Auto shopping picks up in the later parts of each year. Some auto sales are due to buying a car as a gift for a family member or loved one. Other sales happen because shoppers can get deals and price breaks from auto dealers looking to move the previous year’s model off the lot.
Next to buying a home, a new car is the second most expensive purchase many consumers make. According to automotive information site Edmunds, the average price of a new car sold in the U.S. is $36,718. Given these facts, it would be in your best interest to go car shopping armed with information and a plan. Here are ten tips to help you get the most out of your new car purchase.
1. Start out by making a realistic budget of what you can afford. Make sure your budget includes related expenses such as insurance, license plates, inspection fees and routine maintenance.
2. Check your credit report well in advance of a new car purchase. (Click here to learn how) Checking your own report won’t lower your credit score. There may be something flagged in your credit report you have an opportunity to correct and increase your credit. The higher you get your credit score before buying a car, the better loan terms you’ll be able to achieve.
3. Don’t make a deal based solely on the monthly payment. If you extend the length of a loan to get a lower monthly payment, you may end up paying much more in the overall cost of the car.
4. Consider getting one or more loan quotes from a bank, credit union or another lender before going to the dealership. It will put you in a better bargaining position and could save you hundreds or even thousands of dollars across the life of your loan.
5. Seek a pre-approval on an auto loan. The pre-approval will give you a loan quote with an interest rate, loan length, and maximum loan amount based on your creditworthiness. If you have an idea of what the loan deal will entail before looking for a car, you can focus your decision making on shopping for the right vehicle.
6. Save up for a big down payment. Don’t skimp on the front end. The bigger your down payment, the lower the cost of your auto loan.
7. Sometimes, dealers offer very low financing rates for specific cars or models, but may not be willing to negotiate on the price of these cars. To qualify for the special rates, you may be required to make a large down payment. With these conditions, you may find that it’s sometimes more affordable to pay higher financing charges on a car that is lower in price or to buy a car that requires a smaller down payment.
8. Discuss the possibility of a trade-in only after you’ve negotiated the best possible price for your new car and after you’ve researched the value of your old car. Find out what your current vehicle is worth before you negotiate the purchase of a new car. Although you may have been planning to trade in your old vehicle, consider selling it on social media marketplaces or free online classified ads instead, especially if it’s fully paid off. Although it may take longer to sell it, you’ll generally get more money for it than you will from trading it in.
9. If you owe more on your current vehicle than it is worth — referred to as being upside down — then you have negative equity. If you roll the balance of your existing auto loan into your new auto loan, this could make the new auto loan much more expensive. Your total loan cost will be higher because you will be borrowing more than just the price of your new vehicle.
10. Pay attention to the details after you drive away. You should receive an introductory letter from the lender that provided the financing. This letter should include important information about your loan, such as the payment due dates, where to send payment, and how to create an online account. Make sure you make payments on time to avoid penalties and late fees. Consider setting up automatic bill pay through your bank to avoid missing a payment. Learn more about BancorpSouth Online Bill Pay.
These tips should help you get a better deal on your next auto purchase.
© BancorpSouth, 2019