Unless you’re sitting on plenty of cash, you’ll likely need to finance your new car. There are plenty of options available for car loans, and that can make things tricky – especially if you’re trying to decide between new or used or bank or dealer financing. Below you’ll find out the essential things to know about car loans so you can make the best decision for your needs.
There are a variety of ways to secure financing. You can go through a dealer, your own bank or credit union, a used car lot or even take advantage of the increasing availability of online financing. Keep in mind that a dealer offers manufacturer incentives, while banks and others can’t do so.
Your Credit Matters
Anytime you take out a loan, your credit score plays a key role in how much you will pay. If you have great credit, your interest rate will be lower. However, if you have bad credit, the interest can increase dramatically – especially if going through a bank or dealer. In these situations, online financing might offer lower rates, so make sure you do a bit of research before you choose how you’ll finance.
Know Your Budget
Before you ever step on the lot, make sure you already know what you can afford each month – and stick to it. Salesmen work on commission, so their goal is to sell you the highest-priced vehicle by any means possible. Being able to tell them exactly what you’re willing to pay will reel them in a bit. However, you’ll also have to keep reminding them since they will try to push you into a higher-priced vehicle.
All that paperwork can be daunting, so if there is anything you don’t understand – ask. There are many fees and other charges that might pop up, so you need to make sure you know exactly what they are before you sign.
Make Sure You Have Approval
You should always make sure you have the approval for the loan before you sign the contract or leave the lot with the vehicle. If you’re told that the salesman is waiting on the approval to come through, it means nothing is finalized. You should never leave your old vehicle and take possession of the new one until you know for sure.
Car loans are important and often necessary for most car buyers. If you are purchasing a used vehicle, make sure to contact YourMechanic for a pre-purchase car inspection to avoid buying a car with serious issues.
This article originally appeared on YourMechanic.com as 5 Essential Things to Know About Car Loans and was authored by Valerie Johnston.