There are some things in our adult lives that need to be taken care of. Getting a car for the first time or upgrading is important, and it’s even more important to understand how to do this the right way so that you’re not wasting money and that you’re making the right decision when it comes to purchasing the perfect automobile for you and your needs.
Trading in your old car model with a new fancy car can be pretty tempting. Newer models have better features, mileage, and many other factors that make them attractive compared to older models. However, many people opt for trading in their old cars and end up having to pay a huge debt. Although buying a car is a huge purchase, there are some financial shortcuts you can use that can help you finance a new car without sinking into massive debts.
1. Don’t Get Long Term Car Loans
Although opting for long-term loans seems like the easy choice, it actually makes you pay more than the usual amount of interest. The difference between a five-year and seven-year loan is tremendous. Although the amount of money to be paid every month seems to be less, the interest each month adds up to be really high. 5-year loans are preferred, as they provide good monthly installments and relatively lower interest rates. Another reason to get a short-term loan auto loan is in case it breaks down and cannot be fixed, it’ll be more likely that you will have completed the loan payment by then.
2. Get A Pre-Approved Loan
One of the best ways to ensure that you get the best deal for a new car is to get a preapproved loan. Pre Approved loans can be taken from your bank, a credit union, or an online lender.
By knowing your approved budget, you’ll be able to select a car on the basis of it. You don’t want to first select a car model and then find out that you don’t have the approved budget for it. Moreover, pre-approved loans can also help identify if there are any problems with your credit score. You can also opt for a car title loan from online lenders by leveraging the vehicle’s equity. Title loans can be applied for and obtained within the same day. Your pre-approved budget will also help you get fair compensation, and there will be fewer chances of you getting ripped off by the car dealer. However, beware that the pre-approval of loans from online lenders can be fraudulent. So, it’s best to get pre-approval from your bank or credit union.
3. Don’t Buy Add-ons/Extras
After settling on the car model you want to buy, the dealer will try to get you to buy add-ons. These add-ons aren’t necessary and only increase the overall cost of the car. Most of these add-ons are overpriced and are sold for extra profit by car dealerships. The add-ons could include extended warranties, paint protection insurance, tire protection plans, or gap insurances. It is advisable that you don’t make any sudden decisions about add-ons or extras, and if possible, you should say no to the add-ons completely. Although the add-on money per month doesn’t seem to be a lot, it adds up to form a very overpriced budget.
4. Consider Getting A Used Car
If you want a newer model, instead of getting a brand new car, you can consider getting a used car of the new model. It’s no surprise that many of us go above and beyond to buy a new car we simply cannot afford and then struggle to pay the debts.
Your budget for the new car should be about 10 to 15 % of your monthly pay, any more than this and you will be grossly overspending. If your budget doesn’t match that of a brand new car, you can consider getting a loan for a used car. This will not only help you save a lot of money, but you can also end up with a really good deal.
Getting a new car isn’t as easy as it sounds. There are thousands of different factors that you need to consider before you make your decision. When on a budget, you can try these hacks to make sure you get the best financially stable deal. Getting your loan pre-approved is the most important step in the buying process. It shapes your final decision and helps you get the best deal at the car dealership place. Make sure your credit score is good and certifies for a pre-approved loan so you don’t have to face any difficulties. Make sure you avoid long-term payment plans and stick to short-term installment plans.