Updated: Aug 29, 2021
Today I am going to touch on something that a lot of us young folks have no clue about – buying a car! When I first bought my car (it’s a White Jeep and her name is Sandra Dee, you know, like from Grease), I was just signing on the dotted line and waiting to drive my car off the lot. But, as the years went by, I started to understand the process a little more so let me drop my knowledge on you. Just in case you were looking to finance a car or refinance or even trade your current car in for something better. I am going to talk about the finances of buying a car because I really don’t know anything about cars or the mechanics of it so I’m not even going to pretend to know.
When looking to get a new car, you’re probably looking at the features, the make, the model, etc. But, can you afford it? What is your interest rate? What benefits come from buying the car from that particular dealership? You should really think about this before signing a 4, 5, 6, or 7-year contract. This is what’s happening when you’re sitting across from the salesperson at the car dealership: They are running your credit with every financial institution to look for a car loan approval and thinking of ways to sell you extra services with your vehicle. Here are some things to focus on when you’re in that seat:
1. If you have a credit union or bank, ask yourself if you can get cheaper financing and a lower interest rate with them first. Before the dealer begins to run your credit through the database to find possible offers, check with your credit union first. Get a pre-approval with them and bring that pre-approval to the dealership.
2. Ask about Gap Insurance. Even though this is optional, I recommend getting this just in case anything happens. It helps pay gap of the value of your vehicle’s depreciation and what you might still owe. So, for example, if you get into an accident and total the car or someone steals your car, this insurance will help so that you will not have to pay off the car loan. Your comprehensive or collision car insurance only pays up to the depreciated value. With gap insurance, it will pay the rest.
3. Do your Research. Look into what kind of car you would like and make sure it is reliable. Because, having car trouble and having to pay to get it fixed is a headache!
4. Try to come up with a Down Payment. This will lower what you have to pay back and lower the cost of financing in the long run. Which brings me to the next point.
5. Look at how much you are financing. Your loan and security agreement and disclosure statement will show your APR, finance charge, amount financed and the total of your payments. If your vehicle was $15,000 and your finance charge will be $10,000 over a period of 6 years, that is a pretty hefty amount to pay on top of the cost of your vehicle. So, determine if you’re willing to pay so much in interest.
6. If you go to a dealer, negotiate the price. Do not settle. Look at different finance options, the terms, the APR, and the monthly payments.
These were some important points that no one ever told me about when getting my first car (I learned when I refinanced). I will talk more about refinancing and trading in cars in later posts. If you enjoyed this and learned something that may help you get your new car, don’t forget to comment, like, contact us. Write to you next week.