Deciding To Live On A Budget

Do you need a new car but you just don't have the cash on hand? Then a car loan is likely in your future. While a good deal on the car is an important part of the process, it isn't the only place where you can save money and make the most of your cash. Whether you are buying new or used, the following tips can help you get the best deal on car loans, too.

Tip #1: Shop Around

Many car buyers just accept whatever financing is offered to them by the dealership, but you don't have to do this. It's a good idea to look for your own auto financing before you even begin to shop for a car, and the best place to do this is at the banks you are already using. Often, your existing financial institutions can offer you better terms and interest rates, because they want to keep your business and they already have a good idea of how much risk you pose. Contact the bank or credit union where you have your bank accounts, credit accounts, or mortgage to inquire into an auto loan. Often, they will offer pre-approval so you will know how much you can get before you begin shopping for a car.

Tip #2: Know Your Score

It's a good idea to know what to expect before you begin shopping for a loan or a car. You can request your credit score from the three major reporting agencies once annually. Get a copy of your reports and look them over closely for any errors. Taking the time to correct any errors or pay off any outstanding accounts can increase your credit score, which may help you qualify for a lower interest rate on your car loan.

Tip #3: Look at the Total Cost

Often, car loans are presented to you as a monthly payment and not as the total cost of the loan. You may be told that the loan is only $200 a month, but the actual interest rate and length of the loan is downplayed. Your goal is to look at the final cost of the loan so you know how much interest you will be paying over the cost of the loan.

Tip #4: Shorten the Terms

Opt for shorter loan terms when possible – a two year loan will result in lower overall interest compared to a four or five year loan, even if the monthly payments are higher. A shorter loan term also allows you to begin building equity in your car much earlier. This means you are less likely to find yourself upside-down – owing more money than the car is worth – if you are in an accident or must sell the car.