Today’s car buying experience has become efficient and effortless. In a matter of hours, customers can select, test, and drive off the lot with their new wheels. However, even with this expediency, consumers looking to purchase a new vehicle should do their homework before embarking upon the great adventure of car-buying.
Australia’s car loan landscape has many opportunities to finance a vehicle minus the interest rate drama, especially if you apply for a Latitude car loan or go through any of the numerous financing companies. Conversely, car buyers who do not prepare ahead of time can find themselves not only facing high interest rates but also paying more for a vehicle than it’s worth. For these reasons, consumers should consider a few factors before shopping.
Continue reading to learn more about the factors to consider when financing a vehicle, so you can make the right choice for your needs.
Planning a realistic budget is an important factor in determining affordability. When drafting a budget for a car, include not only the monthly payment but also insurance, gas, and other maintenance costs. While the initial monthly payment might be low, these costs are elevated with the extras, which will balloon your total expenses. For the most part, having a closer estimate of what you will actually spend on a vehicle every month can help determine whether the car is affordable.
Credit Score And History
Your credit history is a very important factor in determining the types of financing available to you. For one, your credit rating lists all debts you owe for up to seven years and gives creditors an accurate picture of your creditworthiness. Generally speaking, those with higher credit scores typically are approved if their debt-to-income ratio is low (if they do not have a lot of debt). Additionally, the higher your credit score the lower your interest rate.
Moreover, this report lets creditors know whether you are a good bill payer. A record reflecting a consistent payment history with debts paid all up-to-date determines your creditworthiness. Alternatively, derogatory, charge-offs, and slow-paying remarks are major credit killers that impede the financing process. Before car shopping, consumers should take advantage of getting their one free credit report from any of the major credit bureaus.
One of the easiest ways to shortcut the car financing experience is to get pre-approved for a loan. Through the pre-approval process, consumers get an estimate of what they can afford. Fill out an application and supply the requisite information, and your financial institution can calculate an amount. Pre-approvals are great because they set a spending limit, which reduces the amount of time searching for a car by limiting your choices.
Most loans run anywhere between three-seven years. Longer loan terms are attractive but should be taken under serious consideration. While a longer loan term will lower your monthly payment, you end up paying more for the car in interest. You could double up your payments to pay down the loan early, but some financing companies will apply a penalty for paying off the car too early. Ultimately, when looking for a loan, consider whether a longer loan term will pay off in the long run.
Various Financing Options
Typically, dealerships and banks have higher interest rates. Instead of going through these institutions, consider credit unions and online financing institutions – they tend to offer better rates. The best way to find out which option to choose is to shop around.
Five Factors Of Financing
For first-time car buyers, car shopping can be a nerve-wracking experience, and for savvy consumers, buying a car can be an exciting venture. Regardless of the category you fall into, today’s financing landscape has made buying a vehicle effortless, especially for prepared shoppers. Shoppers armed with the right information can get a great deal and snag the car of their dreams. Okay, maybe a car closer to their budget than their dreams.