Buying a used car is a prudent financial choice. For those on a tight budget, it allows you to save significant amounts of money. However, with financing and the high price of used cars, consumers often question how to afford this purchase. Here are five tips for financing your next used car without breaking the bank or compromising your finances.
1. Obtain a Variety of Financing Quotes
Before visiting a used car dealer, be aware of all the different financing options available. Start by checking online quotes from local dealers that provide free forums to save money. Ask friends or family members who they use and what their experience was. You can even contact the bank where they are employed to see if they can recommend any finance companies in your area willing to work with them.
2. Be Aware of Credit Scores
Before you choose to lease or buy a used car, know your credit scores and the scores of anyone else who will be using the vehicle. In most cases, you should be able to find a lender that is willing to provide loans for used cars and can do so without an issue if you have a low credit score. On the other hand, if you are leasing a new vehicle and your credit score is terrible, lenders may not be interested in working with you or may charge higher rates than usual.
3. Keep Loan Terms Brief
There is no set length for how long you need to pay off a used car loan, but anything shorter than five years is what you should aim for. Keep your loan terms short, especially when financing a high-ticket item such as a used car. People with consistent financial history will find it easier to make timely payments on their loans. If you want to borrow money from the latest models released from lenders in the US or US-based foreign car dealerships, they may require longer payment increments than those leasing or buying used cars.
4. Put as Much Money Down as Possible
The more you can put down on your used car before taking it home, the less money you will be required to pay each month. A four-year loan will also allow you to pay off your loan half the time, which helps your credit scores. Longer loans are often more expensive than shorter ones because they require more repayment in a set amount of time. This is why it’s best to have a clean financial history if you want to obtain long-term financing from lenders and dealerships alike.
5. Pay for Additional Fees With Cash
When you lease or buy a used car, be aware of any dealer or lender-imposed fees. Often, these items will require a few hundred dollars to be paid upfront. It’s best not to make this payment unless the price is already listed on the car’s invoice and you understand it. When you pay with cash and the amount is higher than expected, it may lower your monthly payments since those extra cash payments will leave no room for other expenses.
Even though purchasing a used car is a prudent financial choice, you don’t want to go into financing without understanding potential problems. By considering these suggestions and learning more about your options and lenders, you should be able to finance your next used car without breaking the bank or compromising your finances.