Most car buyers put all of their efforts into finding the perfect car. While that’s critically important, figuring out how to pay for it and getting a car loan are also vital parts of the car-buying process. Figuring out your budget and financing can also help you gauge how much vehicle you can afford, helping you narrow your choices. Few buyers can afford to pay cash for the full price of new- or used-car purchases. Instead, you’ll need to get an auto loan to cover either the entire cost of the vehicle or a substantial part of it. Getting a bad car finance deal can mess with your wallet and wreck your credit history for years.
“Do your homework, and make sure it’s not just about ‘hey, I want to pay $300 a month,’” says Erin Klepaski, executive director of strategic alliances at Ally Financial. “Really make sure that vehicle meets your needs – that you can insure it, that the fuel economy makes sense for you, you can drive the number of miles you need, that it has the functionality that you need, so that you get that whole package and that total cost of ownership experience, as opposed to shopping the vehicle payment.”
It is common for car buyers to put off the thought of financing until they are in the dealership’s financing office. That’s, unfortunately, a path to potential financial calamity. Smart car buyers know precisely how much vehicle they can afford and have a plan in place to finance their new ride before they even think about heading to a dealership. While you might end up with dealer financing, if the dealer doesn’t have an offer to beat, they’ll have no incentive to give you a deal.
Here’s an outline of everything you need to know about car financing before visiting the dealer:
- Learn The Language of Lending – Know all the finance terms that are likely to be discussed during your visit.
- Your Credit Score, and Why it Matters – Understand what your credit score is and why it matters for financing your car.
- Finding a Good Financing Deal – Learn where and how to get car financing that you can afford.
- Applying for a Car Loan – Learn the steps to apply for a car loan.
- See What Financing the Dealership Offers – Compare your pre-approved auto loan to the offer from the dealership.
- Finalizing the Deal – Sign on the dotted line and close the deal.
- After You Have Signed the Loan Documents – Know what happens after you finalize the deal.