May 21, 2021 by Space Coast Credit Union
Other than buying a home or condo, cars are often the biggest-ticket items that people purchase, so it’s important to be smart about how you buy and how you finance what you buy. Here are four car loan tips and tricks to keep in mind throughout the process.
Tip #1: Loan shop—just like you car shop
Traditionally, people would go to a dealership (or multiple dealerships) to pick out the best new or used car. Then, almost like an afterthought, they would get financing through the dealership or from the bank or credit union they were used to using.
We suggest you put as much thought into where to get your loan as you do when choosing your vehicle. You’ll want to select a lender who has great rates, offers a convenient application process, and provides fast approvals.
You can save plenty of frustration and streamline the car loan process
overall by getting pre-approved
for your loan. That way, when you go shopping, you’ll know exactly how big of a loan you can afford, and the dealership can show you a range of cars that are in your budget.
Here’s another advantage of getting pre-approved. When buying a car, you typically need to focus on three different elements: how much you’re going to pay for the car you want and need; how much you will get for your trade-in vehicle; and the details of your financing. If you get pre-approved for your financing, that frees you up to focus on strategic negotiations at the dealership so you can get the best price possible and the best trade-in value. You can learn more about weighing the pros and cons of different common car loan terms
Tip #3: Make smart choices about your budget
Before you apply for your car loan, review your own finances and budget. Ask yourself the following questions before settling on a car price range.
What down payment can you afford, and what car payment would that cause you to have? Most people have a down payment range in mind. What would the payment be if you put down the smallest amount in your range? The largest amount? Is the reduction in payment that occurs when you put down the maximum amount worth the reduction of funds in your checking account? Or would you be better off with more money in savings and a slightly higher car payment? It can also help to make auto loan term comparisons
to get a better idea of your monthly payment.
Tip #4: Carefully weigh the advantages of new cars versus used cars
provides a great overview of the advantages and disadvantages of buying new cars, and does the same for used cars. Neither answer, the article shares, is right or wrong. It depends upon your specific needs and budget. New cars, of course, come with the latest technology and safety features, which is a real plus. Fuel efficiency is likely to be better, and there is no wear and tear on the vehicle. There are no accident reports to consider either. Warranty coverages are better, and it is easier to get a specific color or model. New cars are more expensive, and – because cars can lose 20 percent of their value as soon as you drive off the lot – you can easily owe more than it is worth.
Used cars are more affordable, and the depreciation that occurs early on has already taken place. That being said, you will want to determine if any major accidents have occurred, and you will need to purchase warranty coverages that come automatically with new cars. If you plan to buy a used car
, consider buying a certified pre-owned (CPO) vehicle. These are relatively new with low mileage and sold by the dealership network of the brand.
It is important to talk to your lender about the differences between loans for new and used cars. We offer loans for both, with great low credit union rates, and our express sales associates can guide you through the options.
Be sure to check back for more new and used auto loan tips.