Buying a used or new car often requires applying for a car loan and negotiating the sale price of the automobile. Seasoned car buyers know how to get the best price for a car, and they know the factors a lender takes into account when approving loan applications. Familiarize yourself with car buying tips to help ensure a smooth deal.
Credit and Interest Rates
It's possible to finance a car with bad credit. However, your credit history and credit score impacts the interest rate a finance company gives on the auto loan. Finance companies make money by charging interest on each loan; and the lower your credit rating, the higher the interest on the car loan. Improving bad credit, or simply improving your score to acquire the best rate, involves paying bills on time and keeping debt on credit cards to a minimum.
Negotiating the Price
Knowing the invoice price of a new car can provide a price point when negotiating the price of an automobile. Invoice price refers to the dollar amount that dealerships pay the manufacturer. Dealerships increase the invoice price to make money on each deal, and this increase is called the sticker price. Research invoice prices with the help of consumer car buying guides such as Edmunds.com.
Buy Within Your Means
The interest rate and sale price determines the monthly payment on a vehicle loan. Carefully check your budget to determine an affordable monthly payment. Getting a preapproval from a bank or finance company beforehand eliminates the guesswork. These companies will check your credit, income and current debts, and preapprove you for an auto loan amount before you step foot on a dealership's floor.
Other Considerations
Buying a car with no credit history or a bad credit history is easier with a down payment and co-signer. Down payments reduce the amount financed through a bank, and co-signers (someone with good credit) are held responsible for monthly payments if you default. Down payments between 20 and 25 percent of the sale price are typical. Keeping track of tax returns and income also helps the approval process because lenders will need to verify employment and see copies of paycheck stubs before approving your auto loan application.
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