Buying a car will be one of the biggest financial decisions that you will be making in your life after your home. Thus, it is better that you take every step carefully and smartly so that this decision doesn’t affect you by any means. Well, how fascinating it might sound buying your own car, but there is one fact that you should know. There is nothing in this world that depreciates as crazy as the price of the car, so if you are planning to finance a car, then your primary goal should be complete the payment as soon as possible so that you don’t have to pay lots of interest till the end.
The problem here is that as the value of the car depreciates at a faster pace, so you will have to repay the loan which will be eventually more than the total worth of the car. However, this doesn’t mean that you should drop the dream of your own car just like that. If you play it smartly, then you too can make your auto financing a successful one. Here, in this blog, we have mentioned 7 useful tips that can help you make an effective and profitable auto financing decision. So, let us get started.
Tip#1 Financial Assessment is crucial
First and foremost, you should analyse your financial condition that whether you can really afford a car loan or not. There is no doubt in the fact that having your own car can be really helpful in numerous situations, but it is equally important that you understand your financial capabilities as well. What will be the point of the getting the car, if you are not able to pay the loan amount, which in turn will affect your credit score drastically. If you have already been paying your previous debts and have lots of expenses, then try to finish or at least clear the majority of them. After, then you will be ready to financer your car. However, if you don’t have a regular job and instead you are earning as a freelancer, then you can seek for a financial help. There are many direct lenders in the market who offers guaranteed loans for unemployed. The fund will be enough to make your payments of your past debts and due bills.
Tip#2 Check your credit score before heading to the dealership
Just like of home loan or any other loan, a car loan is approved by considering several aspects and among all of them, credit score holds the most importance. Basically, it reflects the borrowing worthiness of the person, so the higher is the score the better will be the chances of getting the approval. Therefore, if you are planning to apply for a car loan, then it is very necessary that you first give a glance to your credit report and check your credit score. However, keep in mind checking your credit score too often will leave a footprint and can affect your credit score as well. Therefore, it is important that you go through your credit report once in a while rather than checking it too often. Somehow, if even you get the approval of the car loan due to your higher income or other strong financial aspects of yours, there will be still a chance the lender might not offer you the best deal. You might not enjoy the lower interest rate as the borrower with a higher credit score.
Tip#3 Set the budget before choosing the car
Whether you have a dream car of your own or not, it is important that you first set a budget evaluating how much really you can manage to pay if you are going for auto financing. Creating a budget is something that is much needed in such a big decision as it will give you the exact what car suits your pocket and how much flexibility you can get while purchasing a car. Like discussed before, car and home are the biggest investment that we make in our life, and for that, we only desire one thing i.e. getting the best possible. However, sometimes people get carried with this emotion and end up spending much more than their pocket actually allows. So, set the budget by taking a realistic approach and then pick a car that suits doesn’t go much beyond your budget.
Tip#4 New, leased or a used car: Make your decision
Now, after you have decided which car you want in your garage, you should think of all the options of getting that car. Buying a new car might seem the best and common way, but there are other ways available in the market too. You can go for a used car where you will have to pay considerably lower than the new one and also, you won’t have to apply for a big amount of loan. This can really save you a lot of money as the value of the car depreciates at a faster rate, so going even for a 3-4years old car can have a significant difference in price. So, if you are going with the second-hand car, then make sure that you check the condition of the car properly before making the purchase. Other than that, there is also another option that is getting highly popular- car leasing where a person can buy any car he/she desires and will have to only pay a fixed monthly instalment. This can be a great choice if you are a huge automobile fan and don’t want to try out the vehicles trending in the market from time to time.
Tip#5 Don’t extend the loan
Well, it might sound financially burdening to keep the loan smaller as you will have to make the larger monthly payment, but doing this will be more beneficial in the longer run. If you will go to the dealership store for a car purchase, then the first thing that the auto dealer will do is ask your salary and will try to take the deal on the basis of your monthly payment rather than overall purchasing of the car. The sale person will keep offering you lower installments until you find the amount affordable. However, this lower installment scheme is more like a trap where you will have to keep paying the lower installment but in the end, you will be paying a higher interest. A £400 car payment might sound more pleasant than £500, but the price of the car will remain the same and you might even pay more due to the interest. So, the longer you pay the loan, the bigger the amount will become. Also, sometimes the lender might charge a higher interest rate if the loans period is extending.
Tip#6 Go for the down payment, if possible
As said earlier, a car depreciates at a very fast rate and if you are taking a loan, then you might end up paying more than the actual cost of the car at the market. So, in order to avoid such financial inconvenience, it will be better that you go for some down payment as you will have to apply for a lesser amount of loan. This was just one small benefit of down payment and it provides more than that. Getting the keys of the new car without even depositing a penny in advance might sound very tempting initially, but it comes with risks as well which can make your situation worse. Therefore, it is best advised that you deposit a minimum amount of money as the down payment while financing the car, so that you won’t have to repay more amount than what the car actually worth.
Tip#7 Do good research in finding the best source for financing
Lastly, it is very important that you do good research on the market both online and offline before signing the deal to finance your car. There are plenty of lenders available in the market, so you have to find the one who offer the best deals and who suits your requirement. The more efforts you will put on your research the better you will be able to find the deal and you will also be saving a lot of money. The approving guidelines vary from lender to lender. One might not approve your loan request while the other might offer you an attractive deal, so it is necessary that you keep searching for the lender until and unless you find the right deal to finance your vehicle. Also, after finding the lender, read all the guidelines before signing the deal in order to save yourself from any surprises as you will fully aware of the loan process of the lender.
Wrapping up, driving your own car is something that we all dream, but in order to turn that dream into a reality, you have to take every step carefully. And even if you are going for the car financing option, you should do good homework to land yourself the best deal possible for you.