At some point, every driver finds they need a new car. The trouble then is deciding how to get their new car.
After all, cars aren’t cheap. If you can’t get to work, paying for a new vehicle can be quite the challenge. For this reason, many people choose to finance a car.
Financing a car refers to getting a loan with which to pay for your new vehicle. To the surprise of many, though, financing a used car is often more difficult than financing a new vehicle.
If you’re wondering how to finance a used car, you’ve come to the right place! We offer seven tips on used car auto financing that can make buying a used car much easier. Let’s jump right in!
1. Check Your Credit Score
Before you start searching for used car loans, take some time to check your credit score. Your credit score will determine the type of loan you can get approval for.
If you have a higher-end credit score, you can expect to receive a loan with much more affordable interest rates. However, if you have a low score, you’ll likely be charged with steeper interest rates.
Remember, in the eyes of lenders, a used car is more of a liability than a new one. Depending on its mileage and condition, it may be far more likely to break down. As such, lenders want to guarantee there’s as little risk to themselves as possible.
If your credit score is lower than you’d prefer, work towards improving it before applying for the loan. Start by paying any outstanding balances on your credit accounts, along with paying your bills on time.
2. Get Several Financing Quotes
Even if you need your new car in a rush, it’s best to spend time checking out various financing quotes. Spend time figuring out how much lenders are willing to give you and how affordable their rates are.
Treat your used car loan as you would another large purchase. Shop around to find out who will make the best offer. Start your search by checking out Gatesauto.com and then apply for credit option.
In addition to the loan’s value and interest rates, determine how long their terms are. We’ll discuss more about loan terms in the section below.
3. Keep Your Terms as Short as Possible
Opting for a shorter term may seem like an inconvenience. Doing so requires you to pay more money upfront each month. However, in the long run, doing so can save you significant sums of money.
When you pay for a long term, your interest payments have more time to increase. What’s more, your car may not be in a condition that justifies the amount you have to pay for it.
However, this doesn’t mean you should blindly apply for the shortest term available. Instead, examine the different options and calculate how much you can afford to pay each month. Once you’ve determined these logistics, you can then make an informed and practical decision on term length.
4. Save for a Substantial Down Payment
Whenever you want to purchase a vehicle, aim to put down at least 20% of the car’s total value for a down payment. If you can afford to put down a higher percentage, that’s even better.
The larger your down payment, the less you’ll have to pay back in car loans. The size of your down payment may even lessen your interest rates. So, in the long run, you’ll save money by putting down a sizeable payment.
When buying a used car, the vehicle’s total value should be somewhat smaller than a newer model’s. As such, a 20% down payment will likely be more affordable.
5. Pay Cash for Your Remaining Fees
Remaining fees in a used car purchase usually include things like dealership fees or documentation prices. Also, be sure to factor in the sales tax when examining costs.
Instead of rolling these figures into your loan, pay them out of pocket. Dealerships will often offer to add these fees to your loan or even to pay the sales tax. While these may sound like helpful offers, they come with a price.
If you accept these offers, it will only increase the amount you owe your lenders. As such, you’ll end up paying additional interest for any added amounts.
6. Research the Best Timing
Economic conditions cause interest rates for car loans to fluctuate throughout the year. When you find a company you’d like to receive a loan from, do your research. Find out when their interest rates tend to be their lowest.
You can also request quotes from different times of the year. If dealerships aren’t making as many sales as they’d like, they’ll often give you a better deal for your interest rates. Use this tactic for as many companies as you investigate to find your most beneficial offer.
7. Avoid Anything Off-Putting When Financing a Used Car
When financing a used car, you’ll sometimes come across companies that seem sketchy to you. When you encounter these companies, it’s best to run. Thanks to the jargon they use, contracts can often become difficult to decipher.
When a shady company offers you a contract you can’t understand, you may end up agreeing to damaging expectations. Likewise, if a company makes an offer that seems too good to be true, assume it is.
Instead, stick to companies that seem reputable. Get recommendations from friends and family members you trust when looking for a company. Also, be sure to check out their online reviews to see what other customers say about their policies and interactions.
Find Your Used Car Loan Today!
With these tips in mind, you can better locate the best loan options for you. Shop around with different dealerships to find the loan you need for rates you can afford.
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