Six Steps To Take Financially Before Purchasing A New Car

Six Steps To Take Financially Before Purchasing A New Car

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Purchasing a brand new car is a heady experience, especially if you are financially prepared for the event. Before you head out to look at new vehicles, it pays to get your financial house in order. By following these six steps, you will find it easier to buy the car you want and manage the monthly installment payments for the duration of the car loan.

Decide How Much You Can Afford

Take a good look at your finances and decide how much you can afford to set aside for the monthly installment payment. In addition, you want to consider how much you can afford in the way of a monthly auto insurance premium. Use those figures to help you identify makes and models that will provide excellent service and not break the household budget. Be sure to only look at cars that fall within your budget, so you aren’t tempted to make the costly mistake of spending more than you can afford.

Identify the Trade-In Value for Your Present Vehicle

Try to get an idea of how much local dealers will offer for your older vehicle. Look around town and see what the used car lots are charging for makes and models similar to yours. Reduce that average cost by 30% and you have a fairly good guess of the trade-in value.

Set Aside Money for a Down Payment

Even when you plan on using your older vehicle as a trade-in, make it a point to have a down payment to apply to the balance. Your goal is to lower the amount that needs to be financed as much as possible. This will result in lower monthly installment payments and maybe a better rate of interest.

Obtain Copies of Your Credit Reports

When you apply for financing, you can bet the lender will review your credit report with at least one of the three major credit agencies. Many lenders will order reports from at least two of those agencies. In order to make sure the information is accurate, order copies yourself and go through them carefully. If anything is incorrect, notify the agencies and work with them to update the information.

Qualify for Financing in Advance

Before you set foot in any dealership, have a way lined up to finance the purchase. Talk with a loan officer at your bank and explain that you are looking for a new car in a certain price range. Find out what can be done to qualify you in advance for financing up to a certain amount. Assuming you have excellent credit, you can lock in excellent rates and terms that will be available to you for at least the next calendar month.

Comparison Shop

Even if the very first dealer you visit has a new car with the right combination of features and price, don’t move too quickly. Feel free to negotiate a little, and always inquire about any dealer or manufacturer incentives. Make it clear that you do plan on checking with other dealers around town and then do so. You never know when a dealer on the other side of town will have the same make and model available for a slightly lower figure.

Preparation is the key to getting the best possible deal. Make sure you are financially ready and take your time selecting that new car. Doing so will result in locking in the best terms and allow you to enjoy the vehicle while you take care of paying off the loan.

Author:
Anita is a freelance writer from Denver, CO and often writes about home, family, auto and finance. A mother of two, she enjoys traveling with her family when she isn’t writing.

Informational credit to Overland Park Mazda.

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