loans. Therefore, try to get quotes from number of sources to check their offer.
3.Make sure to keep the shorter term for loan that you can easily afford
For any shorter loan, you will pay lower rate of interest with higher monthly payments. Often any sales person may try to tempt you by lowering your monthly payment during Ford Credit Financing, but that will increase the loan term and thus you will end up paying lots of interest for the same amount.
4.Put minimum 20 percent down
Besides avoiding short loan term, it is also necessary to avoid any situation where you end up owing more money as compared to what the car is really worth by accepting certain offers.
Few dealers may offer any buyer who has good credit to drive off any new car without paying anything, which may be apparently very tempting, but it can be very risky. In case suddenly you need to sell this new car then it will be difficult for you as you will owe loan amount more than the car’s price. Therefore, you must pay at least 20 per cent down payment.
5.Try to pay all for taxes and other extra fees with cash
Do not try to finance the following miscellaneous payments that are involved while making your vehicle purchase e.g.
- Sales tax
- Documentation fees
- Registration fees
- Any other purchase e.g. extended warranties.
Many dealers will try to include all these fees also in your financing which will unnecessarily increase the loan amount but not real value of your car.
6.Avoid paying gap insurance
Gap insurance is also something that car dealers will try to sell you for protecting against any accident where the insurer declares that car is a total loss. Prices for any gap insurance can vary widely and dealers usually offer the expensive one and hence if you feel the need of gap insurance, then contact any agent for auto insurance.
The best way that you can think of to buy a car would be with cash, unless if you are trying for 0 percent or any really very low APR. You need to be as pragmatic that is possible while considering for loan.