Every day we make decisions that affect our future. Some of these decisions are small and some are important. You may not consciously think about them, but you do them all the time. For example, when choosing a new car, you'll need to consider whether it's worth financing the purchase with a loan from the dealership or the bank rather than paying cash up front. The choice will depend on your current financial situation and how much you can afford to upfront (and forgo use) at this point in your life.
SummaryDo I really need to buy a new car?How much am I willing to finance?How much am I willing to pay each month?What is my credit rating?How long am I planning to keep this car?Here are five things you should think about before financing your next car:
The first thing you can do is take an honest look at your current situation and decide if there is another way to get the transportation you need without buying a brand new car. Perhaps, for example, buying a lightly used vehicle would be a better option for you. There may still be life as most new cars lose value by the time they are driven from the lot.
A new car is only worth the amount of money someone is willing to pay, which can vary wildly over time. When new models are first released, interest is high and people tend to be willing to pay more for them. Later, this value decreases as the model ages and newer models replace it at dealerships. The same goes for financing a car – you should only finance what you feel comfortable with. If your budget is tight and you feel that $10,000 is the maximum amount you can spend on a car loan, don't let the dealer talk you into financing more than that. Car loans should be something that fits your budget and not just what someone else wants to give you.
Be sure to check out local auto loan providers in your area to get the best personalized deal based on your location. For example, if you're based in Tasmania, look into Hobart Car Finance to find a great loan option to suit your needs.
The monthly payment is the amount you must be willing and able to pay each month from your budget. This is an important calculation because it will determine the overall amount you will pay for your car, including interest charges. Car dealerships often use this number as a selling point when trying to close a sale – the lower the monthly payment, the better. However, some auto loans offer low monthly payments by attaching an unusually high interest rate to the loan, which simply means you'll pay more for your car in the long run.
Your credit score is extremely important when it comes to financing a new vehicle, as this number determines the type of interest rate you will receive on your loan. If you have a high credit score, which is usually above 700 or 720, then you will qualify for lower interest rates, which means it will cost you less to borrow the money you have. need. On the other hand, if your credit score is between 500 and 600 (or even lower), you will pay a higher interest rate, which means it will cost you more.
Finally, it's important to think about how long you plan to keep your new car. Most auto loans last four years — sometimes longer, sometimes shorter — and the longer you're willing to take to pay it off, the more money you'll save on interest charges. If you can afford to spread your car loan out over five or even six years, it will save you a lot of money and make it cheaper for you in the long run.
These are the five most important things to keep in mind when considering financing your next car. Five years from now, you could very well be glad you stopped and considered all the angles before signing on the dotted line for a new vehicle.
