The Best Way to Finance Buying a Luxury Car

Luxury cars can vary in price; some can cost as much as a home. With a higher financed amount, an interest rate can have a huge effect on the end cost of your car. Tax in some areas can also add a hefty amount to your price. Before searching for financing, research the price of your car and taxes to determine how much money you'll put down. High-priced cars in excess of $50,000 can require down payment for lending.

Instructions

1

Check your credit history. Make sure your history is correct and your score is decent. Consider your debt-to-income ratio, that is, the amount of money you have coming in versus the amount you pay out every month. This is reflected in your credit report. Close any longstanding, inactive accounts with high balances as these do not work in your credit favor.

2

Review manufacturer's websites for discounts. Higher-priced luxury vehicles rarely have incentives, but you can find decent discounts for lower-priced luxury vehicles costing $40,000 or less. Check rates---you might see a low rate on a short-term finance for your car, but be careful as payments can skyrocket. For example: If you find a manufacturer offering 0 percent on a vehicle for only a 36-month term, you'll pay $1,388.89 per month for a vehicle that costs $50,000, not including taxes or fees. If you finance this same vehicle for 60 months at a rate of 4 percent, your payment drops down to $920.82. Use an auto loan calculator to determine if a low-rate option is for you.

3

Apply for a loan. Check your local credit union; rates are often competitive through credit union lenders. Consider a line of credit you already have such as a home equity loan. Compare the rate of your home equity loan with competitive local lenders. Check with your dealer---someone with excellent credit can merit a low and competitive rate through the manufacturer. Apply either online or in person.

4

Discuss monthly term options with your lender. The shorter your term, the less you'll pay in the long run---it is cheaper in the long run to pay off a high-balance loan as soon as possible. Usually, a rate does not differ for a period of three to five years. Ask about pre-payment penalty fees with your lender if you plan to pay the loan off early.