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Save on Your Car Loan With These Simple Tips
December 17, 2020● 4 minute read●
Everyone likes that rush you get when you sign a good deal. Cars are generally expensive to acquire, so you can make good savings on your purchase if you know how to negotiate correctly. Here are ten tips to bear in mind when shopping for your next car loan.
Know your financial stance
Knowing where you stand financially is an integral part of getting the best deals. Your annual credit report tells you a lot about how lenders are likely to see and what your options are. If you have an excellent credit rating, your application is more likely to receive approval, and more lenders are willing to offer you competitive rates. Individuals with poor credit don’t have the same luxury, but it helps prepare you to look into other options and act more carefully when applying for loans.
Moreso, examining your credit report allows you to fix any blunder that might be tainting your score. It would be best if you finished combing through your credit file at least a month before you start looking for a loan.
Calculate your budget
Once you’re confident in your familiarity with your financial stance, the next thing to do is figure out how much you can afford. Car loans require monthly payments, which can be a massive drain on your finances if you don’t plan it out carefully. Analyze your current income and expenses and figure out how much you can afford to spend on monthly or weekly repayments. The answer will guide you when you finally get around to car shopping. Don’t make the mistake of relying on bonuses to make your payments; that’s an unhealthy financial habit. Always make room for emergencies, too, so you don’t find yourself in a tight corner in the event of a home or health accident.
Decide on what you need
This point is pretty obvious but still necessary to note. Before you start car shopping, you should know what you want already. Having a fixed goal allows you to narrow down your search to get what you need and walk away from a purchase satisfied. Are you leaning towards a Nissan for personal reasons? Or are you bent on getting a green car? Perhaps you need a loan that has provisions for bi-weekly payments. Please take note of whatever your needs are and have them in mind when meeting a dealer. If you don’t have anything at all in mind, you might get swayed into getting something you don’t want. Remember, many of these dealers care more about their bottom line than your satisfaction.
Check all the figures
It’s not enough to send an application out based on only the interest rate; it’s short-sighted. Comparing only the interest rate is dangerous because it doesn’t take all the variables that affect the amount you pay on each instalment into account. Learn to look at the bigger picture by inquiring about the lenders’ charges. When you start doing so, you’ll notice the loans with the cheapest APRs don’t necessarily mean you’ll pay the lowest amount possible. So be wary of so-called ‘special deals.’ You can use a personal loan calculator to compare rates and give you an idea of how much you’ll be paying monthly.
Send your quota within the same period
Yes, sending multiple loan applications can negatively impact your credit scores. But there’s a way you can get around that. When you apply for several loans within the same period, credit bureaus sum it up as only one inquiry. In other words, they assume you’re looking for options for only one loan, which is what you’re doing anyway. So rather than wait to hear from each lender, send your quota out to multiple lenders and then select the one with the best offer when they get back to you. Ideally, you should complete your loan shopping within a fortnight and enjoy the advantage of negotiating with an intact credit rating.
Timing is everything
The end of the year is an excellent time to make a car purchase for several reasons. For one, most dealerships are trying to clear their stocks and make way for more in the following year. Another point is that with all the festivities, especially in the last month of the year, fewer people are likely to buy cars, and sales are slow. So how do financiers respond to push sales? They drop the prices of the vehicles, and at times the interest rates.
If it’s already too late for you to make a purchase, the end of any month will do. Most dealers are in a hurry to complete their monthly quota, and they’re more likely to be open to negotiation around that time.
Dump the extras
Dealers will often try to tag on extra fittings that aren’t necessarily beneficial for their price. That’s where knowing what you need comes to play again. It’s not wrong to get one or two items, but more often than not, they offer little value but still add hundreds of dollars to your bottom line. Learn to say to offers such as a new stereo when the one installed is working fine, tinted glasses, or paint sealant. They’re not bad if you have the cash to spare, but if you want to be frugal, then ditch the unnecessary add-ons.
Put up a large down payment
The more cash you can pay upfront, the less you’ll have to borrow to complete your payments. Reducing the principal amount you need from a lender can save you significant money by reducing the loan term and the interest rate. If you can’t afford to make a down payment of at least 15%, you can always bring in your old car, if you have one, to cover more of the loan cost.
As you can see, these tips are relatively easy to follow, but when you follow them correctly, they can save you a lot of money. Being more knowledgeable about these things also gives you more power over your negotiations, so you can walk away with a deal that makes you happy.
Written by Jacaranda Team