Investing in a new car can be exciting. The new car smell and snazzy look can be enticing for anyone. However, there are some things you should know before you run out to the local car dealership for your new ride. Let’s take a look at what these are below.
Understand The Amount And Rate You’re Approved For
Before you step foot on the dealership lot, it’s a good idea to contact your bank to ask about auto loan approval. You should see what amount you can be approved for, the term length, and the annual percentage rate.
You don’t necessarily have to get your loan through your local bank, but checking ahead of time to get the basics of approval is important. It’s very likely that you will be approved for the same loan terms at the dealership.
You should have a clear idea of what you can afford before you start shopping. You don’t want to test drive cars out of your price range and end up in a loan situation that you did not plan for. By having a clear amount in mind of what you can actually afford to borrow before you go to the dealership is key.
Calculate The Difference Between 0 Percent APR And Cash Rebates
While a 0 percent APR may be enticing, it may not always be your best financial decision. You should look further into the cash rebate to see if it is coupled with a low-interest rate. By using a car loan payoff calculator you can decide which option yields the lowest overall price for you.
Pay Cash For Add-Ons
It’s important to realize that 37% of the gross profits that dealerships reap is from the financing of aftermarket add-ons. These items are very easy to just include in the overall pricing of the car as a lump sum amount of money you will finance.
However, you should realize that paying out of pocket for these add-ons can save you money in the long run. When you finance add-ons you will have to pay interest charges on them for the length of the loan. You may even benefit from looking for these add-ons, such as extended warranties, from outside sources. They can be cheaper and provides you with more coverage than what the dealership offers.
Be Concerned With Purchase Price, Not Monthly Payments
Many new car buyers will try and negotiate the monthly payment amounts for their loans, instead of the purchase price. When you negotiate the monthly payment amounts, the only thing the dealership is going to change is the length of the loan.
If you can’t afford the payment they’re offering, they will offer you a deal to extend the loan for additional years to receive a lower monthly payment. This means you are stuck in a loan for longer and you will end up paying more interest in the long run. Instead, work on negotiating the purchase price. You want to get the lowest price possible to avoid paying back interest.