If it’s time for you to get a new set of wheels, chances are you’re thinking about creative ways to finance a purchase. We’ve put together this handy guide to help ensure you can get the car you need.
What Sort Of Car Do You Need?
Whilst we would all love to own the latest most popular car, realistically we don’t need a 4×4 for runs to our local supermarket or dropping the kids off in the morning. Instead, really think about the type of car you need.
Do you need a 5-door, or can you get away with a 3? Do you really need a new car, or do you just want a new one?
Take the time to think about the sorts of things you’ll need your car for, and look at the best car dealership website. Do you have long commutes on a motorway, or do you do lots of driving in the countryside? All of these factors will have an impact on the type of car you need.
What’s Your Budget?
Once you know what sort of car you need you’ll need to think about your budget. If you’re considering getting your car on finance, look at how much you can comfortably afford as a monthly out-going.
If you have bad credit and need to get a car on finance, then your budgeting is vital and might show lenders that you are a better candidate.
Before you start, you’ll need your payslip, bank statements, credit and debit card statements, bills, and receipts for things you usually pay for in cash. Add up your income and take away your expenditure and you’re left with a figure of disposable income – ideally, you should put a third of this away in savings, and the rest will give you an amount that can be the maximum amount you can spend on a car per month.
Types Of Car Loans
Now you have your budget, you can look at the different types of car loan. Ask yourself, “can I get title loan?” A personal loan is a common way of funding a car if you’re looking to buy a car outright, however, other borrowing may be affected.
Hire Purchase (HP) is where the loan is secured against the car, with a deposit of around 10% required followed by fixed monthly payments over an agreed period of time. HP is great if you only have a small deposit, however, you don’t own the car until the final purchase.
Another popular method is a Personal Contract Hire (PCP). Similar to an HP agreement, but you usually make lower monthly payments. However, if you exceed the mileage allowance, you will invariably be charged.
Which Lender Is Best?
Once you know the type of loan to seek, shop various lenders to compare their rates, terms, and fees. Ideally, check large national banks, smaller community credit unions, or online auto loan lenders first. In fact, your personal bank or credit union may reduce your rates for being an existing customer.
Of course, you should compare each lender’s annual percentage rate, loan terms, and down payments. The annual percentage rate denotes the interest and lender fees you will be responsible for. Loan terms simply dictate how long you have to pay off your loan. Experts recommend terms less than 36 months for used cars, and 60 months for new cars.
Additionally, take the down payment you can afford into account. By paying a down payment toward the car’s price, you reduce the amount you need to pay off. Finally, consider the taxes and fees incurred with each lender. Several additional costs including state sales tax, documentation fees, and other dealer or lender charges are typically included in these fees. Therefore, you should compare several lenders to find the best rates, terms, taxes, and fees for your personal situation.
Should I Seek Preapproval?
With all your preparations made, consider seeking a car loan preapproval. Of course, many aspects of loan preapproval for home also apply to auto loans. A preapproval demonstrates your financial credibility and trustworthiness to your chosen lender. They also can highlight any issues with your credit or other finances you may have missed.
Moreover, a loan preapproval acts as a bargaining chip with your preferred lenders. In fact, these lenders often offer rates lower than what you are preapproved for. For example, if you have a preapproval at a 5% APR, many lenders may sell you a 4% APR loan. While this is certainly an attractive deal, make sure the terms, fees, and other elements of the loan remain the same before making a deal.