Buying a vehicle is one of the most expensive purchases in life yet contrary to what most people think the vehicle is not an investment. Considering the running cost, financing and depreciation, your car is the next most expensive asset after your home. Therefore, it is always advisable to avoid auto loans whenever possible.
However, most of us need the car to run our daily errands conveniently, yet we don’t have enough cash to pay for a reliable vehicle. Our next option is a car loan. Whether you choose dealership financing, personal loan, hire purchase or personal contract purchase, one of the biggest threat with car loans is overspending. You need to consider not only the sticker price of the car, but also the cost of financing the auto loan. Below we have prepared some affecting tips and tricks on how to save money on a car loan.
Get the Best Deal in the Market
The first step should be to shop around to get a reliable vehicle at the best price possible. You need to visit several showrooms or check for deals on listing pages online to land and compare prices as well as the purchasing terms. Getting the price only is not enough; consider other factors like the car specs, history and such to determine the actual value of the ride, especially when buying a used car. If you have the vehicle VIN or License plate, you can visit https://vincheck.info/free-vehicle-history/ for a free vehicle history report. Based on the amount you have, calculate how much loan you require. If you can seal the deal in full, forget about the loan.
- Monitor and Improve your Credit Score
Before applying for a vehicle loan, check on your credit score and avoid errors and inconsistencies that could negatively affect your creditworthiness. Luckily, you can get a car loan even if you have a bad credit score, unlike credit cards and mortgages. The difference is that you will have to pay higher interests than necessary. With an excellent credit history, you will pay the lowest interest rate possible. A slight improvement on your credit score could save you thousands over the entire loan life.
- Take Time to Shop Around
You need to take time to research and shop for the most favourable vehicle loan. Now that you already have a budget and know your credit score, it is important to explore various options like your bank, credit union or other vehicle finance firms. Consider the option with the best terms as well as the lowest interest rate. This will also give you a good ground to negotiate the vehicle price.
- Do Not Overlook the Dealer
Exploring other options may get you a better deal than the dealership financing, but sometimes the dealer-arranged offer could beat your outside arrangements. Dealers have a close relationship with multiple lenders, they can help their customers get lower interest rates from independent lenders. You may also discuss your findings with your dealer and find out whether they can match or exceed other options.
- Don’t Borrow the Entire Amount or Too Little
It is not advisable to buy a car entirely on a loan; make at least a 20% down payment to make sure you owe less than the value of your car. While some dealers offer car loans without putting any penny down, this is a risky temptation that you need to avoid. The larger the down payment, the better.
Additionally, avoid spending your loan to finance small expenses such as registration fees, sales tax and any other related extras even when your dealer is willing to roll these fees into your financing. Such will only increase the amount of the loan while the value of the car remains the same.
Additional Saving Tips for Car Loans
- Pay your Instalments in Time – Avoid skipping payments, as this will lengthen your loan term as well as cost you more in terms of interest.
- Consider Refinancing – There are many lenders with great offers for refinancing your auto loan. However, refinancing only makes sense if you can get a loan with a shorter pay-off date or better monthly payment.
- Pay Off Your Car Loan Early – Some of the most effective methods to achieve this include payment splitting, rounding up payment and making a large payment when you get a bonus or other extra income.
The most cost-effective way to buy a vehicle is by using your savings. However, if you cannot afford the car you can apply for a car loan and spread the cost over several months. If this is your situation, you need to research for the best auto loan options in the market. Moreover, the above tips can help you save more money on your vehicle loan that you can imagine.