This is a great time to buy a new car for many people. Dealers are anxious to move the new cars out, because a slow economy has meant nearly stagnant sales for many months.
In order to get automobiles out the door, dealers and car manufacturers are offering cash back, dealer rebates, and employee pricing on many of their new cars.
Still, those who purchase new cars today will generally need to get a car loan to finance the purchase.
Despite the rebates and discounts, new cars today often cost tens of thousands of dollars, and car loans extend up to 5 and even 6 years. So a commitment to a car loan is not a decision to make lightly.
While you can get an idea of rates and terms before you’ve made a final decision on a car, you can’t actually do the heavy shopping for a new car loan until you know exactly which new car you’ll be buying.
Lenders need to know the type of car and features as well as the selling price before they can determine what loan terms they’re able to offer.
You can, however, get preapproval for a loan up to a certain amount from a bank or credit union. This preapproved financing can help you in the purchase and negotiation process.
When you decide on a car, do not let the financing be part of the negotiations. Once you and the dealer both agreed on a price, it’s a good idea to get a quote from the dealership so you know what terms they are willing to offer, the interest rate, and length of loan. Make sure their offer stands for several days, and get the agreement in writing in case you decide to return to their financing.
However, you’ll immediately want to take the particulars of the car and the price to your credit union or bank. If you have a preapproval, give them the actual numbers and specs and let them run an official offer that you can compare to the dealer financing package.
If you don’t have preapproval, you can get a solid, committed quote from them. Find out if they offer a discount on the interest rate for automatic withdrawals, and consider that into the offer.
There are online automotive financing companies as well, and they are a great place to look for comparison rates.
When you begin to see what terms – the length of the term, the interest rate and the monthly payment amount – you can decide who is offering you the best deal and decide if you can really afford that amount in your monthly budget.
Hopefully you did a careful budget analysis before you began your car shopping and know the range that will work for you. But when you get the final numbers, its good to work it into the budget and see how it fits.
Be reasonable when you are considering what car to buy. Don’t get yourself committed to five years of very high payments if you wouldn’t be able to make those payments if you lost your current employment.
