How To Get a Car Loan
There are many kinds of loans, and for most consumers, a car loan is the first major foray into the wide world of investments and secured loans. When you’re ready for your first set of wheels or rather, the first set you’re paying for yourself, here’s how to get a car loan.
Do the Math
The first step in securing a car loan has little to do with the bank, it has more to do with your actual income. Before rushing out to buy your dream car, you need to consider your level of income and your other expenses. In short, how much can you really afford to pay every month on a car loan?
A car loan is generally not more than twenty percent of your net income. That means if $2000 comes through your door every month after taxes, you can afford to spend $400 of that on a car provided you are not overspending in any other area of your budget. A car is a depreciating asset, not an investment, so don’t take money away from savings to try and justify a more expensive car.
Get Approved For Your Loan
Even before you start shopping for cars, you might consider getting pre approval for a purchase. If you know you’ll be working with your local credit union or bank, meet with a banker and discuss your plans. They bank can run your credit for an estimated amount and you’ll be set up even before you buy.
Shop For a Loan!
Once you know your limits, it’s time to shop. Of course, your first shopping stop shouldn’t be the sales lot. You should start by working online or in a car guide to see what models fall into your budget. Salesmen are trained to make you leave your wise budgeting behind, so starting your purchase online is a good way to keep yourself in check.
Research cars or trucks you like and look at pictures. Then find out the MSRP and invoice for the vehicle using a website like Edmunds.com. Finally, armed with your knowledge and intentions, head to the sales lot.
Be Assertive
A salesman will almost always try to talk you up to the next level of vehicle. It’s their job after all. You should know your limits and then you should stick to them. And not only are you focused on the MSRP of the vehicle, you should be ready to negotiate price down to 1% over invoice. Be strong and stick to your guns. If you falter, the salesman and his manager will walk all over you.
Arrange Financing
A car loan is a secured loan meaning the loan is tied to the car itself. This keeps interest rates reasonable. If you opted for pre approval, the purchase of the vehicle is simple. Contact your bank and finalize your loan paperwork. Get a check for the negotiated amount and your work is done.
If you opt for financing through the dealer, be sure to research current dealer promotions and typical terms so you can properly negotiate for suitable rates and payment amounts. Be sure to negotiate the price of your purchase first. Then negotiate interest rates and terms. The monthly payment will follow. Avoid adding on any of the extras that dealers create to pad the price of a vehicle.
Finally, when all terms are in line, sign on the many dotted lines and drive away the owner of your very own car…and your very own car loan.
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Posted in Finance and Insurance, automotive
