In this article we will talk about the best ways to finance a used car. After a mortgage, financing a car is the second largest investment most people make. Shopping for a car loan is just as important as shopping for the car.
It is a known fact that new cars depreciate and drop in value like a rock, as soon as you drive them off the lot. Finding financing for a used car is a great way to save money and get more car for your money.
The interest rate you have to pay on a used-car, will depend on how old the car is and your credit history. You usually pay a little higher interest rate for used cars over a new car. You can finance a used car through the same financial lenders that supply financing for new car buyers, including credit unions, banks and car dealerships.
Know your credit score before you go shopping for car, to ensure that you are getting their financing terms and a good interest rate you. If your score is over 680, you should be able to get a good rate and terms.
Next do your homework. You want to research and think about the types of vehicles that you like and what appeal to you. Be careful you don’t get caught up in the excitement of buying a new car, and end up buying something you really don’t want.
Think practically. If you’re going to buy a vehicle for a long commute to work every day, you’ll want something with good gas mileage. Look for a vehicle that not only meets your practical purpose, but also satisfies your desire for a car that is comfortable and fun to drive.
Sources for Financing
Look at different sources for your financing. A lot of times a credit union will offer better rates and terms than your local bank. If you already have a current car loan with a lender, then by all means go back to that lender and see what type of terms they will offer you. It’s always a good idea to check online and see what going interest rates are, that way you will know if you’re getting a good rate or not.
The interest rate on your loan, the amount of money you need down and your monthly payment are based on your credit history. If you have any blemishes on your credit report, make sure you have explanations and evidence to clear them up. If there’s something in your credit report that is derogatory and shouldn’t be there, then notify the credit bureau and have it removed before you go looking for a car.
It is always recommended to go with a shorter term loan rather than extending the payments out over a longer period because you will pay more in interest. The other negative side of a long term loan is that the car will depreciate faster than what you are paying it off. This can leave you in a negative car loan where you could end up owing more on the car than what it is worth. If you are looking at purchasing a car and you need to extend the payments out over 48 months to be able to afford it, then look for a less expensive car.
When selecting a lender to finance one’s car, one should conduct or perform some extensive research over the internet. This assists in finding the most suitable lender to obtain a loan. One may use search engines to locate the lenders by keying in their company names. The financing options vary depending on the type of vehicle. The financing options for brand new cars are different from those of used cars. One should acquire value for their money when financing their used vehicles. A car begins to depreciate the moment a person purchases it and commences to drive it. There are three main options that a person has when planning to finance their vehicle.
They include contract plans, used-car loans and hire purchase. Hire purchase is a traditional means, which aids in spreading the costs thus easing the payment process. When selecting hire purchase as a means of financing one’s used car, one should budget accordingly to accommodate the monthly fees that the seller may deduct until the agreed period is over. Hire purchase is the most popular, mainly because the initial deposit is quite low. Compared to contract plans and used-car loans, this means is cheaper in terms of the payable interest. One may also negotiate the interest rates with the seller in order to obtain the best financing deal.
Contract plans require the buyer to deposit some money as a way of securing the car for purchase. After paying the deposits, the seller deducts the agreed monthly installments from the buyers account. After completing the monthly payments, one has the option of maintaining the vehicle while under the sellers care, or one may make a balloon payment. When a buyer makes a balloon payment, it means that they obtain full ownership of the vehicle. Contract plans have lower monthly fees, as compared to the hire purchase method of financing one’s used car. When one fails to meet the monthly payments of both the contract plans and hire purchase means, it means that the seller reserves the right to repossess the vehicle. Therefore, people should organize themselves financially before purchasing a used car.
Alternatively, one may obtain a loan from their bank as a means of financing the used vehicle that one intends to purchase. The benefit of obtaining a car loan is that it secures the vehicle therefore, meaning that the seller cannot repossess the said vehicle. Bank car-loans have competitive rates and this ensures that their customers have various repayment options. They are also easy to manage and organize, in terms of finances and this makes it an efficient means of financing one’s vehicle. Once a person obtains a bank loan, they may fully purchase the car, by making balloon payments. The bank deducts money from their customers account depending on the agreed interest rates. The buyers may sell the car before completing the loan payments and accomplish something else with the money. When looking for a suitable lender to finance a used car, one should compare the rates and benefits before selecting a particular means.
Without having the cash to purchase your used car, you may want to finance one with great rates and terms. Purchasing a new car may be a stretch for some people today. Buying a used car is a smart way to go if you have limited income.
When looking for a used car you will need to take some things into consideration. For example, the older the car is you may encounter some problems with constant repairs that can be very costly.
When looking to finance a used car, figure out what type of vehicle you need, such as a car, SUV,truck or a mini van. Ask yourself how long you will be keeping the car and what will you be using it for. Before signing any loan agreement make sure you understand all the fine print, such as interest rate, early pay-off penalties, etc.
After you decide what type of vehicle you want and you know how long you plan to keep it, you can start looking at the options you have for financing. Don’t just look at one lender do some comparison shopping.
To save the most money, paying for your car outright would be ideal. But lets come down to reality, most people cannot pay cash for a car. While looking for financing, consider putting a down payment on your car. This way you won’t have to finance so much for your car. If you finance your car and the taxes that go along with it will end up costing you more money in interest.
The less you borrow, the less you pay in the end. Shorter loan terms are a good way to save you extra interest charges. Loan terms 72-84 are not a good option to follow. It does not benefit you, just the lender. Longer term loans can cause you trouble as your car depreciates faster than you are paying it off. You will owe more for the car than it is worth.
Do not sign any documents that state you will have a pre-payment penalty if you pay your car off early. It may cost you a lot of money. The reason is that majority of loans are paid off before they mature, and its the lender that makes the profit.
There are options out there when it comes time for you to finance your vehicle. Do some shopping around and find the loan that fits your personal needs.
By the way, do you want to learn more about how I teach my clients to save money on their vehicles?
A great used car can end up costing a little bit more than someone is comfortable with paying for in cash, which in turn leads to the needing used car financing in order to help make the car more affordable. There are a few different things that you should be keeping in mind when you are looking for used car loans which will make the process much simpler, which will in turn result in a better used auto loan in the long term. Having something like just a single point of difference in an interest rate very well may not seem like a huge deal in the rush of signing the paperwork on your car, but that alone could very well mean a huge savings or a huge increase in the costs over the lifetime of the vehicle which makes it worth it to find yourself the best possible used car loan rates.
Before shopping for financing for used car, it is always best that you start by sitting down and figuring out exactly how much you are going to be able to afford. Potential buyers need to take into consideration that in addition to your monthly payments, you vehicle will also need to be insured, and the vehicle will also need gas as well as periodic maintenance. All of these different costs can and will add up, so it is critical to put them within your monthly budget in order to avoid any surprises or a loan that is more then you are able to handle.
While putting together your considerations for a loan, it will be of great help for you to use a used car loan calculator in order to give yourself an idea of how things such as the amount of a loan, the length of a loan, and the interest rate can change how your monthly payments are worked out as well as the total cost of this loan over its lifetime. As a general rule of thumb, loans that have shorter terms are more beneficial, because you will end up paying less in interest, and the lower the interest rate that you have, the less costly the used auto loan will end up being.
Once you are able to determine some sort of an optimal price range, you should then be able to begin approaching financial lenders for used car loans. Credit Unions are often a great source for used car financing, since they offer low interest rates to their members, but it pays for you to shop around to help give you a better idea of the rates offered by several financial lenders. You should always be fully aware that the quoted rates usually reflect an “ideal buyer” with a great credit score, and people that happen to have lower credit scores may be unable qualify for those rates. Rates can also change depending on how old the car is, which another thing to take into consideration.
It is also very possible for you to get used car financing online instead through financial lenders that are not locally based, even though the service on this used auto loans will be just as good. In order for you to avoid any negative impact on your credit scores, you should first shop around without actually applying for any loans, and ask only one or two financial lenders which appear to have good rates and terms for you on a used car loan.
One last thing that you should definitely try and avoid with used car financing is doing it through a car dealership. Dealers could have working relationships with local financial lenders, but these relationships will unfortunately often involve some sort of kickbacks to the dealers for sending loans to particular financial lenders, and the customer unfortunately will usually end up paying those kickbacks. It is better to get pre-approved for a car loan from a financial lender of your choice, rather than select a dealer to identify the particular car to buy.
Even if you happen to be in a position where you currently maintain not so great credit, there are a variety of different solutions out there that can benefit you. Not only will these bad credit solutions be capable of landing you in the vehicle that you desire, but it will also enable you to begin the road of credit recovery in order to get you back on the right track. Best of all these solutions are online based, and it is extremely simple for you to research the best interest rates and terms and conditions from a multitude of lenders so that you can be certain that you are getting the best possible solution for your own unique financial situation.