Six Steps to Follow When Financing a New Vehicle

May 6th, 2009 admin Posted in Auto Loans | 4 Comments » 320 views

If you are planning to buy a new or a used car, the first thing you would require is proper auto finance at a reasonable rate. However, in order to get the best deal, it is very necessary to do the required research and homework before getting your car financed. Following are six steps you should follow when financing a vehicle:

Step 1:
Compare and contrast all the available models from different automobile manufacturers and choose the one that best suits your interests, needs, as well as your budget.

Step 2:
Once you have chosen the vehicle you wish to purchase, look out for discounts and special financing rates available on it. Generally, most of the manufacturers offer attractive interest rates, such as 2.9% for 5 years and 0% for up to 3 years, on their new models to lure customers. The current incentives and rates offered on different makes and models of automobiles can be easily found online on popular automotive websites.

Step 3:
The next step is to decide the duration for which you want to finance your vehicle. However, this decision largely depends on your budget and present income. If you can afford to pay bigger amounts as monthly repayments, it is always advisable to opt for shorter repayment duration. On the other hand, if you cannot afford big monthly payment amounts, you can reduce them by getting the automobile financed for a longer period of time. However, bear in mind that with longer repayment periods, you would have to bear the burden of auto finance for a much longer period, and in due course of time, you would owe much more on your auto loan than it is worth in the open market.

Step 4:
The fourth step is to decide the amount of the down payment you want to make on your new car or truck. Here are a few guidelines to help you take this decision:

- If no special incentives are offered by the manufacturer on the model you are targeting, it is advisable to make a large down payment as it will help you save big by reducing the total amount of interest required to be paid on the total loan amount.

- However, if special interest rates are offered on your vehicle, it is better to put as little money down as possible. In such a case, it is advisable to invest any down payment and get the entire car financed at 0% or 2.9%.

Step 5:
The best way to obtain auto finance is to get it from a car dealership. However, before you get in touch with local auto dealers, it is not a bad idea to get pre-approved to finance it through a local bank, credit union, or an online bank. This will help you in two ways:

- It would prompt the dealer to offer you a rate lesser than the one that you have already been quoted.
- It would give you an estimate of the interest rate you qualify for and thus help you negotiate a better deal.

To get pre-approved, get in touch with a local financial service or an online loan officer and negotiate a low selling price.

Step 6:
Choose the most reliable, local car dealership that has the vehicle you want to purchase on its list. Get in touch with the dealer and try to negotiate a rate lower than the one you have already been approved at by the financial service. If the dealer agrees at a lower rate, get your vehicle financed through him without a second thought. If you could not negotiate a better deal, get back to the bank that you are already approved with.

Thus, in order to get the best deal, you should follow the above six steps when financing your new vehicle.