One of the most stressful parts of buying a car can be auto financing. However, you can make the process much easier with preparation and the right information. Whether you're buying your first car or have purchased multiple vehicles in the past, these seven tips for auto financing are sure to help you secure the best possible deal.
1. Know Your Budget
It's important to know how much you can afford to spend before you begin shopping for a car. Take a close look at your income, expenses, and savings to help you determine how much you can comfortably put towards a car payment each month. Remember to take into account any additional costs such as insurance, maintenance, and registration fees.
2. Check Your Credit Score
Your credit score plays a significant role in the helping you both qualify for a loan and the interest rate that you'll be offered on auto loan. Before you apply for financing, check your credit report. Checking your credit report will help you pinpoint any weaknesses that your score may have or spot errors that could be dragging your score down. If your credit score is lacking, consider taking steps to improve it before applying for a loan.
3. Find Your Fit
Take the time to find auto financing that fits your budget and gives you the most competitive rate. In addition to the monthly payment, look at the overall cost of the loan, including fees and interest. To pay off the loan faster and save on interest costs, you may want to consider opting for a shorter loan term, such as 48 or 60 months.
4. Avoid Unnecessary Add-ons
Dealerships will often try to sell additional products and services like extended warranties, GAP insurance, or rust protection, when financing your car. While some of these add-ons, like GAP, can be beneficial, they can also increase the costs to your loan significantly. Carefully evaluate each add-on and purchase what you truly need.
5. Get Pre-approved
Getting pre-approved for an auto loan before you start shopping for a car can give you an advantage when negotiating with dealerships. It shows you're a serious buyer and gives you a clear understanding of how much you can afford to spend on a new vehicle. Plus, pre-approval can help to streamline the buying process, saving you time at the dealership.
6. Read the Fine Print
Before you put your signature to any loan documents, make sure you understand the terms and conditions of the loan. You should pay close attention to the interest rate, loan term, monthly payment, and any fees associated with the loan. If the information seems unclear or doesn't match up with what you were told, ask for clarification or step away from the deal.
7. Budget for Other Expenses
Shopping for a car can be equal parts exciting and stressful, so it can be easy to miss important elements that come along with purchasing a vehicle and could affect your finances. Don't forget to factor in other costs associated with owning a car, like insurance, maintenance, fuel, and registration fees. When budgeting, make sure that you can comfortably afford these additional expenses on top of your monthly loan payment so that you can avoid financial strain down the road.
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Rates, terms, and conditions are subject to change and may vary based on credit worthiness, qualifications, collateral age, and conditions. The APR will be disclosed prior to an advance being made on a loan.
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