5 Things You Need to Know About Financing Your New Car

Buying a new car is an extremely large expense. Before you go to the dealership, you should take the time to learn the different things that affect your car’s financing, and what factors increase the overall cost of financing your car.

Factor All Costs Associated with Your Purchase
Before you enter a dealership or meet a private party to look at a new car, you should already have a method of financing locked in. You should also know what your interest rate on the loan will be. You should also include any related expenses into your budget.

 

The primary expenses to cover include: 

  • The cost of the vehicle
  • MSRP
  • Taxes
  • Any add on fees
  • Vehicle insurance
  • Gasoline
  • Maintenance

Know How Much of a Down Payment and Monthly Payment You Can Afford
Everyone has a different financial situation. Therefore, you will need to determine for yourself how much of a down payment you can afford on the spot, and how much of a monthly payment you can afford without putting yourself in a bad situation. Your credit will play a part in determining the lender’s payment. Make sure you do not fall victim to predatory interest rates if you have a lower credit score.

Consider Financing through Your Bank
Most people finance their vehicle through the dealership because they are not aware that they have other options. They believe that the dealership is selling the car to them, so that is where they have to finance. However, you also have the option of using your own bank, or a credit union to finance your car. Others choose to get a personal loan and pay for their car in cash. Know your options before you enter into a finance contract.

Set Up Your Insurance
Since insurance is required to purchase tags for your new car, you should decide what car insurance company you want to use, and have the information on hand to set up your policy while the financing details are being worked out. Getting your tags through the dealership may be less expensive, but make sure to find out how much they are charging. It may be cheaper to go to the Department of Motor Vehicles yourself.

Make Your Payments a Priority
Failing to keep up on monthly payments could cause you to lose your car. It can also ruin your credit. If you are not able to make your payments, refinance your car through a reputable lender. Another option is to sell your car immediately to avoid accruing more debt.

If you are financing your vehicle through a dealership, and the deal they are giving you seems too good to be true, examine the contract more in depth, or have someone more knowledgeable in finance review it. Do not sign a finance contract without being in full understanding of what you are signing.