When you’re looking for your next car, it can be easy to accept one of the hundreds of deals flying across your screen, but these deals are usually filled with clauses and are designed to take as much money from you as possible.
Before signing any contracts or shaking any hands, here are the 3 steps every person looking for a car needs to follow.
Look at Your Credit Score
Understanding your credit score is the first thing you need to do when buying a car, as it can give you an idea of what you can afford and what kinds of loans a bank may be willing to give you.
If you have plenty of time before you need to buy the vehicle, consider raising your credit score by paying off any outstanding debts you may have. This will improve your reputation among lenders and will open you up to loans with lower interest rates.
Shop Around for the Best Loan Possible
If you are interested in buying a car but want to make sure you’re locking down the best loan possible, go to different credit unions and financial institutions and ask to see what they can offer you. Readers should complete this process quickly though, as too many credit checks by banks can end up lowering your credit score.
Readers should also know that some financial institutions even offer incentives to drivers, like Encompass Credit Union’s CU Drive Away program that will get you pre-approved before you even begin shopping around.
Understand Finance Plan Lengths
Long-term financial planning can be difficult even for the best of us, but when shopping for car loans, it is always better to take higher monthly payments rather than longer payment periods.
For example, if you take out a $15,000 loan at 6.5% interest, you will end up paying nearly double the interest on a 5-year loan compared to a 3-year loan, even if the monthly payments may seem lower on the 5-year plan.