Feb 17, 2021 / Auto & RV
Buying a new or used car is a big decision. You spend hours online researching the right make, model, trim level, and color. But too often, financing that new or used car purchase is relegated to a mere afterthought. You go with the first finance offer the dealer (or your Google search) recommends, sign some paperwork, and not long after the ink dries, borrower’s remorse sets in. You found a car that you love, but a loan that you absolutely hate. Here are 3 tips to help you find an auto loan you can love just as much as your car.
Your car will be your companion for years to come, and in a similar sense, so will your car loan. Long after the luster of that new or used car purchase fades, the financial implications of your purchase tend to linger. So, even if shopping for a new loan isn’t nearly as exciting as shopping for a new car, it’s just as important. Take time to compare interest rates, institutions, and lending offers. Look into terms, conditions, and closing costs. And, think about what kind of loan service you want—local and friendly or big and bureaucratic. A little work can go a long way toward finding an affordable loan you’ll love.
As you weigh the pros and cons of different lenders and consider different rates, think about how long you want to be paying for your car. A longer-term loan (6-8 years) will most likely give you a lower monthly payment, but it also means you’ll be paying more in interest over the life of your loan. Crunch the numbers to see if of a shorter-term loan (2-5 years) makes sense for you and fits within your monthly budget. Most experts agree that you should keep your car payment (principal + interest) to about 15% of your monthly take-home pay. Look up auto loan calculators online, input the interest rate from your preferred lender (which may change depending on length of loan) and see what term and payment make the most sense for your personal financial situation.
You wouldn’t just show up at a random dealership and buy the first car the salesperson showed you. So, why should you do the same for your new car loan? Before you take a trip to the dealership or pull the trigger on a used car, settle on your auto loan first. Most dealerships provide their customers with financing offers that have a much higher interest rate than what you can find at a credit union. So, go into your car buying experience with a loan quote in hand. It will help you know what you can afford and allow you to arrange financing at the time of purchase. Alternatively, you can always apply online or over the phone and get approved instantly any time of day, every day of the week.
When you take shopping for a car loan just as seriously as shopping for an actual car, you can avoid the dreaded borrower’s remorse, be fully prepared financially for your new purchase, and find a loan that you can love.