Most people need to take out a loan when purchasing a car. There is no shame in that, of course – cars cost tens of thousands of dollars, and very few of us have that kind of money just laying around. Fortunately, car loans usually come with very reasonable terms and a relatively short repayment time frame. If you care for your car properly, you should be able to continue driving it long after the loan has been satisfied, hopefully giving you time to save up money for you next car so you can avoid taking out a car loan next time.
Of course, even though car loans are fairly affordable in terms of interest rates and terms, you still want to save as much money as possible when making this large purchase. Keep these three tips in mind before you walk onto the dealership lot ready to make a deal on your next car loan.
Skip Some Options
You don’t need to buy a ‘fully loaded’ vehicle in order to be happy with your purchase. Many of the base model modern cars still include everything you need, such as automatic windows and locks, automatic transmission, safety features and more. As you move up into the higher end options, you can start to spend a lot of money on things like upgraded upholstery, a fancy stereo, and other technology.
In order to pick out the right car and right package for you, focus more on your budget than the options you have in front of you at the lot. Establish a price range for your purchase before you ever head out to buy the vehicle, and keep the final sale within that range no matter what. This can save you thousands on your car loan. But don’t skip features if they are truly important to you. For instance, you could get a car GPS from China to save money and still have that feature in your vehicle.
Save for a Down Payment
The math is simple – any money that you are able to put down on the purchase of your vehicle is money that won’t have to be borrowed in your car loan. If you can save up prior to making the purchase in order to have a significant down payment available, you will be able to greatly reduce the size of your car loan, and reduce the amount of interest you pay over the long run.
It is often possible to buy a vehicle with a very small down payment, or even no down payment at all, but you should try to avoid this strategy if possible.
Shop Around in Advance
Before you even head out to shop for a new vehicle, do some work on finding your financing ahead of time. You can likely apply for a car loan approval through your bank before you go shopping, which will give you a great idea of what you can afford and what your monthly payments are going to look like based on the interest rate and loan size.
While you might end up financing the purchase of your car through the dealership rather than your bank, it is nice to have that approval in your back pocket when it comes time to negotiate. If the dealer won’t give you terms that you like, you can always point to your bank offer as another financing option.
Have you ever taken out a car loan? Do you have any other tips to help save on a car loan?
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