In this article we will talk about the best ways to finance a used car. After a mortgage, financing a car is the second largest investment most people make. Shopping for a car loan is just as important as shopping for the car.
It is a known fact that new cars depreciate and drop in value like a rock, as soon as you drive them off the lot. Finding financing for a used car is a great way to save money and get more car for your money.
The interest rate you have to pay on a used-car, will depend on how old the car is and your credit history. You usually pay a little higher interest rate for used cars over a new car. You can finance a used car through the same financial lenders that supply financing for new car buyers, including credit unions, banks and car dealerships.
Know your credit score before you go shopping for car, to ensure that you are getting their financing terms and a good interest rate you. If your score is over 680, you should be able to get a good rate and terms.
Next do your homework. You want to research and think about the types of vehicles that you like and what appeal to you. Be careful you don’t get caught up in the excitement of buying a new car, and end up buying something you really don’t want.
Think practically. If you’re going to buy a vehicle for a long commute to work every day, you’ll want something with good gas mileage. Look for a vehicle that not only meets your practical purpose, but also satisfies your desire for a car that is comfortable and fun to drive.
Sources for Financing
Look at different sources for your financing. A lot of times a credit union will offer better rates and terms than your local bank. If you already have a current car loan with a lender, then by all means go back to that lender and see what type of terms they will offer you. It’s always a good idea to check online and see what going interest rates are, that way you will know if you’re getting a good rate or not.
The interest rate on your loan, the amount of money you need down and your monthly payment are based on your credit history. If you have any blemishes on your credit report, make sure you have explanations and evidence to clear them up. If there’s something in your credit report that is derogatory and shouldn’t be there, then notify the credit bureau and have it removed before you go looking for a car.
It is always recommended to go with a shorter term loan rather than extending the payments out over a longer period because you will pay more in interest. The other negative side of a long term loan is that the car will depreciate faster than what you are paying it off. This can leave you in a negative car loan where you could end up owing more on the car than what it is worth. If you are looking at purchasing a car and you need to extend the payments out over 48 months to be able to afford it, then look for a less expensive car.