How To Finance A New Car

  • By Website Team Technicians
  • 27 Feb, 2017

By Allison Martin

Do you have your eyes on a new ride? If you don’t have the funds sitting in a bank account, you’ll need to seek financing.

 

Know Your Credit Score

The higher the credit score, the lower the interest rate. And in some cases, you may qualify for zero percent interest on your new ride if you have excellent credit. Check all the items on your report are accurate. If you see a mistake that could be hurting your credit, ask the credit bureau to correct it immediately.

 

Don’t Settle for the First Offer

Some dealers offer tons of incentives on new cars if you finance in-house. But that doesn’t mean you should only apply with them.

 

Best Personal Loans for Good Credit

Explore loan products from other lenders before heading to the dealership. Remember, as long as you shop around within a 30-day period, credit score algorithms will consider all your credit requests as a single credit inquiry, which will reduce the damage to your credit score.

 

Have Your Trade-in Appraised

If you’re planning to trade-in your ride, have it appraised. Print this information and bring it to the dealership in case they lowball you.

 

Steps to Financing a New Car

 

Follow these steps to take the hassle out of financing a new car:

 

Step 1: Get preapproved

The lender will want proof that you have the ability to make payments each month. If you’re an hourly or salaried employee, you most recent pay stubs should suffice. The lender may also request a recent bank statement to prove you have the funds for a down-payment.

 

But, you may have to provide a bit more documentation if you’re self-employed, including:

 

·        Bank statements from the past three months

·        Tax returns from the past two years

·        Business financials from the past three months

 

You’re free to start shopping once you have your preapproval letter in hand.

 

Step 2: Negotiate the price

Now that you’ve selected a car, it’s time to negotiate the price. This step is important as it determines the total amount you’ll finance. A few tips to negotiate the best deal:

 

Focus on the total cost, not the monthly payment.

Allow the salesman to make the first offer.

Remain firm and be prepared to walk away if they won’t budge,

If you’re trading in your current ride, negotiate the price first. (Also, be mindful of the cost implications of negative equity. This is the amount owed above what the car is worth).

 

Step 3: Select a loan product

The dealer will encourage you to speak with their finance department. If you take them up on their offer, they may be able to beat your pre-approval terms.

 

Step 4: Finalize the loan

If you decide to go with a direct lender, you’ll need to finalize the loan documents with them. But if you choose to finance through the dealership, you may have to fill in the paperwork on-site. In some cases, you’ll need to pay a down payment on the car.

 

Step 5: Run the numbers

Read the entire loan agreement, and make sure you understand the terms before you sign. If you have any questions, now’s the time to seek clarity. Also, watch out for the add-ons.

 

Should You Consider a Lease?

 

The choice is yours, but leasing a car may be ideal if you:

 

·        Want a more expensive model for the same monthly payment

·        Change cars often

·        Have funds available for a down-payment

 

A Final Thought

 

With a little legwork, you can score a great deal when financing your new car. The tips in this guide can help you save hundreds or even thousands of dollars on your next car loan.

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