Tips And Advice
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You probably already know what kind of car you want to buy and you can research and estimate, taking into consideration demand and availability, what you’ll most likely pay for that car. Once you have a figure in your head, come up with the following four amounts:
You should also have an idea of what kind of loan interest rates you are qualified for when you are at the dealer. We have some tips for getting better car loan rates from a dealer. Timing is important too. When you schedule a car loan application is an important consideration at the time your credit score is calculated.
Salespeople will try to steer you into discussing how much you want to spend in monthly payments and stretching the term of the loan to meet your monthly goal. This will distract you from the overall cost of the car and the loan.
If you do get into a discussion of monthly payments make sure that you are aware of how much more the total price of your vehicle will be. Here’s an example. You borrow $10,000 for 48 months at 8% interest. The monthly payment on that loan is $244 a month and the total cost of your car will be $11,718. If you decide to stretch that loan out for another year your payment decreases to $202, but the total cost goes up to $12,165. Go ahead and try different scenarios with our car payment calculator.
Another thing to keep in mind with a longer term loan is that you are “upside-down”, you owe more money on your car than it’s worth, for a longer amount of time. This isn’t much of an issue if you are sure that you are going to keep the car for the entire length of the loan, but if you decide to sell or trade it in before its paid off, then you will have to finance the new car and the difference between what you owe on the old car and what it is worth.
Auto incentives, such as zero percent financing and rebates, are usually offered nationwide and for a specific period of time. Low interest rates are usually only available to those who have the best credit, so you might not qualify for zero percent, but other low interest rates may be available. Do your research and find out about manufacturer rebates for specific models in which you may be interested.
If you want to trade-in your current car, it is imperative that you research how much it is worth using Kelley Blue Book and several other sources of used car values. The values may vary and you want to be as informed as possible for the negotiation process.
Selling your car yourself will generally get you more money for the car than trading it in, but many people don’t want to deal with the hassle of selling a car privately. Go to several used car dealers and see if you can get them to make you an offer in writing for your car. You can use that information to negotiate the trade-in value of your car when you go to buy a new car.
You cannot effectively negotiate the purchase price of a new car if you don’t know your credit score and what is on your credit report. Before going to the dealer, get your free credit report and make sure the information is correct.
Below are the five items that are used in calculating your credit score.
Understanding how your credit score is calculated is important, especially when you are applying for a car loan. Car buyers with bad credit often have misconceptions about how their scores are calculated. To learn more, read our article on three common misconceptions about bad credit.
If you discover an error on your credit report, then send a letter to the consumer reporting agency telling them what you think is wrong with your report. Include in your letter copies of any documents supporting your claim. Send the letter by certified mail with return receipt.
The consumer reporting agencies have to investigate your claim within 30 days. They will forward the documents that you provided to the company that provided the information for the disputed portion of your credit report.
When the investigation is complete the reporting agency must notify you in writing of the results and a free copy of your report if the investigation resulted in a change of your report.