Buying a car is the next most significant investment after purchasing a home. Whether it is a new or used car, paying a dealership with cash would be an ideal option, but some people need a loan to finance the purchase of a vehicle. However, it is imperative to compare some aspects before applying for a car loan because that’s an asset that will depreciate over time and accrue interests. These are a few things car buyers should consider before heading to a dealership to negotiate for a car.
Apply for a Car Loan at Least 14 Days before Walking to Dealership
Your credit score is likely to decrease slightly once the lender reviews your credit score. However, applying for an auto loan at least 14 days earlier can help reduce the negative impact that the credit history has on your credit score. The lender will consider all the inquiries made within these 14 days as one, reducing the impact on your credit score.
Know Your Right Credit Score
The most significant factor in determining the type of car loan you can qualify for is your credit score. Whether you are borrowing from the dealership, an auto loan lender, or bank, the rate will depend on your credit score. Note that auto loan lenders use different criteria for determining your eligibility for a loan. That means the minimum requirements for qualifying for an auto loan will vary across lenders.
First, calculate the costs before accepting an auto loan. Take time to understand all the factors that determine your monthly repayment amount. The APR has a less impact on the amount that a borrower can pay each month. Other factors include how much you’re putting down, the total loan amount, the loan terms, and whether a borrower has down payment or not.
First, get pre-approved for an auto loan before walking to a car dealership. It guarantees that a car buyer has enough funds to cover the cost of their dream car. Pre-approval also gives a car buyer additional leverage and places them on a stronger negotiation position. You can get pre-approved for an auto loan from online lenders, bank, and credit unions.
Understand the Financing Criteria
Dealership financing can sometimes appear lucrative. Deals like cash back rebates and a zero financing option, which reduces the interest rate can sound like an ideal option. However, car buyers should always know that only the highest qualified buyers can qualify for such financing options. You are unlikely to be eligible for a zero financing option if you have a limited credit score, a low FICO score, or a negative credit score. Either way, shop around, calculate costs before signing the purchase agreement, and never accept the first auto loan option.